PRTY - Earnings call transcript Q4 2019

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Operator

Good day, and welcome to the Party City Q4 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ian Heller, Vice President and Deputy General Counsel. Please go ahead.

Ian Heller

Operator. you, Thank and everyone joining us. Good thanks morning for quarter morning financial XXXX released fourth we our and results. full-year This

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

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

have Chief Officer; Chief our Executive We Todd of our President Weston, Financial Harrison, Executive and our Officer; Jim Retail Vogensen, our Officer Brad and Chief Group

discussion some it management Todd and that we open up We'll regarding Q&A. Jim, in make their start Brad, may by today's the forward-looking statements prepared remarks company's expectations of are performance, and uncertainties call results statements. note for or prospects, future this Please risks beliefs materially to or the that statements future These differ future cause actual these to business plans. could and events from subject before

reflected to that realized. these our updates we such believe are reasonable, assurance expectations or events, duty give be forward-looking expectations new whether will a we otherwise. any statements provide the can disclaim result forward-looking no of that as information, to future statements expressly in We Although

everyone to review as provided release earnings risk urge as filings. Harbor Safe the SEC our contained well in factors statements in the our We

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

our more measures, most directly please and For comparable regarding non-GAAP reconciliations information GAAP release. earnings refer measures financial to the to the

to Harrison. call Jim And over with the I'll that, turn

Jim Harrison

opportunity interim help to to our we I would decades who expertise on X. also over Vogensen, want continued begin to smooth Accounting as the ensure Mike February Good everyone, work Todd several all his financial working joined nearly have board. are for to morning, Officer for us CFO and with team, very like the and Ian. his brings executive a three on take to for transition. him you, Correale, thank today. last call you Todd us Thank CFO, and to and management months pleased by thank today’s new our hard Chief I introducing of this welcoming Todd joining

remarks actions we retail are up the And which operating and will fiscal to drive begin an of Todd our our improvement, the plans at taking XXXX. which our the XX for results your outlook model always, our to will the of for XX Brad are providing quarter XXXX and for improve company years. open and priorities, discuss will the financial then detail by finally, questions. our performance, call As in overview we XXXX. including the I'll greater the performance discuss Then enjoys previous my company's profit of core for fourth

Let the me fourth the with fiscal XXXX. of for quick results a financial and review quarter begin

to For million EPS and compared $X.XX share, the $XXX.X sales in respectively. adjusted million per quarter, were million $XXX.X and adjusted of EBITDA year, prior the $XXX.X and

year, billion $X.XX the was sales was X%, including to $X.XX approximately was share XXXX, EBITDA total share For while a comp as $XXX.X decline earnings revenue per compared adjusted adjusted in million. $X.XX and billion per of

not did the Halloween line our our top meet fourth quarter, discussed we November for in the as On expectations. call,

as we solids, our as were would Additionally, birthday liked. Christmas not and businesses strong have

position drove in-stock it in a as ramp was helium fourth the a balloon quarter our Our bright spot at in in business. up retail

relatively businesses the basis at by business while products consumer our performed shortage, third-party of helium revenue to close rest on Our anagram plan. a to affected adversely products continues the be consumer

line. impacted promotions the unfavorable as consumer bottom costs from and increased products businesses mix as at channel headwinds margin in However, the retail helium well

both margins. new business, sales there's I it upon events significantly headwinds the together As very came year. of difficult a affecting reflect little and A was create denying XXXX, confluence to for

but others, bottom were was of a our and headwind performance, past significant self-inflicted. Halloween that line top situation, Some helium like to year, were these much discussed the performance external, like this

The points of year basis the gross the resources the of retail. our and helium our our to procurement a margin XXX annual was shortage the results impacted alleviate year, worked source for Throughout basis revenue of course points. million find teams total $XX situation decline to by negatively at of XXX

However, so and XXXX supply to additional to chain. series quarter with adequate late our able retail supplies provide that restore creative develop we it were wasn't fourth access a in to the of City to partnerships to helium resources of Party stabilize

for represent our clearly destination As operations, of many a is point Party our go of know, balloons retail significant the differentiation competition. you City separating balloons, for to and from us

strong position year, experiencing stores this are in-stock our for helium. far a So

sales effort from excess to discount as over successful XXXX costs freight Halloween embedded soft place helium and in the promotional significant put expenses and distribution as by pressure shortages, not inventory the caused and expect we carried and we challenges combat couponing it. were an In would season, which as margins in and well initiatives, our as

products market business. third-party huge a the XXXX XXXX of as balloon helium helium in on of sales. as them in the businesses businesses franchisees a we result balloon felt of issues, impact impact broader global the pressure metallic beyond the metallic was latex put our year consumer our market But significant share effects the and XXXX both acquired asset. and challenging Having a well the retail in also a category of in for is

to helium as represented not in third-party approximately our million severe revenue headwinds retail business. $XX impact, consumer Although as

were disappointing, of made initiatives. some our While key there financial progress against some our performance spots bright and was

helium I as pickup retail For have our challenges the in is we sorted and balloon categories. a seeing out mentioned, example,

optimize stores on at closed approximately occasions and market most level, closing profitable laid store our XXXX, We focusing portfolio. in retail the rest stores and January to program improving health of a of XXXX we've the overall In out the optimization a at market in XX XXXX. completed help our performance aimed XX

has we our by well received Though represent growth us bright sales XXXX, in recapture consumers the XX.X% sales very a XX% e-commerce reserves been the and XX.X% was and excess in for liquidation far orders of we with e-commerce E-commerce pleased our exceeded in and spot saw the inventory are The XX.X% provided have of adequate. expectations, thus rates this year. and for for XXXX. of remain a

We also with in store over to our and total XXXX. XXX% XXXX, which which Amazon XXX% continue our in of pleased grew performance over grew marketplace, be front,

performed economic our in surrounding and adjusted the consumer despite products North alternative products and approximately grew to our consumer the the Europe Brexit. $XXX Internationally, With uncertainty businesses in Mexico, challenges markets and revenue delivered business, presented businesses consolidated XXXX. conditions global generally weak strong plan, American approximately million XX%, of dollar, Australia, by U.K close our EBITDA

trade $XXX of million as more net compared when X-wall reduction and XX, In than terms multiple of accomplished payables by of City capital Canadian EBITDA. December to allocation, Part December total XX and of Party X in XXXX. we reduced Tire our double-digit sale Stores this our Canadian at was the of indebtedness XXXX a XX,

more companies. a agreement which contemplates product doubling into family XX-year included the agreement consumer this supply sales Additionally, through than Canada Tire our of Canadian

year also Merchandising, Experience significantly was additions others. team President, leadership including an of XXXX our Sean Chief and organization, our as Roehm, the throughout we strengthened many EVP of important Thompson CFO, Julie the as our as Todd Officer as Brad

of urgency team entire to for long. enjoyed with and returning so success management a that to of Our levels is sense we is executing PCHI committed

today. I And to want to announcement speaking leadership, I made address before over we one of turn the Todd, other call

and we that assuming of April I will Brad release you the saw CEO earnings execute a team transition, corporate many development Vice to this in and well on helping Brad will Todd. role as As announced effective Chairman. focus and both X, other ensuring transition In Brad today, primarily smooth role new role, our of as provide as be I to will opportunities, the support

strong a in Board is stamp my on to search, and to Brad I have which many We growth. unique conducting that aspects lead City. on our identify an needed of in transition and of at business company to has months its X-year culmination leadership and succession next have have the right the worked the found we background In that to already model. the his believe we believe plan, this leader. during of our Brad possess This successor forward almost his chapter the put into other and lead the individual Party business embrace bandwidth retail seven this

chapter. long-term of City's retail and Party Brad retail all City I'm Party has build value led has to for of and pleased the As and to to next extremely aspects support change shareholders. Party growth able future the the Todd strategy operations this company's Group, improve the excited for in experience of City be Retail Brad and developed to CEO a roadmap for

turn that, to And Todd? call Todd. over with I will the

Todd Vogensen

morning, Thanks, good Jim, and everyone.

to team. a busy results are urgency. with know say sense to joined It's First, while have entire and And committed six a weeks business. productive driving the getting to am City been for that team I'd performance the improved very I excited like is the XXXX disappointing, of the to Party

Now turning for slides Please Relations our to on our refer details results. to the performance. site our the further financial available of section Investor on accompanying

not effective As driving increased promotional not expectations was performance. our fourth did in softer resulting quarter expected, meet as the Jim as discussed, as activity sales in sales

profitability. impacted successful and our were discount the overall we in inventory margin While decreases, gross significantly driving

currency sales Our constant X.X% segment With X.X% revenue XX.X% decreased basis our outlook last in both retail comparable basis. implied X.X% reported fourth on the net down quarter sales net reported In constant consolidated retail we year. and slightly earnings a in down total, store our on fourth below total down that the call, for and quarter provided from was XX% count third quarter and currency. the

in discussed soft. we results call, conference were As third our quarter Halloween

supplies innovation, more newness Christmas In the the category, structure results In our minutes, momentum. category. pricing and discuss aligned and Brad on addition, our and will party offset recapture lacked categories category, few and with retail which necessary focused in initiatives business solids the not assortments our a balloon we're improved market. that solid to in the stabilize Christmas underperformed, our In the was than the

Net Turning XX.X% agreement a increased to basis. revenue third-party segment. growth wholesale X%, volume international from incremental driven constant wholesale of Canadian Tire our currency and on our by

XX.X% quarter year. basis fourth by promotions The gross points of increased margin profit the the fourth quarter last the margin consolidated primarily below gross For driven of was decline XXX XXXX, same quarter. was or in

North company's our internally costume's, an gifts of Halloween XX compared self increase higher than American the impact of by XXXX, to stores share XX.X%, and birthday driven basis XXX increased supplied In impacted negatively retail year, or program was e-commerce by points City the points and due quarter of XX.X% optimization Party our in an increase our products, to to the penetration QX costs. by in products. helium during addition, primarily at shelf operations of the manufactured improved last gross manufacturing shelf store margins Total were and basis

XX.X% or of million Operating expenses, which excluding marketing million primarily and charges of name store The quarter was legal optimization, settlement goodwill leaseback $X.X revenue, fourth trade million the and XXXX. impairment $X.X totaled and than increased transactions a sale higher increase costs. reflects $XXX.X

line of $XX.X year prior to $X.XX and last bottom EBITDA of the adjusted $XXX.X year. in net income of million QX year compared in compared to QX these from changes is million XXXX. $X.XX $XXX.X Overall, $XXX.X in XXXX, the impact EPS was this adjusted was down Adjusted million million

Tire. which Turning posted reported full-year stores includes Consolidated store of revenue on of basis. of and constant on impact the in a X.X% on Canadian basis operations which currency a and Canadian currency, billion, decline Retail closures the XX represented a of X.X% a to to sale our basis XX reported a results. and constant X.X% decline was X.X% $X.XX

Reported comps discounts markdowns points half due from and declined of rate to for program, store our for Gross clearance the optimization basis costs. declined the year, XXXX promotional X.X% the in second primarily increased helium year. margin increased XXX

basis at was XX shelf up retail of share to total points XX.X%, XXXX. Our compared

increased manufacturing addition, In to the XX share for of points XX.X% our shelf year. basis

totaled excluding was store XXXX. sale name late revenue gain impairment goodwill in million $XX.X of the XX.X% wrap expenses, acquisitions higher the around and the on transactions or program, on $XXX.X optimization franchise and primarily than Operating result The were XXXX. trade and the leaseback increase million of

to XXXX. The XXXX per share transactions. ended Adjusted million year versus $X.X year-end net our the year. sale $XXX.X XX proceeds EPS the our $X.XX prior leaseback in was stores the debt sale Adjusted year. and was million Canadian and primarily million in $XXX.X versus versus with $XX.X of adjusted $X.XX Tire in by from net billion, our of down million EBITDA was income prior $XXX.X from the in driven was reduction debt million $XXX by We

year-end in XXXX, had capacity of and at cash we under ABL and cash credit equivalents Importantly, $XXX $XX borrowing our approximately agreement. million million

we've that like few guidance. items discussing Before our to XXXX full-year our review outlook, factored a into I'd

XXXX focused at initiatives on operating shortly. about retail will through results talk financial that anticipate Brad that be a our company. We're First, year we the will various for of and stabilization improving

and rollout initiatives However, take will the these impact time. of

expect As not these initiatives such, the we our of see do full in benefits to XXXX performance.

non-comp our Tire sales in sale optimization stores offset program impacted in XXXX by that last by and anticipate of XXXX, our be the partially XX in to We wholesale store segment. growth modest will year's Canadian

return We improve of profit to normalized expect our we XXXX optimization from more as to the and gross level margin promotions relative rate clearance to program. a XXXX store headwinds

stores plan We in expect Canadian in XXXX leaseback from sale January approximately completed optimization approximately We of in the and $X with transactions EBITDA stores the the in adjusted Tire million XXXX. headwinds incremental closure our to million our from Canadian our $X XX store month. costs of XXXX of sale

plan $X EBIDTA to XXXX We optimization expect benefit million. our results store approximately the by of

remainder the continue approximately plan opening stores XX closing to approximately we base, rationalizing XX. of strategically and XXXX, store During our

In terms the the we situation the from supply any otherwise of quarter. at But very all closely COVID-XX, chain first you financial this potential coronavirus, and material monitoring not developments. is as our do any impact anticipate as results fluid impacts in we're know, known to point,

result, Taking mid to revenue XXXX, percentage please our be for that note expect down the outlook single-digit any factors single-digit range. and down to in account percentage COVID-XX. potential into from low excludes the a comparable As impact range sales in retail we be these

adjusted $X.XX be $XX of the million EBITDA interest year. in to share, with Net million to $XX to of to range be $X.XX income $XXX to for expense in or and to $XXX million per million the of range million $XXX million the $XXX

are in capabilities. and invested enhancing expenditures, We manufacturing half approximately planning to approximately segment with capital retail half and invested distribution in our invest million our $XX in

we declines roughly In results the XXXX, be to expect during XXXX similar sales relative terms across of year. comp our our to quarterly

all For release. our around other our press please outlook, detail refer to

call I'd over that, to the turn with like And to Brad.

Brad Weston

Todd. you, Thank

in, employees stewardship, Before also I'd the incredibly organization. last am years. Party of leadership lead say I with fantastic and has like take XX business I to firmly to management greatly integrated as alongside established focus our very vertically long-term itself differentiated, leader as to to Under against an I Jim his want our we sustainable I wholesale working our the industry City forward on to look team for opportunity a to that drive business. our Jim's priorities the Board, talented moment growth. thank dive executing excited a for over this strategic

place. believe great that in firmly I we a platform have

However, and experiences I'm that needs also acutely aware constantly shopping evolving. are customer

customer the Party relevance City elevate brand. improve. our opportunity identify as store So can our span roll on and value sleeves with months, last and to experience In an opportunities marketing, perception, this had areas adapt must we the work drive with increase to closely strategic organization, where to. to over make team retail merchandising, and several spirit, the to to These my customers, I've improve our our changes e-commerce our the business engagement up operations we the

some natural While initiatives key observations quarter, our opportunity initial business and provides retail to are to overwhelming to in-store we actions and for the growth order adjacencies curated changes new experience. our I focused in-store developing inventory, the today last with consuming needs the stores our store on navigate, assortments, is We time simplify piloting momentum. product I'll on layouts you shopping and a shared This relevant to five the of experience we are recap taking provide retail a way. recapture more be and drive new meet Number de-clutter product with experience can which one believe the us better of These in products to the through customers. help with the begins with assortment and customer appealing store presented also greater visually reduced changes will are that and more a in experiences. services along a

combination remodels, December. successful XX stores the we Building will new plan to Later three to generation test what on X-store in from insights and a be of XXXX. relocated learned These in month, stores we a next we of XX this executed will first stores stores. the be launch

inventory In shop-in-shop from adjacency us to aisles. we grocery long moves reducing store will current to use, away and these SKUs, concepts which reductions product layouts changes, focused on addition recalibrating style the end be

will include a These existing supplies wearable focal like kids candy. party provide be service up balloon strategy. serveware, checkout services markets experience experiences. our will more allow forward of creating the our next plan for in-store queue. birthday customer gain the available, including to customers experiences The for non two shop-in-shop digital level which customers taking stores balloon pilot point concepts extend biggest hosting preferences favors, into and offerings and in balloons, deeper this speed will XXXX, costume products party in also better inform to to insights tableware planning us will to the in and shop go These QX separate round products further have to transactions party in consumer balloon delivery, to colored and differentiated personalized terms and with We us year tests

Number are our an City, and capabilities, unique for achievable balloons. clear foothold manufacturing better a and two key leverage providing we a us win numerous have licenses is our in platform. with opportunity given differentiator and to unparalleled Balloons Party

purchase categories relevant our incorporate opportunity to services will We we well as know as maximize balloon this important the drives. ancillary

sales, to key begun goal average had experience the value, two significantly with and enhance which Our customer transactions balloon drive increased is to order initiatives.

First, a a markets service partner we began few starting delivery XXXX. December in in delivery balloon with piloting

experts certified in we January XXX every and all training store balloon out our to in also February. in rolled XXXX Next, stores

full we're QX. rollout expectations exceeding incremental driving are in sales. results chain currently wide initial the And and planning Our

categories, is taken to drive our needs we there at categories. volume believe of where our three our in address tremendous Accordingly, close and margin look portfolio. reviewing effectively think and areas of sales. In Number a the sales portfolio to our across meet pricing key more customers have we product drive increased perception is we value a can we opportunity dollars determine

fact instance, and a by us. than solid is our as of is XX% For tableware almost our paper for This for an of customer, tableware plastic category sales is the more heavily evidenced shopped and in important XX% business basket. that

margin increased in the Beginning last we're September, and pleased began strategically gross prices we lowering results and units with dollars.

We continued desired items and tableware, in already we result. such to the categories, and birthday look indicator test such will that key other the as is as to comp additional We've kids sales begun as we see basket solid which includes increases test balloons. categories costumes. ahead, value continue review to Halloween and And

We expect to it progress, will pleased with early this take showing start time the really effort returns. for we're but

Number engagement stores. in culture improve four customer is selling

Our sell clear increasingly need to for culture. driven successfully better metrics. at culture customers growing engaging create and store with looking maintenance more to supplies. complete If selling our do that, supplies. operations for customer get training to just of customer level engagement order with and of to party from do we engagement a on customers hiring and a sales customers leading, and in more associates party to are trend, This store need the capitalize pivot party store. to party a who stores higher this we we're play and accountability our management is a pivot There's shopping role planner by to a are In than have we and experience to a opportunity with

associates pivoting the we on-demand party focus as our a to via planning our to also party up appointment inventory professionals We're engagement. addition, available in in program online SKU digital of levels, of planner planning frees our physical a or time and ecosystem in-person customer for stages this on sales strategic chat telephone, In and count reduce store.

our building Number five on omni-channel is platform.

continue expectations advantage. to with add a capabilities will key competitive customer omni-channel create keep We to to pace and

points digital strong performance to represents multiple total a sales. improve now enhance customer Up throughout we Buy and As But be very continues Store opportunity significant of touch process. Online Jim mentioned, to the see portion Pick our and in

the But so results in test encouraged learn the are and we by far. of many initiatives, these of phase for early the innings seen we're we've preliminary

As the and we them, we being these to impact continue financial business in positive said, see That take the their to associated incorporate changes on our and become time. impact evident expect results. more generate do learnings

ways customer to product core of these working to addition number analytics data, new to to savings transform explore to new drive In operations, our growth we're including and to CRM initiatives, accelerating wide identifying initiatives, develop reinvest a on engagement, tactics five to initiatives. insights and results personalized market our utilizing opportunities and marketing initiatives loyalty retention enterprise maximize in acquisition store to continuing optimization and and increase

work view out of success City's lens opportunity create of it too. benefits Party supply power joy is to through cut which strongly is great enjoy the retailer making by the model, improvement the also fully I but know product a is we our us, know the unforgettable this create for have vertical believe purpose chain We full easy our we brand, substantial. for that vertical will decisions to we memories. we if customer, integrated of as while the exercising our unique

turn I'd it now that, like With back over to to Jim.

Jim Harrison

like our In to call more and to than Brad. for dedicated want XX,XXX all you, thank also thank success. today. to who I are joining recognize would closing, our I our and growth you Thank associates

challenging over excited can While XXXX Brad's serve to was about challenges make seeing stronger leadership. that term. our forward a what these and I'm do Party to the us believe year, response City longer an I company to look only extremely better, under

And would questions. up to I call open for that, now with the like

Operator

from [Operator question first Suisse. comes Instructions] Sigman ahead. Seth with Please Our Credit go

Seth Sigman

and good the initiative, congratulations just start I to some wishing to guys. and the Hey, luck really morning. color with on it's Good and helpful. guidance, wanted all best the the Brad, Jim, first you you. Brad of

last negative on curious, XXX, so or you to low take of helium think have and impacts for the time XXX from from comps really lapping I basis for and the all this going points to some it's year, our single-digit indirect Just based to play year. out, math some guiding but

So that I offset, both Thanks. some guess should what thinking considerations be maybe of the about negative? and are other we positive

Brad Weston

that, retail obvious Seth. to is Obviously, -- appreciate continuing evolve. So

think I a switch. are going the of just of flip not to many initiatives, be a

take fiscally really relaying mentioned, value the -- a perceptions, those stores, and in We're the We be environment any time. mode. business and responsible. testing, going and improving won't physically won't test learn We're we in I to long-term. disciplined test with As very learn put that harm put things and

we In fact, stabilization on all they're focused create how that can lead growth. to long-term

this period. see a more we So as transition

So, it those this are -- that's how at point. we see

Seth Sigman

I the right that the So these are just -- about there's talk it's that's of some you we're lot And now. of changes one to affect happening reflected and investment making then that the also some early making that's Can learning of to as of of testing about if things think level the be disruption, financial guess, perspective, you the I guess guidance? the sort of with are tweaks And how that stores, level you of a the from may talking changes? a we in do here? about

Brad Weston

my where couple we a additional We'll out in series will then expand markets of try environment So you learnings significant roll testing and we're I stores, create we gain learning. three then disruption. there these of be as a we changes, can stores of When as those remarks, on mentioned based a with very those major some will can control starting in-store little pilot and in the learnings.

also how sales to pilot, all testing not I in upside. where planned the margin only Whether organized we're and And the family -- continue costs price, five but have the capital related to we they can to cost stores, unit our not responsible testing you and a and initiatives. have are but when about sales unless expenditures the and price, and it's components control the very, do very we're we them learning said, we're those, to pilot investment, we proceeding just sales think it's so to very around a like implications impact, guidance. not of very fiscally small around in Relative reflected understanding So a way.

all any those minimal, much And relative have of are are investments we the any other So investments, under if really control. very them. are they self-funding of or

Seth Sigman

Okay. And also that my deep from and I for COVID-XX just impact, you guess clarify is to impact talk no you guidance pretty related demand question just the perspective, a And seeing there what about Thanks that. you to on that here think Is and both said embedded are follow-up that first can the supply we're into demand? then I if here. quarter.

more out there? color back I the in happening the what's business So any the on guess, of trends on,

Todd Vogensen

yes, QX and out our guidance to in to But going ability feeling back we're look in up is about continue So situation. continuing we terms demand, fluid very at you of this later monitor the supply mean, point, their forward, of we what terms get did suppliers and going, good hearing the excluding I things to both tell monitor. year. this I'd and is chain in positive a of

too just terms say to way going In I'm early. it's of demand,

the keeping the we And in we get about reflected single-digit the even seeing comps relatively you was to across further means to that any of just obviously run will concerns I coronavirus. understand heard the doing. into the we're safety our It our that then guidance. very were quarter really think and we've have and we to the amount wait quarters, the seen a big the associates until towards we're year before in forefront customers up it, monitor recently. rate continuing across And again, of of ramp which just what what news low

Seth Sigman

Okay. luck, of Understood. and best Thanks everybody. again

Todd Vogensen

Seth. you, Thank

Jim Harrison

Thanks.

Operator

with Please Morgan Stanley. Simeon from ahead. comes question go next Our Gutman

Simeon Gutman

debt for ask on XXXX plans your Thanks. wanted about to is talk first slated you for morning, Good everyone. I XXXX? to down. pay Can compared what

Todd Vogensen

Sure. been the think down go back managing far comment and I've path a in of our want And of too to still year overall a weeks, means we to terms deal a to our to a the Mostly very debt situation working out wanted to little great of here, was debt, a through that reiterate get six more cash we on that going have that I'd out I that. have managing numbers. back come before like frankly level position capital availability I of our position, there priority it's numbers, than chance study and in to less the in specific later what that and overall I under fluid bit throwing ABL

Simeon Gutman

I we that beyond a some cash going the pay cash too the high business can free of which to free used laid be to fair that the level, don't the heard out, enough. this is excess debt Brad you plans but in or speak know is CapEx, Fair down within if that's generates for assumption about at whatever simplistic? assume excess and

Todd Vogensen

we with of sheet come of a more I tenure chance a back to one doesn't given of Clearly, yes how degree debt far more to that. cash it's me much extra little down early like. are to Again, at our matter it's my priority be bit on and me think a details, that little number get as we looks the I to have going pay having more it. into too cash, looking balance to study this the you and at scare a in for environment get for point, bit excess

Simeon Gutman

to and at could the doing the pace don't to want this just test appropriate always that of things to any feel and it. go you you're moving business that even I I stage faster. in quicker enough. lot want look, you a given guess, stage? go at the yet you're and it the not at move nature you're Do Got deploy And learn XXXX, want and then faster given to this you in mode can Fair Brad, faster ask you performed at once of or how

Brad Weston

sort say gas learnings those a on level all a very that like months, We're on our each don't we've rate based to and -- to to positive basis. results. seven that faster, are data I on we that last -- fluid. ability a those and anticipating. daily would of Seth, on learnings I of more over find excellent in the to at So on any have as impact elements push will. results the I'm said can if the rate go the of brakes the weekly the have I not them would And month-to-month to I confidence are those a Related pace we're five where new pace, sort our in we of we think risk that can there and certainly of have than And I and some -- process. how nothing insights ability to thought much that don't relative week-to-week, I a -- faster. is or out, exceed say go it of basis are the getting initiatives have relative expectations and it's there's and laid

Simeon Gutman

Great.

Okay. Well, and good luck. Thanks Jim. the best, all

Jim Harrison

lot. a Thanks

Operator

with question Please Rick comes Stephens. next Nelson from go Our ahead.

Richard Nelson

morning. My congrats Brad as well. Thanks. Good to Jim and

of point? So around you I'm plan point, do how lot you this curious Halloween a anything for at at COVID-XX, this uncertainties do different

Brad Weston

that because plans that. constant supply focused in the anything around opportunities we're I Halloween. on that -- focused doing that exist So than would changes not we point, say we're a at different works view on been have a of we the in strong keep we're and sales primarily chain have our eye obviously on this not the

tell a know, there. of sort do are the it for We consumers a shop. consumer can to know for job we mix clearly opportunistic match understanding want us. trends more You of us own, that insights opportunities make a your do-it-yourself given we're opportunity more do-it-yourself that better The of those of

have some think right trend license and and more on more our we type do-it-yourself I reliant the instances, too are In on opportunity costumes. We more opportunity have costumes the we've product assortments to introduce making focused and been relevant.

the clearly and that an match them what different that in-store merchandising offering have we opportunity make execute that mix can in others And in than We had learnings really that marketplace. customizable. will reinforce way the costumes be that to reinforced that the in is exists and the we've execute accessories

marketing in again make have to more plans the we're And the can can the we on as content build and and and more in we And so, very well. exciting build reinforces We online focused strength marketplace. that customer. shoppable around the for experiential that have distinct the experience Halloween, we addition,

Halloween, to to we continue relative plan. So

-- forward Halloween. is The as opportunities against to Halloween as XXXX interesting. days tailwind. plan the positive. provides to know identified that year be three look from we to and to a continue is lineup presidential it's We election will not for IP last prior that be going also timing The interesting just Saturday, we But traditionally Halloween

improve our year. performance clearly So Halloween on and this newness, looking last innovation focused trend, on we'll be to in

Richard Nelson

Also, last traffic Brad. for markets sales. Francisco center, front curious regard to and I'm with Seattle, of in that San weeks couple or have color, Thanks seen these store

that, provide be could you helpful. If that color would any around

Todd Vogensen

we it tough Yes, this again, very of at because two on, And can a I I Todd. or think misleading. think measurements to this be day is early give are you point it's

So decided now. demand I we’ve the you to side at tell the probably And can this give equation around just the right that's specifics of point. best not

Richard Nelson

Fair those? you covenants, Okay. with to speak you could the Also, if enough. where stand

Todd Vogensen

now. the debt really studying how agreement. as In ABL covenants with are, I very way ratio, the bounds I've I’ve applicable that's covenant -- up you, our the coverage there's the of light. very Really before, right The within would the the we well agreements, the which tell to been call fixed company them charge most debt set impressed and the are I’ve one

something So really this at point that's concern. covenants, a not

Richard Nelson

good Great. luck. Thanks and

Todd Vogensen

All right. Thank you.

Jim Harrison

Thanks, Rick.

Operator

Martinson ahead. Our with Please go from next question comes Karru Jefferies.

Karru Martinson

Good morning.

million. $XX capitalized for last When a guidance about here, helium, we tailwind a having $XXX for roughly to talked Just million the $XXX million the looking the we the spoke, costs. at

to your what obviously, months big us ago has thinking Can changed in So, a from just a kind swing few here. bridge today? of to you

Todd Vogensen

underlying can what not I’m are little seeing What few ago, of impacts Having been I been a handicapped, has Brad effects seeing a the talking tell we're is bit in positive we you, but also balloons. evident as was about through last some today, quickly as we retail center front And not we opportunity and the year. were those businesses things went has have as helium so that as changed. in probably core things months the

really is the build consider rate in So baked we run of. the what of to what we can more that of off be business then would we've core

comp building in, you in the initiatives single-digit part a of And these expect start that trajectory. so as seeing would core as and change negative rate that to you're low then see

Brad Weston

that last we've consumers having months I said I a with I'll that, and here, are path summarize it's a fantastic digest, where got been consumers. by we've out sort the create initiatives and of establish be I in of that forward. I seven relevancy, in how to with are would we it you student how core think kept five would the strategic really add business, pace of to learn, and relevancy key the think a bit to we struggled saying, not how further of we opportunity have the right consumer understand laid that And reiterate, momentum. as the create level And before, And expect. to regain have we I expectations components relevancy it.

Karru Martinson

the Okay. And out then helium balloon of for market the state when what we look is guys? third-party at sales, the those

Jim Harrison

continue market also we on should of the at just in look stock has needs improving, we available satisfy situation the -- we back we of when definitely And Jim. globally that ample beginning City the where of be look year. the the right Party now helium, the the the last is The there XXXX, This off not helium balloon to to business, Sure. are improving, it situation helium believe consumers. When is stabilizing. supplies by is in but at broader of is stabilized third-party

Karru Martinson

And any when to at manufacturing, portfolio, liquidity. asset facilities or even be look at you that owned your bolster for geographies potentially your Okay. ways you're sales or it then looking

Jim Harrison

the to specific and bondholders transaction, is before, and those the business my value Todd, and leaseback. Tire context mean is and active understanding sale is the that saying, do the continues. and long-term work around subject them you're how Canadian raising. mentioned that. we in And to try portfolio, an something I to and our did off I've maximize forward early with doing as terms my would of leverage or part it the far too role engineering those thoughts Karru, there you of reviewing last and that going two what year, that is think with talk far, portfolio assets As we shareholders provide to the to One our the financial strategy know, process thinking investments the I other with we're of But being about about, very for in Brad be transactions.

Karru Martinson

very much, guys. Thank you

Jim Harrison

you. Thank

comes ahead. Telsey Please Feldman go question next Joe Our from Group. with Advisory

Joseph Feldman

$XXX then even that And debt out step higher? that's is to million guidance. It if And mean, further, know, should even I I how do further, a fair morning. given million up. to wanted impact Good you for see there? new repayment, that a are I up ask guys. we what or is $XXX like obviously, up start capital does expenditures the as years, next roll of bit being Hey, the to it will then and them these and jumping expand amount that we up a stepping think tests about looks level to couple -- this your step should

Todd Vogensen

clarify, you looking referring for year to make capital we next targeted sure? our expenditures million Sure. at were what to is And were to just just $XX that

Joseph Feldman

Yes. Yes,

yes. yes, CapEx, Your

Todd Vogensen

Yes.

significant we've be $XX million things a up. really the talking So does about. been step which year, next reflect shouldn't It

of of benefit and that about our cost into of relocations So well tests stores and building or half the where in think payback we're is there's types doing. new as investment stores we seeing we're you're good things the as

of out discipline getting making sure it not a cash which here, And with of So be of ahead should on ourselves one a I've that fiscal things is significant impressed around investments. we're not our that's really and going that up. step number been

So you that. see should to really continue

Joseph Feldman

does the just up not one you're that going do of surprised to much CapEx. I’m remodels? these step So just these on remodels to have how full it cost Like to then?

Brad Weston

refresh. are more being are a are remodels incremental anything of to experience. them. capital fixtures, a not balloon And light that balloons fairly of the there a there's lot and that is So we put where and standpoint fixtures are into relative enhancing it than around else relay incremental it's really store the from Otherwise, the it's

in the stores invest think estate not to their have their are additional market fair capital landlords the also to to intensive. they willingness It's So real commercial in to desire about for traffic us. and and addition

Todd Vogensen

or that has we about we coming very that already we're investments planning to to plan remodels, up we're top make, the gen. take last any do been are in the trying relocations disciplined one store slated of I advantage piggyback on throw new investments think that Then any thing next or opportunities that already team on part of in already and can are build to so a going is to of

Brad Weston

the testing customer what the you to experience generation, ability list and get of in along. I -- would costs sales, agreements make the vary not as positive types a They an reach manage is may others to level learnings the but is obviously that on well. investment you single number as also landlords you and on go store. that only also reduce learning the on the of can costs put depending and want individual based wouldn't an I say part

might to So much as like. greater we'll will the the have we a long-term insight next these look a roll as several months investment what gain out we over

Joseph Feldman

And question, quarter, -- of we're after guys not Halloween. another it. you pretty well kind then baked the Got third

You some guidance. gave

spoke the I we think -- had seems and in $X.XX was change? out ICR kind didn't big I your was was to to probably different like a were I'm how it so I just come -- going lot like stuff as mean, the end street to at, knew happened? and confused from that that happen you That like, of be at earlier. guidance, low EPS. that, at that the guess of what what where like we're in about

Todd Vogensen

through I've side a a December area course in we say areas the have We downward more So have margin would Halloween. the to gross of expected of the normally predicted. got profit towards promotional improvement Christmas after like would like activities. went the than programs. We through we that I through at, little bit the solids, big from see more looked went moved was would lot I We everything

bottom very, we there promotions, so through and when incremental didn't the flow to those very was when line And really quickly.

Joseph Feldman

Okay. this quarter. Thank with luck you and good

Todd Vogensen

you. Thank

Operator

of We Please ahead. question, Securities. have America Reuter for more of and one that William comes go Bank time from

William Reuter

Hi.

sense out When the can you're question. Just of about prices being I year, When for last you that portion paying due higher think a last of baked lower much that spot this stock have you'll some or sales not as at helium expectations year follow-up as look assume of you're gross this give those a Karru's year, achieve I you to guidance? your margin as the versus what us on to sourcing think year. it what's a dollars to you're that on due you going well into expecting, increased

Brad Weston

Yes.

in Our they costs them we XXXX. balloons overall overall higher we business not getting with us, be behind a run our with will had. rate line plus shortage in largely better helium a QX -- see overall should that be the will minus. plus -- But in 'XX be to XXXX, sequentially, a Helium

has continuing It's to a our of healthier. piece get business been balloon business. healthy, growing Our

And see so, that sales that balloons, comps costs any higher. being offset if good we will in drive we helium

our now level, as reads very depending our about take informed our watch we around SKU to some the continue in data at in our elasticity. a gain elasticity think balloon and up, have category way prices prices down those We price of to to we of insights some prices, ability on

put we've that things the guidance. And are and so into those our thought about

William Reuter

That's be will assumptions debt your you might consider that a price to the Todd's allocate capital little challenging. there, and as well? repayment all guess, is share helpful. debt, given that that a fair being cash bit on free to of I making or it little flow you working I say relatively new would understand depressed, given

Todd Vogensen

debt I early. to think cash and it is to down would pay is amount that one flow look free priority. right cash of continuing towards at We're Debt number what the go be.

year inventory. improve a do is continue we our this worth, expect it's to what on productivity where to For

working as year, So see don't spiking. high needs look our the we we across capital

return inventory on margin gross push to inventory continue turns, investment. to expect We on and

down. out of, exactly comment. me working for how that means much that bit of debt a massive so of needs It's to see we early goes not again, should little pay And to capital in terms just

William Reuter

then to Okay. found given opportunity you operating renegotiate kind leases, any lastly, may do to that an opportunity of just expect retail year traffic, you And soft this have or relatively costs? reduce that be

Brad Weston

a of the are an been done, participating terms in expenses. part as prices has we all do that thought the in and those basis. And continue we'll we've optimization it about XXXX. opportunity did negotiating So store actively rent to we discussions are those consistent a reduce past, lease our in on we ongoing initiatives to in XXXX, Certainly

William Reuter

the Thanks right. All taking for questions.

Jim Harrison

you. Thank Thanks.

Operator

turn Brad back This I would over question-and-answer the remarks. session. any to concludes conference to Weston our like for closing

Brad Weston

am each thank for that of speak every Todd to truly excited to like available are and opportunities I great. the us. and passionate in one lie which truly with of joining you I about us, front I'd you. and are

So thank you, everybody.

Operator

today's The conference is attending you for now concluded. presentation. Thank

may You now disconnect.

Party City Holdco (PRTYQ) 12 Mar 202019 Q4 Earnings call transcript