Party City (PRTY) Tops Q1 EPS by 2c, Beats on Revenues; Offers FY18 EPS Outlook Below Consensus

Party City (NYSE: PRTY) reported Q1 EPS of $0.07, $0.02 better than the analyst estimate of $0.05. Revenue for the quarter came in at $507.8 million versus the consensus estimate of $502.54 million.

First Quarter Summary:

• Total revenues increased 6.5% on a reported basis to $507.8 million and 5.1% on a constant currency basis.
• Retail sales increased 7.2% on a reported basis (6.7% on a constant currency basis), driven primarily by square footage growth from store acquisitions and a solid brand comparable sales increase.
• Brand comparable sales increased 2.4% during the first quarter, in part as a result of the beneficial timing shifts of both New Year’s Eve and Easter, partially offset by the negative effects of holiday compression.
• Net third-party wholesale revenues increased 4.3% on an adjusted basis when adjusting for the impacts of currency and franchise store acquisitions.
• Total gross profit margin increased 20 basis points to 37.2% of net sales, primarily due to higher share of shelf1, leverage from the increased sales and savings associated with in-store productivity initiatives, partially offset by increased distribution costs, higher wages and non-cash purchase accounting adjustments.
• Operating expenses totaled $168.6 million or 33.2% of revenues, representing a decrease of 110 basis points from Q1 2017, largely due to leverage and savings associated with retail productivity initiatives and the benefit from last year’s restructuring.
• Reported net loss of $1.2 million compared to net loss of $4.7 million in the first quarter of 2017.
• Adjusted net income increased 13.7% to $6.9 million despite increased costs associated with higher interest rates and investments in Kazzam.
• Adjusted EBITDA increased 12.3% to $55.1 million.

Fiscal 2018 Outlook:

For 2018, the Company is reiterating the following guidance:

• Total revenue of $2.44 to $2.49 billion
• Brand comparable sales growth of approximately 1%
• Adjusted EBITDA of $415 to $430 million
• Adjusted net income of $172 to $183 million
• Adjusted diluted EPS of $1.76 to $1.87
• Net debt leverage2 of approximately 3.8 times by the end of 2018
• GAAP net income of $143 to $154 million
• GAAP diluted EPS of $1.46 to $1.57

GUIDANCE:

Party City sees FY2018 EPS of $1.46-$1.57, versus the consensus of $1.83. Party City sees FY2018 revenue of $2.44-2.49 million, versus the consensus of $2.48 million.

For earnings history and earnings-related data on Party City (PRTY) click here.

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