Shares of Party City Holdco Inc. lost two-thirds of their value on Thursday after the party's trader reported a surprising third-quarter loss and reduced its outlook for the full year, but not only because of helium deficiency, which lasted a year longer than originally expected.
The company also suffered from weak Halloween sales from higher shipping costs as a result of Chinese customs duties.
was pummeled for a 67.2% loss to $ 2.00 in very active trading, to close well below the previous record low of $ 4.21
Trading volume increased to 42, 6 million shares, which was more than double the previous volume record of 19.4 million shares on the day of the stock's debut on April 15, 2015.
The company reported late Wednesday a net loss that expanded to $ 39.7 million, or $ 3.02 per share, from a loss of $ 2 million, or 3 cents per share, over the same period one year ago. Excluding non-recurring items, such as fees related to the store optimization program, the company reported that the adjusted loss per share was SEK 0.28, compared with the FactSet consensus on break-even.
Revenue fell 2.3% to $ 540.2 million, below the $ 551 million FactSet consensus, as a 2.6% drop in same-store sales missed expectations of a 0.5% decline. The company blamed 2.1 percentage points of sales decline in the same store due to headwinds from helium deficiency.
But it's not just about helium, which the company continues to regard as a temporary problem. Halloween product sales for the quarter and October were a total of 3.2% lower than last year; Sales of the same store for October fell just 4.9%.
Sales of the same store for the 256 temporary Halloween City stores, up from 239 stores last year, fell 20.8%, mainly due to weakness in the adult category given more and more costume sales are moving online.
"The results for the third quarter and October were disappointing, because many of the winds that we expected failed to materialize," said CEO James Harrison. "In particular, the exceptionally better stock position for the Halloween sales season produced only minor increases in retail revenue early in the season."
The company cut the 2019 guideline for adjusted earnings per share to 84 cents to 91 cents from $ 1.26 to $ 1.36, and for revenues to $ 2.35 billion to $ 2.38 billion from $ 2.40 billion dollars to $ 2.45 billion.
Harrison said the outlook for 2019 includes "a significant impact from temporary headwinds", such as helium deficiency, and higher shipping costs.  Helium deficiency was first mentioned a year ago, in the third quarter 2018 performance report. Harrison then said in the post-earnings conference call with analysts that he believed "the helium situation should resolve itself in the second half of the fourth quarter."  At that time, Harrison played the helium problem, saying it was "not as serious" as the 2012 and 2013 deficiencies. He said it appeared to be a "cyclical issue" compounded by geopolitical events. The problem was that Qatar, which produces a third of the world's helium, had "political problems" with Saudi Arabia, so it had to find new routes to markets other than Saudi Arabian ports, and one of the new ports it found was hit by a typhoon.
As the helium problem continued, the company said in its first-quarter earnings report in May that it found a new helium source, which Harrison said should allow the company to "return to normal levels of sales" in the balloon category.  Also read : Party City finds new helium source to revive deflated balloon business a helium position in stock since the fourth quarter began, but then the company was hit by weak Halloween sales.
The company also said Thursday that gross profit margin dropped to 30.6% from 36.5% a year ago, including 1.3 percentage point headwind from higher shipping costs as a result of China's tariffs, a year ago Harrison said tariffs issued by the Trump administration were "not a serious headwind" for Party City's business "and in fact it may turn out to be a slight headwind."
The stock has now lost nearly three-quarters of its value over the past year, while SPDR S&P Retail exchange traded funds
lost 8.9% and the S&P 500 index
SPX, + 0.27%