PRTY - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Jack, and I'll be your conference operator today. I'd like to welcome everyone to the Party City Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. reminder, is a recorded. As Instructions] this being conference [Operator call to Mr. I like the over would now turn to Ian Heller, Associate General Counsel of Party City. Thank you. Mr. now may you begin. Heller,

Ian Heller

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

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

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

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

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

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

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James Harrison

on Adjusted XXXX. line. continued by expectation of on today's everyone, Thank focus and then and we on for the about well the will both focus shift. open in begin X% continued performance pleased XX progress increase that questions. vertical us support strength the operational adjusting with grew solid with results $.X.XX per gains. retail of the initiatives, detail, Good increase up results Dan of share on you, After morning, with underlying we're quarter calendar once second These including we're demonstrate Easter of the of announcement which, financial underlying expanded discuss and your today. approving results grew when the the growth product greater share associated per XX% the our largely sales realization and is basis line top business. again a for will highlights of in sales bottom the productivity I comp for then Overall, quarter the model and Operating for over the X% Net earnings prior the period, the the margins points, the making representing will the headwind with as thank pilot. a the outlook basis for summarizing second joining Ian. the of year. you as our Amazon were call

broadening with against reach the also new our pop-up retailer, world-class business of as Halloween of During to relationships the progress store become product to made strategy financial the we the key deepening the retailers, efforts a product format. growth trade, quarter, accelerating of including expanding commercial the good consumer priorities number channels and

about earlier this rolling program I'll shortly. this initiated morning, announced take more path Amazon the out we Additionally, to also market. pilot we've with

proven And our a later. our eight delivering finalized we brand will debt finally, provides more with two ended, instruments. quarter to year new floating of previously further acquisitions discussed the we strengthen securing sheet attractive detail profile the a for as first steps took a this by an rate the discuss at expanding City balance the balance franchisee extension better much laded multiples. Just Dan with structures, note a ABL while existing in conjunction and maturity unsecured between stronger fixed Party

productive and busy a it's quarter. all-in-all, So

look and despite revenue we our associated to profitably grow shift. was about the of the in quarter bps Retail business. XX systematically, As Easter with sustainably X%, headwinds growth

of which XX% and into we enhancing in these second the quarter. many this company-owned seeing go progressing from The XXXX focus. meeting delivering portion stores productivity is season. of of of Planner important in to Importantly, at year, omni-channel expansion gain as Party more are is effect and ahead clear strategic expectations The accelerate we anticipate savings The the efficiency evidence Party priorities. further reinvestment Dan scales in begun are Expanding redesign about a meaningful began capabilities, program, labor the City program initiatives into complete key the we now of Halloween comps which our expected and will that detail. rate, we've such, as remain

piling creative, improve consumers new product nature the enhanced side browsing. life content, flow a mobile in began we usability site Following site with and re-platform functional and check-out January,

full expect late to the We mid deployment in August. site in

some continue XX% is total USD counter of the reach in-store buy distractions and [ph] now from pickup of to to about we see Additionally, continues online, the which grow. program

direct the months. quarter. remains poster. consumers While we which reflection the over on the We're the made clear BOPIS twelve also progress last American improving work with focused have XX% CRM digital North relationship A comps total initiatives we've grew including of help in

in out customer finding strengthen we and CRM base the promotion by are building and better the in characteristic QX, informing consumer targeted data During marketing sites our that key further the capabilities strategies.

the extension and opportunities providing category stores while most for disruption approximately deepest the offering relevant of format and connectivity effectiveness. pursue in lastly, late limited test June, objective will these announced promotion assortment category. current in toy in we program, supporting assuming into stores as While And we'll expertise insights we our leverage of Halloween the enhanced pop-up increase pop-up are consumers early for will This take advantage consumers. product provide XX cadence with the stages of

clear pilot 'R' addition benefit, Toys tier In sites. location provides a securing top in many 'R' including and Babies to the Us assortment Us advantage this

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partycity.com And and for focus We strong announced the as our remain reach the on We characteristics, creation finally period allow of growing the potentially in to database continues and initiatives expand reach a our Halloween consumer TRM space. conversion we the to on also unique an year broadest update the of costumes. providing of customer visits our offerings. front new data even continue we efforts. our proprietary grow, end product our track will and offering brands today, initially site market on marketplace. of of with on we're meaningful this progress. the Party expansion As with the to XX you the tailwind further season, to by will conference digital excellent view This us City a In leader Amazon our and

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buy consumers We the throughout store our this also Amazon Halloween available and the reach. pilot extend up further anticipate will season the year for online, be pick

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valued leaving the of of will like of my success business the past over recently like behalf month. initially organization remarks well Gregg him and a of with President conclude Board in financial many and most On to value the consumer within I'd Directors, future by team. leading to our for friend. has that the team I entire PCHI the Gregg management the of discussing resigned product at for him been company change the organization, end this his has contribute the and wish the years, management position contributions and the XX the the be partner a have Melnick, retail been Over Finally, the thank endeavors. time, very and Gregg business.

over for line we I'd to reiterated have Dan summary solid of progress with performance call with expectations, in quarter the was made results now, And detail. and XXXX the the on growth year in date quarter discuss full outlook performance based that initiatives, and to us second to the with to largely key So in turn on like the guidance. greater

Daniel Sullivan

financial outlook Thanks, morning, up quarter provided the for performance questions. Jim, discussing the everyone. for we'll guidance good and and XXXX on I'll and and open for insight our then call before operating our further

and income currency. X% were rate $X.XX quarter to results control driven filled by margin our gross operating As expansion solid by with at points. reported strong financial and XX XX the and We by Jim X.X% by strong growth, adjusted basis initiatives. XX% or fundamental, Grew for and growth adjusted largely net line line rate said, second revenues productivity execution consolidated share. retail margin in points expanded core per almost quarter, line gross of cost further $XXX our EPS top basis of our income bottom we of execution expectations, top In our when our grew by delivered disciplined adjusted million

generated also million approximately We pre-cash $XX flow. in

X% our increase network headwind in basis opened XXX that the and Brand a which last months. a quarter footage Canadian results, in North basis at line quarter's stores holiday and of permanent quarter. stores, our X.X|% or points acquired calendar the we increased and included business the new of e-commerce end, on over a store about rate constant headwind second one currency, XXX storage five of At closely net in quarter comparable point basis by our our totaled store which basis in QX XX our retail driven expectation corporate store stores, the in and recent as with grew more we run shift Easter line the comps we largely twelve call. retail were X.X% a point Looking despite X% top from by XX sales independent U.S. segment reported XX quarter American increased include our our estimate mentioned during trend. and and in On basis, our and sales

X% including quarter and in when once of category and XX% from strong in a grew up traffic, year. were sales a a category again served again in saw a about everyday X% our sales comp BOPIS as over web and American North Our inherent We strongest our of importance of growth business. our which reflective solid core resiliency performance for the reminder the this traffic

well performed business graduation our over up year-over-year. Additionally, X%

performance businesses. Turning continued product and in strong softness the and foil core The when acquired in and to the X% markets independent adjusting X% continues Net by strength consumer QX in in category. the franchise after franchise for acquisitions about primarily franchise international driven impact business of exchange, impact the revenue non-vertical decreased balloon for channels. U.S. our increased stores of adjusting foreign reflecting

plant direct results these shipments. were impacted previously shift by negatively from we certain the As a slight in of timing Halloween disclosed,

grew the the high by solid this products category in our management nearly manufacturing involve deployment top the International strategies Importantly, of single-digit further role vertical driven consumer business Anagram, constant revenue expansion. delivered plays across X% foil in of line reinforcing markets. our quarter currency, growth balloon and category

We our U.K., Amscan quarter, Europe assortment, deeper and in from In currency. and innovative continue grew merchandising. all benefit SKU double-digits the constant refined penetration Australia to

was margin year. above or profit basis points gross last the quarter consolidated XX XX% Our same

centers distribution in retail freight Continued as in product due wages a strong gross of of to Shelf, Share cost distribution benefit and a higher our margin of offset decline productivity increased result mix wholesale by commodity to manufacture our lesser and extent expansion pressures. partially the in was our positive the retail division mostly and efforts costs increased

and flat by Share net pressures foil asset While of total saw balloon the manufacturing last of We and and to gross accretion of the Operating and mix margin was of year assets ACIM Retail integration. leverage expenses essentially basis spend. our XX over drive our Shelf of XX%. of benefit increased reflecting revenue continued acceleration expenses despite on efficiencies operating of category, including shift further business. the across in XXX inflationary Shelf in related basis by QX leveraging last broadcast of year-over-year, triples. basis at under points, doubles strategy increases just minimum our percent Granmark productivity converting points XX to emphasis driven the leveraged Share improving the our just a Share to media a XX%, points to and growth all through wage the leverage versus Shelf to year Manufactured primarily manufacturing

labor We XXX in of the a our continue reinvestment stores improving catalyst for in on year-over-year. our to remains see of focus management, productivity improved to costs store productivity retail across customers. in all contributed fleet point decrease stores of and the experience our basis labor more shopping efficient This which

by the amount comp Jim quarter tax and benefit at third Interest operating $X.X operations same productivity. increase double continued of As further will rate the net is just the by second increase stores due were end labor XX% performing increase Party million was QX. facility, income on during million term mentioned expense growth, year almost XXXX an approximately borrowings than million our reported better or LIBOR was with XXX well Reported on and the under quarter lower repurchases both million stores the was results in solid XX revenue, essentially in planner highlighted for be gross driven last gains improvement solid attributable rates by loan line fleet and and this quarter, and Reform. we rate. Based quarter of In in our quarter margin from top with and of ABL XX of plan year $XX.X or XX.X% These facilities. the the basket Tax August. ABL to increasing our representing the last in the for effective about the the sales to basis growth, $X initiative it's the of to $XX.X XX% both the share end fourth under and point strong and of of the impact above

compared year's $XX.X year. income quarter. share was of last net $X.XX growth per compared adjusted Adjusted to XX% last second Our share represents per about $X.XX to million of EPS

from EBITDA backs. share largely of headwind and interest year, With $XX.X a by $X the driven million was cycled Reform higher as by Halloween buybacks, increase rate. Tax of a partially positive last versus the of add $X.X result a the quarter non-recurring offset XX% Adjusted as we million slightly second about

less quarter flow quarter, year. adjusted below the at as the the EBITDA $XX pre-cash which defined million During last second we was delivered $X of approximately CapEx million

quarter, retail web celebrated flow inclusive our effort. we times. our distribution operations had asset of the our efforts, of quarter. of to pro $XXX use money fixed This support of debt XXXX center replatforming million in in a secured capital basis we a approximately existing from $X.X the the X.X Cash productivity offering our ABL CapEx and took from revolver of July. working $XX priced automation existing of in leverage As quarter the investment with net ratio proceeds million the frame. of transaction quarter, At in $XX subsequent and in late million with bond end $XXX debt simultaneously with use the $XX X in following the quarter about our application place forma at the in year ended extended or attractively in million initiatives the on We that million and leverage neutral available resulting capital of billion based

improved much better our generation. this structure security our flow cash we Importantly, aligning needed free maturities anticipated with and debt maturity profile providing across

likely rates interest Additionally, certainly improved rate premium, we fixed debt a for gaining at rate to of time increases. profile, small prolonged floating our

prior rate now of roughly of the transaction. XX% is fixed versus only debt made up instruments As XX% a to result, our

our for to and full-year on performance half our reiterating fiscal the of provided guidance. to Based our date the Turning outlook. our previously we second year, outlook XXXX are

in range $X.XX to revenue income the be $XXX $XXX million. $X.XX range to share year. up billion expect the the or We $X.XX still billion be be and to continue in to in million approximately to to $XXX anticipate net million $X.XX We EBITDA of sales of full-year adjusted million to for of $XXX range to adjusted X% be comp the per and

for points we've rate expect We fiscal by supported to points over the of and margin income basis of margin XX gross about basis reported XXXX increases. GAAP continue improvement operating about XX XX.X%,

in million to interest year. Finally, million the we the range expect $XXX be of expense to $XXX for

In capital of terms with X.X% continue on ratio CapEx priorities, we of allocation plan spend net about anticipated of a leverage net revenue to ending the times. to about X.X and debt year

other all and press please For it over I'd refer call our questions. release. that, details open with the around to turn our outlook, back to And operator up the to for like

Operator

with Thank comes line question you. Stephens. Instructions] [Operator Nelson of first Your Rick from

line is open. Your

Rick Nelson

some what Thanks. Like relationship, Good how about morning. Halloween and motivated Amazon? more much will to get that be assortment your the on Amazon color of

James Harrison

With best and largest probably morning. really argue the Amazon, the think to to trafficked world's it respect is Good most way I frame Rick. is Amazon with Sure. mall.

as a those City business business is ours. and hold And City. maybe who's If consumer brand customer you broad really we buying, mile the of It's our of our the a so consumers were going life virtually market customer business events. our enjoy shops Party Share help mean awareness. the in doesn't Part XX% Shelf to the on our that think to to and we when recognize about moments. party celebrate special that goods party That XX% model, almost moment know model sales to business XX% we We you consumer speaks anybody

consumers in the consumer store So process. the To review easiest the consumer another through way thought eventually life at, on be two the help our our platform And trying really we're opportunity a front is goal front those get Amazon special storefront, marketplace the celebrate is moments to that really it. Amazon an advance. of Amazon look that's going just and and just store mission can to we explain in to extension for to

the our of on much we how assortment, home of focused big. primarily costumes to terms In the

toward So somewhere culture City designed And is is what in customer over again costume proprietary we're XX% by our will what XX% of of there. in is probably us is will the be Part manufactured by remember our and once what we us. it and

quite on So Amazon. with provide differentiation else consume it to a everything with with

were excited you opportunity are about said we the were we So goes.

Rick Nelson

Right.

and for Okay. sales this what planner up? get on like actually Also branding party to left store like that. sort pilot. update seeing same Thanks of What an stores the are

James Harrison

turn to the I'll on Dan.

we're associate in answer and the not we haven't but days this I'll let disclosing Dan to varies associate, pilot obviously list We from still because question.

Daniel Sullivan

stores we're so by QX the but are Yeah Rick we in about of obviously up scaled QX. that over end of XX the course

stage, we model say very with results we're So performance to we're and early of which the model pilot. we're a link and growth comparable seeing action third all Jim's expand point can where internal broad in much has between and to party pilot continue the brush really comp basket led the us to encouraging seeing

go will will double that going XX stores QX to year. QX think by end more close in XXX to that the for the of we So from

it's informing So I the although and to too yet results ready we're because results the are encouraging still not expansion. the certainly early think disclose

Rick Nelson

fell What comment to ago of manufacturer know prior you're Share you in number can or orders if of I Shelf Share year-over-year. where year could I a was first it's Shelf that if also ask at Okay. the there driver quarter.

Daniel Sullivan

Yeah, absolutely.

is think Shelf we've think the which less the been it relevant Share Share absolute Shelf what I I of right. far talking mix about than numbers of reinforces of

saw balloon of points And so In accretion a the quarter, come primary was going this drive of of expansion what Share model Shelf we result business. was the margin Shelf another for total that Shelf is gains of through gains. continues our in essentially of of foil Share in flat margin to drivers that's quarter essentially QX manufactured saw accelerated continued to Share Share three manufactured growth XXX further from through we so games and all Shelf the basis

points then the including our those leverage we've to so assets drove continue We manufacturing Granmark the and celebrated three gains. ACIM integration up

Rick Nelson

Good to Thanks know. luck. good lot a and

Daniel Sullivan

Thank you, Rick.

Operator

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

Your line is open.

Matt McClintock

Hi, yes. Good morning, everyone.

on was I could wonder if a Jim for So toys second. focus we

fall, from Just you we've bit what Can toys is for getting? the also just with vendors can update landscape on think your to maybe the your product competitive this us And How evolving? you help of type about you're relationship can us building they're for that market retailers talk a after share? other fall? plans just just business of and heard levels inventory going about Thanks. anticipation of your more towards kind you that overall

James Harrison

Sure. for Ryan question toys. is me. Vero, Matt. is it here turn tell him I'll to who will President I Retail with of Group over for

point in toys answer Just time to not for landscape. strategies. competitive quickly your questions, questions though this terms over the our landscape, convertible That's to this overview Ryan of turn call. I'll to But in not to specific the us evaluate we're going on of

Ryan Vero

Sure.

consumers Halloween as City with assortment So going and many the running and in holiday fall our of an store conjunction standpoint, focused opening store beginning that we're be to now announced products a previous locations building we've toy putting this will we're season. side-by-side the be then of in pop-up roughly City which through on season. the XX From want the obviously Toy stores,

and really meeting holidays. it's top a shopping for of City. with listed store be toy the suppliers consumer so the It's toys Toy top needs items that and specialty focused toy really the on And store, pop-up those we're obviously suppliers industry the if seasonal products so the to you will those a on in

Matt McClintock

behind pipeline. fully going then as just And on of for generational major one a or some the helpful. this Thanks. thing driver That's prior if here I years? you. opportunities at buy I another question least versus to there's year for sell that's point on the one the Jim really required Thank extension that or type you And some creating franchises would down Okay. on franchisees you the greater these well coming amount back franchises more last at just what's just to and say

James Harrison

business any not XXXX most really have just really of so legacy City for the added back. may issues we is We've natural Yeah, right for And that's understand think and our over It's want it. with business. very And go with basis it and operators with you've day to a of have one buyer new really a the the have first years franchisees. most business, we refusal was a relationship nailed Party for Well we I franchisees in it required very XX tough owners the their most at end been part. we've a of one a operations. difficult

of continue bit be of number annual an on we transaction. to a for would anticipate be of I and talk that That to So they as to next basis, acquiring years rooftops XXX a will they franchise is acquired more and as there and suspect that quite issues smaller do those I them prime would owners face number reached continue dispersed would a want buyback after to last large inclined legacy next want about and issues we we've that would I are for to to years. I say generational see the most it pretty part several XXX we us about that amongst few so and a remaining XX a in would the doing

Matt McClintock

of you the Thank Perfect. color, all. very for much first

Operator

question next line Stanley. from Your Morgan comes with Simeon the of Gutman

Your line is open.

Simeon Gutman

Good morning, how you website speak marketplace diligence Amazon. thinking business know guys. about on fees as as at I Can one item? to own, we their relative about have paid risks the third want that is fees and just know the about party who's follow-up mean is talk who experience you their far you for other marketplace retailers the you're the I you and evolves shipping to to putting first and did as opportunities the it and the simply economics then way stamp the those on works it

James Harrison

Right.

casually. our very first help very, the quite on who engaged as of did something it well We and the consulting be bit was and as how marketplace a behalf Simeon. So on due a works conducted a we moment especially so was consumer diligence research, would great question well-known on assistance how spur we of this deal not of for perceived the research marketplace firm, of

the filled fulfillment structure, right of be going associated us is market terms on the of will manufacture sales to you're with we the generated bill it facility. site. be our we'll because absolutely new of And by the which In so if

Simeon Gutman

a for Okay. and one. detail on And financial picture maybe maybe bigger question maybe in just Dan

Just outlook clarify not by interest $X expense but going income is million to up net changing? the is

Daniel Sullivan

That's right.

Simeon Gutman

other then And the piece.

just then And question about…. another Okay. there's

Daniel Sullivan

guidance for We adjusted income debt took $XXX largely to the year, the $XXX interest transaction year. up range the for our million of to result on adjusted but not our expense million have

Simeon Gutman

on then Okay. been I just big profitability And you've since picture public. mean

really a disappointed on think called couple if in steady quarter, factors a expense EBITDA this freight line I as going I a it that of freight it's know were been well. but got pretty There was are think I right. you don't have up

just Just the temporary changed that business is or the talk anything quarter? temporary was this thinking about about to these we stuff expenses overall heard the profitability of

Daniel Sullivan

points margin because doing and to the cyclical delivering year. vertical And headwinds, right still that in in over a I what XX said freight you're we the strength labor is anticipate and quarter basis see of seen headwinds those we bit it think meaningful it and for points mostly what summer. of we're our accretion expect is No we've of year rate some labor the about despite business I around seeing our are distribution something margin we this the we've bit to is a little balance and in in saw QX think what although is

folks with So but in this as as allowed are yes, actually faced the us challenges compensate. our vertical to have we many are industry

James Harrison

that doing pick centers. very Most recently swath module which less and is We've increases to of as by our almost goods labor pick process in of will with the person skews cost July our us of fold our a to that on address called also that is improve everyone's the three ease with deliveries going live relates add of efficiency pool things which new obviously we're to I'll to months including think last fairly large distribution the a our Another mile it of dealing which to and of try the carriers. twelve center. burden something distribution point is number freight heavily invested in

can a I of and we lot thing addressing are address this there's a it. to we that So do think

will for next XX we future. make actually the over XX inroads distribution some an believe issue I continue freight to in perceived think to can months. be the I good

Simeon Gutman

everyone. Thanks Okay.

Operator

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

lines is open. Your

Seth Sigman

guys. could Thanks starting working productivity how initiatives top retail just or a every the on a that and the guess an up out the ahead results. graduation, I And if question the I called second offsets well comps you're of that positives? highlighted to of My is Good may productivity helping those your would when the X% you then are positives part look few and you be day place. lot. the show morning, of example again number so up give Thank business of you. be in obviously you. us in underlying wondering examples a a what at to you that was initiatives web What I'm question of have is number on line

Daniel Sullivan

So shift in the in comp park we business the purely to going that have obviously obvious Easter offset to the aside. positives can we're retail

little summer think would that solid think graduation is continues the some highlights patriotic so I the quarter business a then we for you be around business think and challenging see which you're And I of be and the offsets. timing shift been. and around again the the I to right everyday those bit are we're of so celebration call consistent

Seth Sigman

happening is initiatives, what as show a starting the And be box in to helpful? productivity would and could examples then how would the maybe and just of give us results that up retail you relates the in couple if to actually

James Harrison

platform about we've Ryan. talked you very just of very, invested party we also planner grown website and that the obviously of over top, side turn the and the heavily But as to in was up. I'll it our have each

to of terms I specifics the within box In out Ryan. throw

Ryan Vero

in initiatives. pieces sort of highlight major Yeah our three retail of

so the and initiative lighting also speak. tasks in Dan we customer First At the stores and LED in on stores put Jim helium moment focused ramping which And that systems us margins and allowing mean. quarter efficiency really on moving to some second our the of off the hours, as programs for almost new invested practices service XXX the our up general we efficiency within I and last energy away workforce third helium is the distribution as mentioned our in in and also but improve then pieces to really highlighted for helping in that earlier. processes all, again process pilot major productivity model is were improving and party receiving labor both reinvest efficiencies is operational planners just

Seth Sigman

that expecting and referred we If you I able quantify you third with Thank but for quarter back just you so could question the be wholesale wholesale the the one Okay. in Are business this that the in mean come is that to business delays the to Thanks. on you third expect quarter? should reaccelerate follow-up to to. other I would that.

Ryan Vero

delays in is Yeah of the about from in points XX of small or back in was come XX basis were our the relatively that'll of hollowing issue issue the alluding direct QX. we spoke U.K. timing shipments some to tailwind around factory to

Seth Sigman

Thank you.

Operator

comes question next with the Your from Deutsche of Baker Bank. Michael line

Your line open. is

Michael Baker

expect the to I Thanks. easier store of last half the so half can it's X% Halloween always in so year another should you're and wanted be what negative comp why and I Halloween back comps? X.X% the half it will why again sales versus and happened among similar a well things the comparisons year I see such back that we last issues go that you just because same say second about for particularly enough. this way are as didn't saying we first of so Remind us asking you're accelerate wouldn't comps you in year-to-date, quickly lot outlook accelerating some better close much how I website year. other approximately do But the recall the suppose half ask up comps

Daniel Sullivan

But early the first one, of run Eve days the it's run in like X.X% basis Yeah took remember business. basis place you're about Year's XX comp a a benefitting reported New rate that's that talk more so a shift that half from the rate point right. let's on year so

take which points into with one you the that's negative as that for year shift what of things, about when not New Wednesday will XX it said well which combine Halloween In guide. gave back moves the heard place December prepared the highlight to half a which our comp is you out worth this of mention, I'll for we have terms of and catalyst year Eve couple already That's next we then growth a and of a original clear in Year's XXX Jim that the will basis of QX. move all year

We a we difficult. think good a half again, So of just very bit there's and calendar we between we've the X% one of still performing business with half thought. the guidance on about and feel lot line largely shift noise holiday shifts given in a what comp two little make about comparisons

Michael Baker

And right, it's it's of either actually Halloween my there last but week? any pull think a Tuesday so here there's - not it as year calendar follow-up between a this that that's not the but I was big Wednesday negative middle try is I I understand on catalyst to year difference no a recall

James Harrison

But or before after. Saturday parties, about day for if simply you party the Wednesday a week. the It's the Sunday do Friday the a it's is think from if worst right celebration of worst of adult elements it. indult to probably have the night Wednesday, on day probably after the it's

much we is. is reflects that that worth In terms guide how think what we of are

Michael Baker

Okay. for the color. Thanks

Operator

Advisory Your Telsey Joe next question from Feldman line of comes Group. from

line open. is Your

Joseph Feldman

back Thanks. Good to City with doing. pilot to something Toy go to the going you be Want guys. guys morning, are

I'm there's it think about size targeting you of even or off box more some some opportunity be the rent little wall the is take Toys I prepared can Can you whatever is you need? former R mentioned in kind what of you a the store cheap you explain sites. because remarks, wondering possibly with a might and so Us about that size

James Harrison

flat Yeah, talk if City just business a in landlord the it's at I of generally that you has occupied don't or store Authority. a Toys once money Us The pay that landlord Circuit will get some not has box, for and little landlord because box, matter we per doesn't the we advantage store on generally. rate, take about R basis DICK's script box it's a a Sports or currently pop-up

those of got was. the temporary selling the the temporary box, - too of or box rent the right price but a So need just box the can't the is big size we or be fundamentally get to we area

Joseph Feldman

Got it.

it. got Okay,

is to be an And the okay. as will of ask I too the yet where really I you be related think anything that the the one guess of can there to seem about anything, question of research done anything there down the I mean just rent is tariffs So it's could you? you placing then of to much government's guys worried about there thinking but or road have doesn't issue of be tariffs impacting kind our

James Harrison

are product, very or with think what a of The example items China at coming is on full components which XB good ends looking - tariffs a I products from temper because a will tariffs with first of engineering to the XA with opportunities some we when gives no full-year which to give a a at items of into impact pricing very, negative percentage at is tariffs us to the our XX, are vendor we the manageable into August, be would period the several round looking our turned there expire. which With waiting to the is was accelerate second certain virtually need standpoint sourcing, chosen is round and where be round Halloween actually impact only look to and smart to portion happened at the respect of without to the the having Sure. really something that second machine. some effective government respect tariffs for period is the coming product the for time looking accelerated that is what factor business respect

and three impact almost tariffs with to are probably cups. latter is paper to to of are season. There over apply us, respect part next so of everybody forward will the tariff. and affected as that and going pricing just in to paper area tariffs beneficial with on reflected so going be the to that so lately And X% one certainly smart a will go to XX% are machines you're the But tariffs getting basis I plates equally be would season imagine the

cups on you tariffs. so the manufacturing opportunity businesses us to may plates for a United virtue see by we and we in paper share here of market from the As fracture an green some know States potentially

adjust it price be either will balance that to on reengineer number or So expect the tariffs. of material resource, impact can not we we rate of comp

Joseph Feldman

very much guys. and to Thanks good it. quarter, this luck Got

James Harrison

Thanks so much.

Operator

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

is open. line Your

Tami Zakaria

for you taking my thank question. Hi,

market So out if question for they them DSW added some additional and the my cut you're is now. in in rolling first time

where are my is, the So those question out? any and service positive you seeing areas rolling stores you're on impact your

James Harrison

Not such material small - it's to example at difficult a to get it's I'm very this impact going them. determine fine point. because the

Daniel Sullivan

successfully party focused pivot we're more doing work on Yeah yet customer to acquisition acquisition program scale we to not the vendor We're begin Tami, work. customer and real remember, acquisition up. any executing when we'll

Tami Zakaria

you it. Thank so Got much.

to manufacturer see or toy long that related the category your now opportunity is down you question any more toys do the stores. in items my testing term, So you're line

James Harrison

assortment in future. that the manufacturing do at year sell. does Was we'll then in us be the tell. will certain look But the for it, will But make Dan that's in everything way may down the of definitely ourselves. We we sense elements there

Tami Zakaria

it. you so Thank Got much.

James Harrison

you. Thank

Operator

from Chris Sachs. comes line Your Goldman next question of Prykull with

is line Your open.

Chris Prykull

the Good morning, taking guys. questions. Thanks for

domestic the some or year. independent larger getting franchise acquisitions of going franchise is stronger the What your all and what sales me over maybe a And been that from party domestic your I mention softness? good has you're function a know you you just larger and an wholesale channel. So is of did and that's softness soft players the out noise just are through the independent Can bit seeing business from for are but Why customers domestic away? you seeing there? walk of the is operators retailers past just

James Harrison

their party's probably retailer focused we've of broader little are solids in there's the lot the independent pressure business trying of been latter City. as we a color their market. commodities higher in lot the the businesses were the as them. on under City bit Certainly business to from Yeah Party the of upscale sure. places seems the supplier as people see and support Presence it's actually side store to on i.e. we we were more for solid marketplace lot a plastics consumption others that reduce on A just some the biggest category of And to pressure the side. Party our look solids like a outside of be the visit to and and

terms the like because So have to inability of I of do as to in party City, quickly. on we price evolving the ours in successfully of their so function a think the of resources it's as consumer it Party and they the more depends stores them evolve

Chris Prykull

that the toy color. on category you just enter helpful at the and process a a through in toy you follow-up the me quick How level, business more your integration decision level. look how That's did make gross can to does gets maybe sort your margins like one of to And how the margins? more party lastly leverage brand how a relative high business, specific Great. your and complement offering, current the walk thought then high vertical

James Harrison

stores. really with years larger I number stores the for skills last of a strategy been towards for carried in couple ways terms can of use the selection format me get to we So of the exact in of our a XXX work one stores toys two in that couple larger

actually carrying the footprint larger some of we've toys stores. So in been

in we radar their the see is good have opportunity disrupted a for And extension quiet that sometime the been toys marketplace our sure become of to option portfolio and on format. in product us have obviously to for an as expand we so work pop-up

are In nor party the will terms faction be we because margin, with our goods and we make we a manufacturer the distributor the current we them wholesale the at In product. as party of the case, of became neither an of can not this goods extract time.

party. attractive So the margin profile it is is not as as

Chris Prykull

the Thanks so to luck much. of rest year. the Good

James Harrison

Thanks lot. a

Operator

from comes Nagle Lynch. Bank question line Curtis with Merrill the Your of America final of

is Your open. line

Curtis Nagle

for very Thanks taking Great. the much question.

in if the the interest inclusion but So of I the guess something higher of answered at forgive terms from you the what toy offset unchanged I me is the the it or this guess else? comparators in which business is guidance expense

Daniel Sullivan

we ranges that so we expectations mitigate one have higher so our I half expense. guidance that the right can preexisting Now we again for and think reiterated on to interest answer is to the guess and within based short our performance

Curtis Nagle

follow-up. the or the to just not you anymore? Are role do we planning role guys present replace to And Gregg's Okay. have

James Harrison

build time we've last started and to no been the rebuild as retail a take Dan, to strong Harrison, plans consumer at are very, We've that Ryan products several Ian, business. of There very you competency strong team good entirely role. on really additional point really the building fill most team. years hold retail this side Michael been that know is of

comfortable always are there build then the So looking bench need there where to and we're we to in see buildup good We're candidates do strength out pretty we organization something. if in opportunity the are. look an will they the and

Curtis Nagle

much. Appreciate very Thanks it. good. Very

James Harrison

you. Thank

James Harrison

very we the everybody. forward well. look quarter again, a pleased with joining and Thanks you second appreciate I to good as third we're call. Once the Thank you talking report to much. in you quarter

Operator

quarter City you your XXXX call. We conference concludes for second This earnings the participation. Party thank

now You may disconnect.

Party City Holdco (PRTYQ) 9 Aug 182018 Q2 Earnings call transcript