Party City hits record low as helium woes sink results, outlook
Party City Holdco Inc. plunged to a record low as the retailer slashed guidance as helium shortages hurt third-quarter results.
“The negative impact of helium shortages was felt across the business on both the top and bottom line,” Chief Executive Officer James Harrison said in a statement. “Many of the tailwinds that we expected failed to materialize.”
Shortages of helium have plagued the Rockaway, New Jersey-based company, which in May said it signed a letter of agreement for a new source of the gas. Due to the shortage, same-store sales in the third quarter decreased 2.6% vs a 1% drop a year earlier.
Stephens analyst Rick Nelson said helium shortages weighed on same-store sales by 210 basis points. His buy-equivalent rating on the stock is under review.
“We previewed risk to estimates but actual results and guidance was far below our expectations,“ Nelson said.
And “more problematic” than same store sales was the decline in retail gross margins, which fell 560 basis points to 34.8%, short of his 39% estimate. He said the company attributed the decline in total gross profit to higher helium, freight costs and inventory markdowns.
Party City shares fell as much as 67%, which also marks the biggest decline ever. The stock has 5 buys, 2 holds, no sells, and an average price target of $9 according to Bloomberg data.