PRTY - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Leandra, and I will be your conference operator today. I would like to welcome everyone to the Party City’s Third Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Counsel City. General Associate Heller, of Party Ian Thank you, Mr. Heller.

may now begin. You

Ian Heller

results. and operator. our joining financial Good you, thanks third morning, XXXX released Thank we everyone, for morning, us. quarter This

press You release can copy find of on website at a our investor.partycity.com. our

executive introduce today’s like are who our I’d here team Now to on call.

with company’s as differ events Executive start risks Reform Harrison, Correale, may XXXX actual and for prepared and our Chief Retail open some statements regarding plans. and forward-looking Dan Mike Financial statements the Vero, Private Officer; the and have business Jim we results that cause to Officer; the Ryan beliefs These of We these to Act Gregg performance, or Accounting prospects, Q&A. from in President defined We’ll Officer. future management Chief or are call future our future Chief of Jim uncertainties Litigation before by Securities subject Sullivan, their Melnick, could statements. make President; about materially that under note remarks discussion, expectations Please division; today’s Dan up it

Although provide we give disclaim statements assurance expectations these such reflected we We that realized. will updates contained to statements factors as can result to expectations risk be our any our no future are harbor statements whether provided as to safe duty as of believe events information, the expressly in that or new SEC forward-looking the reasonable, in everyone earnings a our the otherwise. We filings. review urge well in release forward-looking

and measures will financial both of operating company’s non-GAAP we and to financial call, today’s refer During results. the GAAP

directly GAAP turn to please release. refer with the financial Harrison. over the For I’ll more measures reconciliations measures, and to information call Jim that, comparable And to earnings most the non-GAAP our regarding

Jim Harrison

update year company’s against operational progress thank as quarter growth an and results in our provide everyone, well as as initiatives and morning, detail an issue overview of the as of will once the updated expected I’ll well made in will again then experienced effects I in directly as providing us Good from softer resulting today. further our for see our and you for Ian. line site financial view benefits you, the Halloween. Dan performance address performance begin by that ecommerce joining model. an on vertical more the of Thank guidance. third well strategic discuss from retail the counterbalancing third than Bottom demonstrated full We detail as we the sales, quarter shortly. an the hurricanes

top provide model coupled expansion experience disciplined margin synergies strategic line our previously vertical financial the by expectations. X%, products channel in improving growth for in our health harvesting growth, strengthening over source our store business, announced the all and control, on while vertical gross in further of our driven key and both markets made which markets the with in of of accelerated cost good resulted term in for businesses and globe, adjusted progress diversified alternative the we well as and for importantly initiatives, growth customers, positioning as around the of acquisitions the the with longer more Continued modest shopability line growth EPS Even growth, of integrating the model. consumer revenue

SVP their of Voytilla, thanks up Before loyal storms. of hard moment to a quarter, the our all Marc dedicated thanks as the gratitude team associates, running and like of and and that EVP possible the offer John safety in and Facilities. families Their the particular, Prevention work affected that incredibly for and Vero ensure the to soon the for after areas. Loss associates our to in to discussing and were stores storms properly we’d the highlights well-being take his business were Also, Ehle, prepared express of like Operations, as would and and I our of of and Ryan special a we

constant basis to algorithm. of on Turning quarter the disappointing currency, on with e-commerce in issue, Retail North currency The we posted comp and product their This an approximately Google decline their decrease the in determines significant when the basis. in X%, led result hurricanes. excluding a a largely softer up remedying. of significant results. third impact quarter the in X% sales positive rankings. modification a hurricanes. the pro in the impact which retail the will progress Consolidated user SCO in revenue the search comp was of the ranking company’s which of SCO forma The have decline in year, results, constant this was result a operations identify our million to increase made was engine by driven a search performance had American rev later modified the excluding algorithm, Early for but $X X.X% for net sales search

a web site across growing to development visit the did As key categories the the our structural first made bounce month the to after response, platform. back months domain expertise necessary the October, to X% the the by execution of X%, In year. engaged declined plan. a we of provide help in later and result, and we approximately e-commerce Traffic third of resources six during began quarter and for store’s stabilize mitigation almost to in changes as rankings in external

into work content site. More focused implemented also of continue importance do improving monitoring to we’ll we and particularly an overall our SCO improving the improved will is functionality capabilities, digital which great in been the with we’ve quarter continue know, the strengthening on enhanced reinforced business as ongoing responsiveness, quality. urgency. platform have early the experienced this you platform and and linking web mobile so broadly, and challenges This We The XXXX. on

this was products part, in softness franchise the for due largely And independent consumer exchange. inventory the the of the just continued carryover this last declined from the over and high levers impact after and quarter, year. We about result excited and to deepening expanding to revenue to acquisitions of for top focused issue these primarily X% multiple initiatives. in against franchise channels, net foreign assortment levels penetration Turning growth view Halloween of the in businesses, remain in the with In am timing the alternative line objectives: product growth of we market growth drive a these as primary international progress against and the pleased two businesses. I sustained markets. both adjusting

terrific category growth, healthy a the our with necessary better capabilities a consumer and of we market growth-oriented organizing provide quarter on resources capitalize trade. objectives, revenue trade. International products of digit during to with sales opportunities. opportunities the adding American We consistent expansive of consumer critical to product growth at growth North the the combination within Alternative roles of the to will the year-to-date properly channels grew businesses, key alternative serve we’ve ensure where expectations underdeveloped with mid-single while XX% delivered completed channels year-over-year these associated enhance steps store-in-store aligning and continue that ensure quarter, performance out we the with incentives taken markets incentive growth Granmark, organization at product performance. programs, Clintons with growth early sales capabilities to position strengthen under these programs in retailers, broader, core just Germany our to products talent and the In of that manufacturing our our in markets that positioned key expanded offerings line quarter, existing leveraging and drove and By the growth. corresponding capabilities, innovative and the on in building and strong these which the Mexico, recent and expertise in in capitalize redesign well in such UK Morrison’s, we was back-to-school holiday as their acquisition and much are

important the manufacturing we’ve lucrative promotional personal interest Appeal, $XX By desire into that on we an growing made wholesaler for of Print a further products and acquiring portfolio expression. personalized that a gained acquisition entry propels us printed the a the broad quarter, of million in capitalize Finally, individual consumer products vertical into majority businesses. products, during highly

shopability celebration consumers depth at sustainable idea of and needs. We, in-store for experience acquisition, all other are putting in this continually to their significant in-store our model. positioned running consumers technology assortment, preferred -- ensuring improving our shop business. addition better product of the their very to discovery was progress on preference of Within well within growth and the a for best different intercompany-owned across asset where growth have in inspiration assisting the drive therefore, unparalleled as for of consumers. long-term of business our differentiation confirmed By deal leveraging remain by stores we and stores In focused better in great the retail, of category platforms to initiatives a aimed a there on source generation, are a and

improving manufacturing stores, shortly. have as XX finalized we to up In We this our well an which accelerating relevance up stores pick experience, encouraging. with and of of full also to fully and we buy element in playing consumers support acquire underdeveloped to through strengthening acquisition the commercial this we in our the markets. also the omnichannel is the across in a conjunction over stores, responded market, growth and, the vertical in further million space subset acquisition initiatives important markets are footprint. and sourcing improving stronger and include third of and million stickers the the and XXXX. additional date products these that broader the produced role live in $X market are presence some The quarter store generated piloting model fleet while are distribution products products. reached have development banners, will more and by running will strategic pick shopping. speed the a of Highly going of and progress this the first closes on decorative report results Granmark we online these providing our both continue later in early a XXXX. in-store made remain online, strategy revenue providing program. month going September increased capability to products for existing stores, improves availability incremental creation instances, this Having $X with key talk worth want ease inventory seven marketplace Oklahoma. store value customer from franchise of strong Asia, and This the quarter, than own up been we a broad Mexico and Kazzam. The offering pleased After very expanded rather into provide acquisitions franchisees revenue upon about independent manufacturing the open business now well, of the new other In Based in across These acquisitions increasing extremely U.S. accretive their in of are in almost being buy of will candles, agreements produce online, and strategy. roll-out our both integration in checks I the to consumers store, to with an North shareholder associates addition on an store, also market items. important to of in number have very well Dan update to provide these early Oklahoma results, for for of to white margin, in American in to called up also I’m development

Kazzam, broad and vetted for from hosts choose a food. providers party able will As through entertainment a service to be activities, of party spectrum reminder,

this over the upfront. importantly, the our marketing building and report us planning I’m XXX acquisition XX, Dallas over thus, the needs. market and signed the to strong went October out more service providing them platform platform for in consumers to process months activities added Having in on allowing thrower last participation defining consumers. stream us to the up eight Industry and on the that to introduces for has begin the businesses in September. listings live In XXX to for stores vendors platform, e-commerce an addition their providing or market through already party as platform -- perhaps party And with process, spent happy leverage steward revenue earlier better us, in vendors, on their been Dallas offerings party-planning vendor have we’ll we

party positive response While still a too and leveraging the received vendors low-recognized early comment scene it’s on expanding brand. are excited and results, further about to our digital from capabilities our we have

for and expect We pilot, to learn as Kazzam new these we’ll markets. this you from preparing a share with be excited be to learnings deal to great we’ll expansion

As we invested share a point $X.XX per business approximately initiative. this of have in interest, to Onto new date Halloween.

revenue and or X-week period the increase X.X%. the retail report prior year, revenue over November decline about X% revenue For of a growth multiple approximately pleased of X.X% approximately over our totaling total period, a growth, with to of ended $XXX brand year included XXXX, million $XXX last the approximately source we comp representing results X, which are reflect million,

we everyday business Our categories permanent with decor of as stores performed as the were our the well in better, the and key and performance category. pleased growth accessory

Our our negatively in insight of web impact discussed provide will our our as shortly. the in traffic stabilization this Dan business remained levels challenged the more despite and late month earlier continued to issues Halloween performance quantify sales.

our So in the and the adjusted cost combined for hurricane margin with results headwind despite expectations expansion, EBITDA gross quarter. the vertical that sales, and continued were which the EPS summary, with of model e-commerce the drove control softer line good power in drove

progress make are key addressing e-commerce issues, against business other We the initiatives. we continue to and

and $XX fiscal was or X.X% for revenue last year. I’ve growth million Halloween As over solid was performance October said,

on and in we to you outlook ensuring We strong to the now, and are detail. year to look of and discuss updating And the Dan results aspects finish focused call. business QX the turn all year, I’d forward on full to the executing call like over a to the more across

Dan Sullivan

morning, we gross our into provide the strong discussing Jim, delivered margin for and core control for operating financial quarter, In insight our and Thanks, generation. and enhancement, further outlook good on quarter flow performance guidance for everyone. cost of XXXX. and financial our I’ll Halloween focused fundamentals cash and the before

results about strong to sales basis footage FX bottom revenue in impact roughly negative as well our of City XXX margin fleet, million from line $XXX.X during result X.X% XXX basis negatively $X store largely modest down X%. a sales, of particularly mitigate due, increase quarter grew flow for of points totaled $X.XX about corporate quarter’s was for were currency, in and quarter, the headwind, top increased share affected gains consolidated the basis to approximately of net adjusted primarily for our an in over The growth. Adjusting Free store At permanent months, hurricanes continued million. approximately end, stores. hurricane-related XX% mention, revenue quarter, stores, Retail of XXX increase Jim square acquisitions reported XX Comparable a stores gross $X million segment the were they was the headwind, by tax in and line X%, XXX as the heard were basis reported XX stores. rate or or the on which XX% you as increased top X% points Halloween or the of impacted expectations discipline, by in this generation which new was and financial as retail with partially as XX helped adjusted labor, per of growth, X.X% franchise network last hurricanes. diluted on or a largely store cost level almost impact constant XX over As XX% line Consolidated headwind offset cash of the earnings $X.XX when part, and in a of hurricane was points currency. to favorability. line

the owned quarter, we and company one During store. six closed opened

continue to We relocations and existing optimizing on fleet completed in the focus QX. XX

and year-over-year business trends. our our patriotic almost in brand mentioned, October also a performed the discussed. as hurricanes, Permanent driven of also down declined on visits, SCO issue comp from basis, entirely below by of which represented down revenue was minus QX retail our well these were XX%. line of everyday X.X%, with impact of sales year, site revenue adjusted prepared, grew were Summer, the which already growth quarter, the broadly growth seasonal our web slightly sales, store for X% on As through the graduation slightly sales results. revenue slightly and wholesale and store X.X% QX X.X% flat, results basis business had adjusted for comp about month solid sales is comp X% the The in merchandising Jim stores The comparable and growth X% Permanent cycling and businesses were and labor improved were in of the performance point expectations. last while well. Comp the expectations. up recent technology growth positions and while by improvement XXX comp Fiscal consistent across month. October, effective was last driven spend. promotional were ensured and stores an impact solid with in October, enhanced X.X% in a execution Everyday more were sales use the improved in-stock cycling

a web the have overall across as search to operations, earnings discussed taking did is In simplify labor Although further month productivity of XX earlier, change Halloween traffic course we’re a operational better strong work, improvement on. of improve the permanent piloted as remain our we month importance engine over we QX of store the improving our stores productivity, encouraging. performance continued call. effort of stores. shopability, traffic support run went store on of associates pilot to the our reminder and see store with in results business and level during of performance designed our scheduling our improve the the although help store our insight The provide the initiatives result stabilized struggle to October, issues over We’ll and

basket look productivity Jim stronger Improved store associates. days. labor driving from through has will in and customers redeploy selling experience next comp with basket labor both our indicated, encouraging overall trends, feedback we’re pilot the to store to roll-out base of support consultative sustainable activities. complete become five performance initial provided growth and The fund catalyst initiatives positive in-store As of improving and improved pleased the results then the operations and XX the and the over with store results these across full and

additional continue to XX the over We an cadence accelerated are and expanding expect now deploying stores pilot XXXX. on throughout to

franchise of quarter. a Turning partially channels, X.X% October sluggish as the in basis, in was year’s million offset due recently of driven point our to total BIG category beyond. in year, markets high last basis and for the Mexico. in and by and share through broader businesses. acquisition acquisition XX%, of with concept stores acquisitions: the was and currency sales offering were result gross by for currency demonstrated X.X%, the of were grew delivered still a to After elimination independent last to in recent since increased basis opportunities expansion profit share the gains European share the core this leadership clear the and catalyst margin at the driving seen also us inventory increased combination approximately the of our The business. margin our of economics growth in as by a and our of of by largely we a and environment same both that and both margin well points XX.X% Halloween. consumers. from growth role adjusting breadth growth non-vertical solid the twofold: sourcing business XXX category key line Granmark growth foreign pleased last Consolidated realized in and The Gross which largely or Festival. expansion with this growth and the carryover balloons announced in launch core results impact We and was and of these on the management reminder quarter above these shelf growth the of ACIM leveraging margin Manufactured the products are with is of part, sales of store-in-store the revenues are constant In from XX year’s And gains product for initial increased we accelerated component consumer stores of capabilities of W broader and our International currency of due continues efforts. both franchise differentiation, organic XXXX to of year a the vertical of of expectations across program meaningful in remain constant well, shelf a solid again shelf, points the double-digit continued levels full of the with manufacturing decreased cycling anticipate QX our and shelf markets, and was $X.X strengthening acceptance model. the driven serve in XX of Halloween we’ve markets, manufactured two foil the through Australia. to of last the model and year, UK share margin associated

can three by largely We to share next the the shelf of leverage continue self-manufactured double assets. five existing to continued that believe we of years, our over manufacturing driven

of costs revenue development percent by year-over-year, costs. the these nine sourcing realized our $XXX,XXX fixed across and largely associated points we XX enhance The our and and agents efforts was to of XXX XX to basis doubles, offices start-up remaining marketplace within as Indonesia. of initiatives driven basis the or utilizing of our deleverage tax Operating organization increased stock liabilities. tax reengineering points third-party of XX a the exercises basis diversify on a In effective increasing enhanced provision terms provisions, capabilities based quarterly cost our offset These China, discrete quarter, the by dollars including due related the operating is quarter, sourcing moving deleverage with the to rate operating full by to productivity suppliers economics costs versus for associated on focused continue expenses gross deferred retail with and working million a margin and to per including the strong added wholesale of XXX items, We’ve inclusive in represents basis savings by remained share, of sourcing in points the as income better year, were rate, In amounts expenses over of control, uncertain Adjusted last an better and rate direct-to-factory. partially FX additional existing in effective net rate the by points. people India, reserves essentially efforts benefit in will points Vietnam with from rates slightly option eliminate expense The lower XX.X when product leveraging on We’ve and fully basis Further to business. X% QX focus on in hurricanes, flat of forward. adjustments. return to hurricane about XX quarter, effective factoring state and effects per favorable XX.X%. inflation rate. changes grew store $X.XX XX.X EBITDA Adjusted tax tax rate per X.X%. principally to was and EPS the margin of due $X.XX XX.X%, and tax year labor Adjusted new share of from rate share increased headwind and growth overall $X.XX were increase million increased and of offset improved discrete expanded of items $X.XX management. were

in our existing build. debt pay leverage watermark And resulting capital working ratio the quarter available million the quarter, high a We $XX.X capital quarter, million of X.X reflection XX.X and year for a seasonal CapEx a and cash Cash as in times, the about operations third net acquisitions. million end $X.X free the we towards allocated source of use asset-based $XX.X working of we quarter $X.X million, of defined build. we largely at XX.X of year. was $X.X the versus CapEx, increase the $X.X million, billion, in less of pre-Halloween of EBITDA down ended while totaled a an revolver. During normal $XXX with flow, of last million, of given million had delivered debt million adjusted debt quarter, approximately the the from the flow was inventory towards

XXXX expect to approximately the leverage continue times at the end to be We X.X of debt EBITDA.

Looking to our guidance. year full

$X.XX be million net development-related about to $X.XX in year-to-date revenue including our to year million our down of share Halloween, updating now range XXXX outlook. $XXX now expect billion; adjusted $X.XX X%. billion of expected $X.XX $XXX are for to or income $X.XX comp be share per to We we’re per year costs. marketplace sales results, full We and to flat Given in full the project to includes

as our to in $XXX focused EBITDA $XXX We combined expect sustainable adjusted will the power model, million. as improvement. capabilities, range initiatives to drive and our elevating e-commerce of We of be top on million the which, our well retail with executing remain bottom line vertical

For questions. our refer to other I’d like press to before Jim with please to And around over all details the our release. that, turn for call opening outlook, back up

Jim Harrison

the all of you, making Overall, Thank I’m against pleased strategic these initiatives. growth Dan. with various we’re progress

heard us outlook. top repurchase repurchases substantial Dan say, line XXXX that I take It pleased to of share X% a approved accretive remains This with in advantage flow. we is our free EBITDA business X% the to strong, guidance about pursue $XXX affords in share make what X% cash gives EPS a and of is to opportunistic down opportunity growth consistent as The feel share business of reinvest strong As Board for you announce with flexibility million growth, generated actively debt acquisitions, authorization cash price. approximately the has Directors this backdrop, pay am growth. and a the business, us program and support return depressed to This shareholders. the

shareholder returns. a continue will allocate to balanced manner capital drive disciplined to and We in

efforts healthy generate business harvest deliver have to free features levers opportunities, growth flow of multiple us margin are all grow our EBITDA cash continue gains, to revenue to of gross model. our forward, well and and core Going continue EPS. positioned These meaningful

the our growth XXXX to high and to generate growth beyond. importantly, digit EPS to into operator questions. While well this more and growth earnings XXXX more we turn over for And and back mid-single we business’ comp that, sales in remain QX EBITDA in confident single-digit I’d ability like positive with call, detail will call discuss in the

Operator

Stanley. And Instructions] Gutman our with Simeon first line Morgan comes of [Operator question the from

line Your is open.

Simeon Gutman

a some Halloween? around it the bit, My Just to first issues question guess, the initially. expectations? the The -- weaker I why is quarter. understand the direct of guess the to website than source, to why And little I is I is wanted relative fourth guide is was related shortfall

Dan Sullivan

you’ve holistically, look Jim we’ve that due So the a large a on When impact the explained. Halloween web performance, first about talked have at thing and the few got issues obviously, is more we’ve in part, to the was, you the factoring about which quarter I look I because on think Year’s basis we talked occasions. at New it think quarter, which Eve run-rate to into the

we December November months on in the the positive. and to flat of so be us And comp effect, Year’s positive overall out slightly again, terms be performance. basis, adjusted Eve And an New think will quarter, still will stripping for

Simeon Gutman

general, this noise are period? Halloween aggressive the Amazon the And performance? progressing thinking deal ever a of think increasingly promotions, And is in of quarter, pleased you right, an just becoming about been custom it’s then think with was back, lot as it to in is running these Is the beginning with as stepping threats? there businesses equipped you was I competitive it how

Jim Harrison

similar there So question are there.

more we in start Bearing let’s in Monday saw Halloween. from the competitive of this with we’ve mind, saw So We moved a to so nature the a effect. definitely competition Halloween Tuesday, year. midweek

pie the So itself gets smaller.

responded said and we a costumes I’ve times from to. we online of before, a price part others and Amazon most with business is costumes in competition in As saw a many our to susceptible is that bag, the which bag, competition

or three of stores the I’m Tuesday approximately a stores our competitor compelling based proper making of you also opened really really, that and and believe. stores to make we at importantly, type well as assortment to our we year, that so is Spirit closer as stores, brick-and-mortar And they a sure And have of And stores, number had can opening the competition. points, this respect more price the performance our We’re looking pleased with Spirit. when I biggest the brick-and-mortar a there, competition. know, competitive that as our year. this we very With pricing and for more offer face upon pop-up,

Operator

question of comes next Your line Sigman Credit from with Suisse. the Seth

Seth Sigman

I as wanted general on allocating when website to where And in the change started? Can just view in investments, about all? you omnichannel better your And issues it? actually to capital that today it are us the and at does you understand those you follow help on addressing then up in then quarter. online issues think

Jim Harrison

to over issues. then question Ryan part you to give of first, second I’ll on it answer more turn the color the the I’ll actual

to a mobile $X like quarter on we that in terms that When I about continue e-commerce We on Halloween I’d our I in our the issues, our was the -- is e-commerce roughly an was it heavily feel part little both feel well for talked would $X.X to desktop our do would have as planned we effect like important absolute million. -- dollars as future. third And about one that We upgrading platform, frame million. our site. -- bit. the decline e-commerce to site just -- of we’ve in of investing mention

we numbers. it So growth site, that, to these are big mention e-commerce We With since turn I’ll think important explain issues. to just Ryan not had over our the in we’ve wanted such to great happened really that quarter. it’s to it this explain what

Ryan Vero

Yes.

really in allow start Those of sales. didn’t before So timing the our really start One in some to made search were began the these words just of rankings primarily on, put impact based they to impacting our those didn’t our in was us on the associated the of Those in the time. getting changes to we earlier seeing summer. year. place changes actions later the -- changes short didn’t really Without algorithms, Google, detail, on run. into we issues from reporting that with tools monitoring that just at much the changes we tools until traffic were two too changing the the in spring to have some some that were new see rankings took

we made The changes of engines and the way with stay rank of of And the sites. to that on so an to links improve you’re target our number forth. This pages is of your terms top really ongoing web and you second the is have a search to content rankings. pages, quality moving technical structuring how thing in

in forward completed as allow and a in content responsive is a mobile days. site, going core are our step Jim those us the share made site working sites. anticipate for And means XX which being replatforming have we big us. technical of of algorithms So also we desktop or also platform, essentially we functionality design, really for next term, which changes, been is design to on sites some on, and so the to mentioned, site desktop the our most of that which And same go number to the medium year, a the now the impact changes to ranking how

Seth Sigman

guys and then and that of believe Okay, have Dan, these about just from next you some to perspective, a as change should initiatives between think you reason about? CapEx the retail talked there online year, is spending investments any

Dan Sullivan

No.

shifts bit -- is overall have, of guide. it, X.X% view X%, so we think the the IT. warehouse, cap spend, proper still that Obviously, store a and I between revenue call maintenance CapEx

So no in the there. discussing beyond, for ‘XX initiatives our in so Ryan already our operational plans it’s issue has and long-term been were plans

Operator

comes question from Rick with the next Stephens. line of Nelson Your

Rick Nelson

I’d your October. quarter commentary negative the as on you third well you as tracking like were to about comps, ask the through

positive. Your the commentary December that as turn drivers what I’m November, you there? see suggests curious would

Jim Harrison

stores to for in-stores. only XX%, their the to to that well. intended at brick-and-mortar on Rick a were continuing I web is for to Halloween where our for Halloween consumers also shop going shop season, interesting go XX% their they shop were inspiration, number to that asking there think of what goods. indicated seeing indicated use XX% while during are It’s they we’re goods quite they primarily that the they intended to indicated surveys the And perform would XX% conducted XX% Halloween that They web.

quite QX up our we’re who we strong. being we in over business very -- at business. So their think also likes well looking quarter, everyday our and for and very the I in I QX, month down robust in stores, It Halloween. that shopping look up and the of for the and everyday business in goods we’re their see was brick-and-mortar fourth roughly experience and party Halloween speaks in When our X% consumer, X.X% at think business active still we’re a X% goods of

really everyday comp, it’s core. bread-and-butter our which really is the our driving business our in that’s really So

So I think good there’s in fundamentally, things a lot category. of good news in our party the stores of and a on, going lot

Rick Nelson

horizon? I’d would time well assume so challenges And final [Indiscernible] in into over months is or web two that these push the it that

Jim Harrison

our at it the next capabilities ecommerce problems, now really doing fundamentally, both is and we’re what mean, bulk and of Rick, of the remediated looking to we desktop chapter does. mobile. the our Yes, strategy our I and the the of development

Rick Nelson

sequential And quarter, shelf. your I I’m this could if that you XX% of basis think, quarter ask year-over-year. XX% you points curious mentioned about XXX about that share up I shelf, was of That, the you last decline? the manufacturing mentioned

Dan Sullivan

difficult it’s mix at a share Rick, big on plays of a seasonality to role big because Yes, shelf look trend basis product plays a and role.

What of grow us by our three is not continuing points. opening led gains. to moments accelerate saw at and So share share at shelf will runway to be in you time saw foil you left really you we there but comp still shelf share meaningful and really also only say QX this in balloon you to then of really have areas: year-over-year. but in of we manufactured excited it And important growth, leverage about continue is heard is manufacturing the we grew which ACIM in for Festival. business business, up, margin discrete overall to recent XXX were two of look come really comments, acquisitions a begin it shelf, through that basis did And

Rick Nelson

Great. Any for year this next targets time? at

Dan Sullivan

in give certainly year, It’s QX do but our we’ll next No. for too early to for specific that call. targets us

Operator

of from Your with the Barclays. next question McClintock line Matt comes

is line open. Your

Matt McClintock

A couple of questions.

alternative the Is we year? sounds just and of think a in The that course businesses? about How in would place. over in something It next When is the the optimized businesses? sales can first on happen we international. do acceleration real team those start those next or that like to and quarters markets one couple see of

Jim Harrison

I’ll marketing, some international. With really I finally, ability selling the can ability business very organization, alternative and important talk the you’ve about is describe the our that been we’ve resources. to selling the really it, distribute, last alternative structural having added the sell. ability to changes to talk highlighted, has to organization Gregg for pieces store. selling to specialty as our our ability to additional to and focus the ability in the The respect as of been the manufacture, has markets the because made source, right? markets, party like then, about some us to part underdeveloped part still, design that three And

to but XX months. to see we’ve I’ll over expect to growth next not about in accelerated So international. some as meaningful improvements And talk more would alternative XX we’ve now developed and those it resources, growth, to turn growth, we any that the Gregg had now markets

Gregg Melnick

on perspective, have the markets us able mid-double-digit you’re so opportunity, and twofold adding their also of party organically. existing grows, really acquisitions a really both around world provides markets grow kind accounts, for businesses. we’ve as, growth category a been foot. the accounts, from getting growth to in as additional grow to a on Matt, category And we’re it base for But international the new low well growth bringing real we on Great. an products footprint begins new from I still to foundation leveraging think experiencing those with be as What’s grows. the international take now customers lot acquisitive is various the to within us of One, to Granmark, strategy. runway going for in continued as of

that continue in And years. so coming the to really we expect would

Matt McClintock

And initiative Okay. improve just then experience. to the store

out guess I entire see correctly, out rolling near additional chain? you’re think, the pilot those I initiatives rolled to When said recall if that XX could term. the that’s I you in we stores. the to potentially

Ryan Vero

stores. really roughly prior began XX We Halloween So we in launch stores resources post-Halloween the to pilot this to in season. recruiting selling additional five began

selling, able mode right we We’re have in sure want test the this the year. the our be in on executed learn right to a make program, the And with the through now engagement doing out we that folks to right roll real success consumers. we’ll and to right be stores, tools, it model we see consistently as next of our course that continue

Operator

question next the Your comes of Morgan. Zakaria from JP with Tami line

Your open. line is

Tami Zakaria

pricing, margin prices So to if do seen after my your some this in we’ve the or expect at you especially impact all? that question is, first hurricanes. year, spike How resin

Jim Harrison

has of well. changes on by that. levels due through with -- in change level not a we’ve seen well along the contracts paper, because a cost at pass date, To as we able we’ve resin. and where costs to as that impact been quite well those pricing, we’ve Resin, with wholesale as to inventory dramatic dealing our result been both of Part been is them Historically, cost, is been as dramatic in to able commodity that commodity a there manage of as historically, in affected everyone we’ve a retail place. familiar our able the we’re have that

Tami Zakaria

question us business could you of costumes my much remind costumes? is or about how your is, second And

Dan Sullivan

you juvenile have business costumes, adults, if estimate. into careful be definitions XX% So of a use our you that’s proxy think a you get costumes, bit Halloween the because to But of gets is of I fair it costumes, costume, hard. roughly

Operator

Your Deutsche next question Bank. line Adam Sindler comes with from the of

Your line is open.

Mike Baker

It’s actually Baker. Mike

October XXX. right, to by did that if million? issue say you XX I are the closer think. that’s So I think that’s October these points, down hurt the And if is case, Yet, numbers basis e-commerce $X about

how guess trying weakness? is figure are declines how out of issue because this other, or e-commerce and I’m of just So comp your to whether of much the rest the competition general much what’s be it I weakness? just more

Dan Sullivan

was impact Jim numbers e-commerce year-over-year quoted back the of Obviously, the into in quantifying flat important, Halloween. in think, the I growth just decline coming into Mike, He we’ve to essentially was web. the seen a performance. So web getting QX the

that’s So math. to clear just piece, the up one

improvement was the but that gap. QX, and we U.S. an from of in a remainder saw base store Canadian in stores, year-over-year, the which Our performance combination is what be of will slightly that’s down and

Mike Baker

of opinion insight And impacted because your spending? competitors like business, Or your into some your you is feel is you have to of wholesale due consumer by do others? share your that being in

Jim Harrison

our stores on X% million. $X means stores X% So I’ll our frame in mean. what

it’s So of effect $X it. terms a million in quantifying

visibility competition, franchisee tremendous In the terms have of we obviously to network.

We of outperformed City would I segments. the across independents. also visibility those in board, Party have say good all terms And

any we lot intercepts do of and whatsoever. based meaningful and market have we have that, that but of upon been Amazon, lost a terms Spirit believe, not on the we market In the don’t done, and mass share visibility have surveys

Mike Baker

You’ve not.

at could I you has, my adjust Okay, hopefully, understood. to fourth were and is closer little X%, much essentially would quarter? up about tough, midpoint, will But down think I guidance maybe was -- EBITDA down quarter, margins implied in XXX in If I my X%, my math question which maybe more margins imply EBITDA, sales a right right. But margins so Even here. your Why ask up basis EBITDA you accelerate. which the math math again, quarter the third If I why -- the fourth should think points. addressed be that flat. one the is your think

Dan Sullivan

Yes, you’re close.

the the going Your to somewhere point year-over-year. be We X% on right. that the would in is say QX range revenue is

seen expansion we’ve margin year-to-date gross in OpEx see QX and to September. what similar will QX We performance in

to margins year expect line see in We operating income with QX. broadly last

year have were we this and capital that spend deferred prioritizing some quite fourth keep we a number much new a significant Halloween. we quarter. better post-Halloween, of add-backs the of to activity, ahead done We’ve year, mind, rent store had our of and in last did think for in job relo I

Mike Baker

add-backs quarter you helped in had of your which you won’t So year? the which repeat EBITDA, fourth this -- last which year,

Dan Sullivan

right. That’s

Mike Baker

that’s why the down. margins be And might

Okay. Understood.

Operator

Your next Nagle question Curtis America. Bank comes with of from the line of

Curtis Nagle

allocation. capital on one just So

level level why prioritize above exactly bit are leverage shares at buyback. other a million that pay in we see $XXX and a good typically don’t that a the a engaging running rent down? on buybacks. you buyback debt but understand announced is I peers adjusted guys aren’t you where at to basis, expensive, a relative So your I guess, guys retailers

So that would on helpful. very color be any

Jim Harrison

there would Sure, There by us. for I are we are saying companies, that are of think se there both. peers per any just retailers, I start product don’t hybrid a are consumer

basis if can $XXX than in free whether that earlier, or in different it’s million the whether whether of "retailers," and best for or substantially in think other an as access are all flow million of it’s We cash ability business support to competencies in paying to deploy shareholders, investing look characteristics us authorization We get understand of it’s capital way think terms for for at matter that said and X.XXx building look I to options, is it best of all provide and than look and flow or context, I our as look deploy on at less to our to of cash down believe I try gives our of returns annualized think that those how that we the and in a debt understand us our and at returning leverage. it’s shareholders. the it excess the it’s best model. out wherewithal to capital a most share having feature we shareholders of and our buyback stores a at those shareholders capital we Our our provides very who acquisitions, think And whether $XXX it manufacturing the debt.

Operator

next Telsey line Joseph of comes from Your the Feldman question with Group.

Joseph Feldman

little line have positive in of -- The the nitpicky with the quarter it. the move tax a to corner you anything if the But to on around exclude that there the impact was guys XX%. else back we be to and issues, rate to need you the tax lower a it Because did about? thinking on is going first one. it But just why the had one, quarter, understand you’re I sort that

Dan Sullivan

question, did. it also, There the to no, tax as a to to related the on and true-ups. mentioned adjustments upfront, I hurricane FX. some the was from tax positive favor But we No, a Yes. to in I of of the small to answer things quarter assume headwind rate, mean quarter have in were state impact did on the was number our EPS had, just EPS. Yes. well I the exercise my was we that that options related provision as in -- matter mean highlight, there resolved It to in on a return you saw and

have we in in saw that we the effect anything would don’t the QX. QX So answer beyond is, see no, that

Jim Harrison

question U.S. obviously, positive from reforms, U.S.-based a income very obviously, our on tax we include our EPS. coming proposed effect, a most rate that to extending of our you’re if have company are with operations, change the a the in so And effective would

Joseph Feldman

some the to the you sift in Good the another site the at are any harder picking This BOPIS? like quarter. question. at to since are noise this given this check, or or point. way the And change trend ecommerce X.X launching have months comment inventory percentage on or through up But store there then and people issues using of a but point? little be with really, of like, people the it’s seen BOPIS know what been anything I X may only

Dan Sullivan

Yes, of the fill ask it, I’ll I’ll of in to numbers the execution end and Ryan take it.

been that of do to your an we see impact, store that business period in has actually is good that’s -- traditional web see, do We’ve points business. now, and out October. open of bit basis yes, built we roughly the moves it which so a the and and obviously, web couple of $X the So and million really impact to revenue a BOPIS-related over hundred September

we So and online Obviously, we to the without maybe, it comp, do doesn’t program. look with and BOPIS. at And stores impact. total you the talk do to affect BOPIS see and with Ryan, but without want our yes,

Ryan Vero

online, the deployment you Yes, store of our out, build in think third is mobile we’re of we’re the Today, traffic. only web pick it in up early platform, our mentioned, onto which total fairly buy and stores. we desktop And capable really all I it’s about our bullish the on of fully once potential only longer-term as in platform. on even about a really,

as opportunity greater historically drive online. onto and much, to categories, deliver obviously store which more while And pick categories this BOPIS order we that web upside some retail the a customers for using the so have balloons, for to we them in been up our tremendous for have like customers they us not mobile platform move thing much strong are

excited potential really, So with by really the that.

Operator

William of line Lynch. Merrill Bank from next with America comes of Your question Reuter the

William Reuter

increase period. or e-commerce competition I’m from seeing in some You’ve holiday from comments the competition whether day, competitors. brick-and-mortar either wondering made around increased an mostly other players about in every you’re

Jim Harrison

always With in stores. respect what party much of everyday has to is mass the of really the party the stores, our been competition in market it terms the category, competition pretty the own

the the to we there since the ecommerce them. we visibility basically associated wholesaler of players, everybody When everyday at and We primary competition a hold have don’t in from IP business. see look almost coming all great we with the lot

and clearly sell being the in-stock itself category on do, web ensembles web. it merchandiser to coordinated is we and tricky also For anywhere. core the managing XX to lots on the from business a and sell of a of to really and reasons, merchandiser thing think pretty specialty We maybe is manage differentiates party very coordinated general the or don’t difficult items, XXX where I that’s party ensemble the components on them general SKUs

William Reuter

shops you And holiday, And number this will around based the next it believe pop-up activity year? guys may not year? Okay. have upon you there that those do competitive that the guess, think I of number then do change increased been are that do the profitable a of substantial will you

Jim Harrison

and Halloween. Halloween on And our simply yet the do postmortems to still effects on diagnostic determined formulating and, Halloween finished the not next pop-ups; in various of year components approach our City. for the on be our plans is particularly, for of we of how on have we Halloween total that We as business the terms

William Reuter

target to lastly Okay. have of started hope But And the end the year? year. year? you this where seen leverage leverage you end for target have Do for you from think We’ve me. of then end to next a just next your about

Jim Harrison

of Somewhere in X times. the range

Operator

comes of the Martinson Your next Karru from question line Jefferies. with

is line Your open.

Karru Martinson

just stores. I up on to So wanted pilot the follow

What the your more. You’ve fleet? for see that in of that? applicable CapEx do now, XX store had you are entire five being the expenditures deploying to kind And

Dan Sullivan

selling really of Yes, will de out happening the to there’s us skills productivity CapEx the labor create to is that no isn’t a into we’re work There labor need of What we line, resources help allow in-store also is and doing store to impact. much. store see environment. the But and pivot CapEx take the on we’ll better here actually a types minimis. improve

Jim Harrison

people, really It’s Karru.

Dan Sullivan

people. It’s

Karru Martinson

out And to has you had? can that the is something the footprint, if it continues that it roll to that have that you entire feel success

Jim Harrison

the a the disciplines a in basis resources make fleet. consistent to terms of across matter right it’s of on place and executed proper people, Absolutely. It’s building the putting entire sure training building right the programs in

Karru Martinson

think for working mean, the X.X that that leverage the when that? you? about about And cash of we leave I Okay. potential swing I target think should the include for buybacks just how kind we capital here. assume ahead box lastly, Or would net year-end, share does times, that of would

Jim Harrison

of None we the money including to buyback, how many our any process back. how spend as much on leverage, incorporates we guidance, thought shares buy

Operator

from line of comes the with question Grant Jordan Wells next Your Fargo.

line Your is open.

Grant Jordan

of Just a quick couple ones.

inventory some of talked inventory last terms this stores? Halloween up there a about from year. You little in finish How year bit was weakness because was did in there carryover some

Jim Harrison

as at independents own our carryover at that franchisees substantially see anticipate year-over-year. carryover well is We the of the on inventory and we inventory would as down stores,

being would we remarks, my So -- see bouncing as we that I mentioned timing expect issue, a in that that’s why back.

Grant Jordan

guys? bit talked the of you was then seeing, little weakness mean, you about is a of some of franchisee I are more seeing for it independents, just those And Okay. weak Or there trends out there? Are some the stores. out you closures

Jim Harrison

they the of course the the to to through extent, inventories, of franchisees, independents just Halloween. this think because entire high-level ultimately the would of them. for open would of more worked carryover a their sales they’ve position, a degree, some inventory at that that pressure not that now way their themselves think on lot which better really through into carryover had large I anticipate translates and also buys I in-stock And year, back I of a into get to

Grant Jordan

there’s pipeline so you of those left. Do then franchisee stores XXX have And stores? of like anticipated roughly or any acquisitions out sort of

Jim Harrison

as it of being the it where more on available potentially and reinforce stores additional brand be up as The white us acquisition accretive and franchisees the acquisition ability territories, there’s look of capital for strategy. at We open a franchisees as to our we is shareholders, space much of the gives good further continuity can use believe part brand. and to our strength get

with developing customers, important is strategy, success a of our think of we I as stores engagement our getting with about to store to that all endeavor. perform associates, think our model customer-facing better that for long-term

Grant Jordan

think And may then overall said do last share think gained one, held or just you you you this, have -- I share? already Halloween, but

Jim Harrison

we pretty held think I much share.

Operator

concludes closing over session. I the Q&A will management for call now the turn This back remarks. to

Jim Harrison

interest good. business. for the in joining Very today. support you We continued and again, your Once everybody, appreciate thank us

the to team, questions reach myself at subsequent the ready answer have As additional to time. stand any free and a may always, out Dan, of you and us. rest to able Feel willing,

We to have are to this Thank the you provide able happy be much. information very the call and quarter. for quite

Operator

This today’s concludes call. conference

You may now disconnect.

Party City Holdco (PRTYQ) 13 Nov 172017 Q3 Earnings call transcript