Party City Holdco Inc. Shares lost two-thirds of its value on Thursday after the party merchant reported a surprising third-quarter loss and slashed its year-round prospects, but this was not only due to a shortage of helium, which
also suffered from poor Halloween sales from higher freight costs as a result of Chinese tariffs.
was tampered with for a 67.2% loss to $ 2.00 in very active trading, to close well below the previous record low of $ 4.21
Trading volume rose to 42.6 million shares, more than double the previous record of 19.4 million shares on the day of stock debut on April 15, 2015.
The company reported a net net loss on Wednesday ba, which expanded to 39.7 million dollars, or 3.02 dollars per share, from a loss of $ 2 million, or 3 cents a share, for the same period a year ago. Excluding non-recurring items, such as fees associated with its store optimization program, the company reported an adjusted share loss of 28 cents, compared to the consensus FactSet consensus.
Revenue fell 2.3% to $ 540.2 million, below the FactSet Consensus of $ 551 million, dropping 2.6% from branded store sales at the same store missed the 0.5% drop in expectations. The company blames 2.1 percentage points on the decline in same-store sales relative to the headwinds of helium deficiency.
But this is not just about helium, which the company continues to view as a temporary problem. Sales of Halloween products for the quarter and October were 3.2% lower than last year; Same-store sales fell 4.9% in October alone.
Same-store sales for 256 temporary Halloween City stores, which were larger than 239 stores last year, declined by 20.8%, mainly due to weakness in the adult category with more higher sales of costumes are moving online.
"The results of our third quarter and October disappointed so many of the tailwinds that we expected not to materialize," said CEO James Harrison. "In particular, the exceptionally better stock position for the Halloween sales season only led to slight increases in retail revenue early in the season."
The company reduced its guidance range for 2019 for adjusted earnings per share from 84 cents to 91 cents from $ 1.26 to $ 1.36, and for revenue from $ 2.35 billion to $ 2.38 billion from $ 2.40 billion to $ 2.45 billion.
Harrison stated that the 2019 outlook includes "significant effects from temporary winds," such as helium shortages and higher transportation costs.  Helium deficiency was first mentioned a year ago in the third quarter 2018 earnings report. Harrison said then in a post-conference interview with analysts that he believed that "the helium situation should be resolved in the second half." in the fourth quarter. "
At that time, Harrison thwarted the helium problem by saying it was "Not as severe" as the shortfall in 2012 and 2013. He said it seemed to be a "cyclical issue" exacerbated by geopolitical events. The problem was that Qatar, which produces one-third of the world's helium, had "political problems" with Saudi Arabia, so it had to find new shopping routes other than Saudi ports, and one of the new ports it found, was hit by a typhoon.
While the helium problem continued, the company said in its first-quarter 2019 earnings report that it had found a new source of helium, which Harrison said should allow the company to "return to normal levels. sales ”in the bubble category.
Read Also : Party City opens a new source of helium to revive the bubble business.
Thursday's results show that helium deficiency continues to hurt ballooning businesses, but Harrison said he was "encouraged" that Retail Operations was approaching 100% helium in stock from the beginning of the fourth quarter. But then the company was plagued by weak Halloween sales.
The company also said Thursday that gross profit margins dropped to 30.6% from 36.5% a year ago, including 1.3 percentage points of higher freight costs as a result of tariffs in China. A year ago, Harrison said the tariffs issued by the Trump administration "are not a major front-end" for Party City's business, "and may in fact prove to be a backlash."
The stock has already lost nearly three quarters of its value in the last year, while the stock market SPDR S&P Retail is trading
lost 8.9% and the S&P 500 index
SPX, + 0.27%
has accumulated 9.9%.