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Category: Party City (PRTY)
Date: 16 March 2021 Stock price of PRTY: $6.87 Market Capital of Party City (PRTY): $760 million We take a look at the 4th quarter 2020 earnings report of Party City (PRTY) the leading party goods and Halloween specialty retailer by revenue in North America and, we believe, the world’s largest vertically integrated supplier of decorated party goods with multiple levers to drive future growth across channels, products and geographies
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Brad Weston, Chief Executive Officer of Party City - We are very pleased with how our organization navigated 2020, swiftly pivoting to meet the evolving needs of our customers, all while prioritizing the health and safety of both our associates and our customers during this pandemic."
More About Party City
Party City is the leading party goods and Halloween specialty retailer by revenue in North America and, we believe, the world’s largest vertically integrated supplier of decorated party goods with multiple levers to drive future growth across channels, products and geographies.
Party City operates 830 company-owned and franchise stores throughout North America. Our worldwide locations include our corporate headquarters in Elmsford, New York as well as locations throughout Asia, Europe, the Americas and Australia. The company also sells direct to customers through its e-commerce website, PartyCity.com with Buy Online Pick Up In Store and Curb Side Pick Up available at select stores.
We design, manufacture and distribute party goods found in over 40,000 retail outlets worldwide, including Party City stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Through a series of acquisitions between 2005 and today, we have built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages which position us for continued organic and acquisition-led growth and margin expansion.
Party City operates 830 company-owned and franchise stores throughout North America. Our worldwide locations include our corporate headquarters in Elmsford, New York as well as locations throughout Asia, Europe, the Americas and Australia. The company also sells direct to customers through its e-commerce website, PartyCity.com with Buy Online Pick Up In Store and Curb Side Pick Up available at select stores.
We design, manufacture and distribute party goods found in over 40,000 retail outlets worldwide, including Party City stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Through a series of acquisitions between 2005 and today, we have built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages which position us for continued organic and acquisition-led growth and margin expansion.
Overview of Party City 4th quarter 2020 earnings
Fourth Quarter Summary:
- Total revenues were $648.2 million, a decrease of 11.4% on a reported basis and 11.7% on a constant currency basis
- Total Retail sales decreased 8.2% on a reported and 8.3% constant currency basis, impacted by closures related to our store optimization program and the impact of COVID-19, offset partially by the benefit from the 53rd week
- The total number of corporate Party City stores was 746 as of December 31, 2020 compared to 777 a year ago.
- Brand comparable sales for the 14 weeks ended January 2, 2021 versus 14 weeks ended January 4, 2020 decreased 5.9% due to the impact of COVID-19, especially on seasonal celebrations.
- The Company’s Retail segment included a 53rd week of operations in the fourth quarter and full year, which contributed approximately $40 million to revenue, approximately $12 million to Adjusted EBITDA and approximately $0.08 to adjusted diluted earnings per share (See "Non-GAAP Financial Information").
- North American digitally enabled sales increased 27.1% including BOPIS, curbside pickup, and delivery.
- Net third-party Wholesale revenues decreased 23.0% or a decrease of 24.0% in constant currency, driven by lower third-party sales including softer franchise store performance, and the impact of international COVID-related restrictions.
- Total gross profit margin decreased 1,454 basis points to 25.7% of net sales driven primarily by a year-end seasonal inventory disposal of $88.3 million, which aligned inventories to the Company’s new seasonal assortment strategy of targeting higher in-season sell-through of merchandise and reducing annual inventory carry-over. Excluding certain items not indicative of core operating performance, gross profit margin decreased 50 basis points to 39.7% of net sales mainly due to deleverage on occupancy costs.
- Operating expenses totaled $281.1 million or $242.4 million lower than the fourth quarter of 2019. Excluding certain items not indicative of core operating performance, operating expenses totaled $200.5 million, or 31.1% of revenue, a reduction of $4.8 million compared to the fourth quarter of 2019, primarily driven by cost management to reflect lower revenues and reduced retail store count.
- Interest expense was $13.1 million during the fourth quarter of 2020, compared to $26.0 million during the fourth quarter of 2019 mainly due to lower amount of debt outstanding.
- Reported GAAP net loss was $96.4 million, or a loss of $(0.88) per diluted share.
- Adjusted net income was $27.5 million, or $0.25 per diluted share, compared to adjusted net income of $47.8 million, or $0.51 per share, in the fourth quarter of 2019. (See “Non-GAAP Financial Information”)
- Adjusted EBITDA was $77.3 million, versus $119.5 million during the fourth quarter of 2019. (See “Non-GAAP Financial Information”)
Party City management commentary 4th quarter 2020 earnings report
ELMSFORD, N.Y., March 11, 2021 (GLOBE NEWSWIRE) -- Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today announced financial results for the quarter and year ended December 31, 2020.
Brad Weston, Chief Executive Officer of Party City, stated, “We are very pleased with how our organization navigated 2020, swiftly pivoting to meet the evolving needs of our customers, all while prioritizing the health and safety of both our associates and our customers during this pandemic. Throughout the year, we made important strides on our five strategic initiatives, innovating and elevating our customer experience while also significantly improving our financial position and flexibility with our actions to reduce debt and extend maturities. I am extremely proud of all that has been accomplished thus far and the hard work and commitment demonstrated by the entire team as we continue to transform the business.”
Mr. Weston continued, “We enter 2021 in a substantially stronger position, armed with greater consumer insights and a solid foundation to build upon as we further our mission to deliver The Party Platform by advancing the building blocks that we put in place in 2020. We remain intensely focused on our customer and more effectively operating and leveraging our unique North American vertical model as we continue our transformation and further strengthen our industry leadership position.”
Brad Weston, Chief Executive Officer of Party City, stated, “We are very pleased with how our organization navigated 2020, swiftly pivoting to meet the evolving needs of our customers, all while prioritizing the health and safety of both our associates and our customers during this pandemic. Throughout the year, we made important strides on our five strategic initiatives, innovating and elevating our customer experience while also significantly improving our financial position and flexibility with our actions to reduce debt and extend maturities. I am extremely proud of all that has been accomplished thus far and the hard work and commitment demonstrated by the entire team as we continue to transform the business.”
Mr. Weston continued, “We enter 2021 in a substantially stronger position, armed with greater consumer insights and a solid foundation to build upon as we further our mission to deliver The Party Platform by advancing the building blocks that we put in place in 2020. We remain intensely focused on our customer and more effectively operating and leveraging our unique North American vertical model as we continue our transformation and further strengthen our industry leadership position.”
Party City (PRTY) stock price history over the last 5 years
The image below shows the stock price history of Kirkland's (KIRK) over the last 5 years. And its been a good time for Kirkland's stockholders with the stock increasing by 86% over the last 5 years.
The stock of Kirkland's is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Kirkland's stock is positive at this point in time.
The stock of Kirkland's is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Kirkland's stock is positive at this point in time.
Party City (PRTY) stock price history over the last 5 years
Latest stock valuation of Party City
So what is Party City (PRTY) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Party City at $4.10 a stock
We therefore believe the stock of Party City is overvalued at its current price of $6.87
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $4.10 thus a good entry point into Party City would be at $3.70 or below.
We expect the stock of Party City to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
We therefore believe the stock of Party City is overvalued at its current price of $6.87
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $4.10 thus a good entry point into Party City would be at $3.70 or below.
We expect the stock of Party City to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued
Next earnings release of Party City
It is expected that Party City will release their 1st quarter 2021 earnings report in mid June 2021
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