If it seems like parties have been a little less festive lately, it might be because of a helium shortage that has grounded the balloon business.
Party City Holdco Inc. PRTY, +0.25% shares soared nearly 11% in Thursday trading after the party goods retailer said it found a new helium source, in the hopes of giving deflated balloon sales a lift.
The helium shortage created a 200-basis-point headwind for first-quarter results, according to James Harrison, chief executive of Party City. Wholesale sales of Mylar balloons were down about 8% due to the shortage, which is expected to be a headwind once again in the second quarter.
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Now, Party City has found an alternative source for about 15% of its annual helium requirement, which should help shoppers get the party started.
“This helium should allow us to return to normal levels of sales in our balloon categories,” Harrison said on the call, according to a FactSet transcript. “While the average cost of helium is increasing over prior years, we have successfully put in place selective price increases which will serve to mitigate the higher helium cost.”
Party City reported earnings that matched the FactSet consensus but missed on sales, thanks in part to “helium headwinds.”
The company also announced that it will close about 45 of its 870 locations in 2019, more than the 10-to-15 closures the company normally executes.
“This year, after careful consideration and evaluation of our store fleet, we’ve made the decision to close more stores than usual in order to help optimize our market level performance, focus on the most profitable locations and improve the overall health of our store portfolio,” said Harrison.
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Still, the company said that its analysis has uncovered a “whitespace” of about 200 new stores across the United States and Canada. And, this year, the company will be launching four new smaller format stores spanning 7,000-to-10,000 square feet in a number of markets.
Also looking forward, Party City said more than three-quarters of the 2019 Halloween offering will be in stores, warehouses or on U.S. containers by the end of May, with another 8% “on the way” by the end of June.
Party City stock has sunk 20% for the year to date while the S&P 500 index SPX, +0.37% has gained 14.7% for the period.
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