Party City updates Q4 financial outlook following impact of Covid-19

Party City has updated its financial outlook for Q4 2020, adjusting its total revenue, brand comparable sales and adjusted EBITDA for the three-month period ending 31 December 2020.

The updated expectations for this period are as follows:

The preliminary total revenue is now expected to be approximately $645 million to $650 million, compared to the $675 to $695 million predicted in November 2020. Brand comparable sales were expected to be either flat or down by a low single digit percentage – they are now expected to decrease in the mid-single digit range.
The adjusted EBITDA – which was estimated to be in the range of $80 to $90 million – is now expected to be between $75 million to $80 million.

“We are pleased with the progress we continued to make in the fourth quarter against our strategic initiatives to reinforce our position of authority when it comes to celebrations,” said Brad Weston, chief executive officer of Party City. “However, the rapid surge in Covid-19 cases had a greater than expected impact on customer behaviour in the months of November and December.”

“This was evidenced by under-performance in regions like the Northeast, as well as in certain categories like tableware that are most impacted by the reduced size of social gatherings. We remain very encouraged by the strength in balloon demand across our fiscal fourth quarter, as winning in balloons is a core strategic priority and differentiator, and key to expanding our relevance with customers.”

During Q4, Party City also continued to improve inventory levels across its stores and distribution network, updating its seasonal assortment strategy to target higher in-season sell-through of merchandise and reduce annual inventory carry-over. The curated product selections are expected to improve customer experience and inventory management while also reducing working capital needs.

Brad continued, “As we look to 2021 and the eventual return to normal, we continue to execute against our five strategic initiatives to increase relevancy, strengthen our competitive differentiation and elevate our customer experience across all retail channels. In support of our strategy, we continue to take actions to improve the in-store and online experience including increasing newness, reducing inventory with a more edited and curated product assortment, improving customer engagement and expanding omnichannel capabilities.”

Party City expects the previously disclosed sale of a substantial portion of its international operations – which is worth $59 million – to be completed by January 31, 2021.

These updated financial expectations are unaudited and based upon the company’s current estimates.

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