Party City says first-quarter profits were missed due to Omicron, supply chain disruptions and an explosion at a helium plant

Party City Holdings Inc. shares plunged more than 61% on Monday after the retailer reported a drop in earnings that was attributed to a variety of factors including higher freight and port fees and problems with global helium supplies.

Earlier in the year, omicron was challenging and turned heads at many gatherings, although Valentine’s Day, the Super Bowl, St. Patrick’s Day and Mardi Gras all boosted seasonal business. By March, the company PRTY,
says inflation is putting pressure on consumers.

The disruption in the supply chain has also created hurdles and additional costs.

“While we expected freight to face headwinds in the first quarter, given ongoing supply chain challenges, freight costs didn’t decline quite as we had predicted,” Chief Executive Brad Weston said on the conference call, according to FactSet.

“In addition, we have incurred higher than expected port dues due to delays in unloading containers.”

Collectively, Weston says the additional fees impacted gross profit by $12 million.

See: Tupperware shares have been downgraded as shares continue to fall

The company has also been hit by problems in the global helium market. In the US, a facility that produces 8% of the world’s helium has had operational problems since 2021 and was completely shut down in January 2022. Operations could resume in June.

Two of the four facilities in Qatar were shut down for maintenance in March and restarted in April. Qatar produces 35% of the world’s helium supply.

And a Gazprom plant in Siberia exploded.

“Although Russia produced only 3% of the world’s helium supply in 2021, this facility should contribute a significant amount to the global helium for years to come,” Weston said.

“As a result of these factors, all major helium suppliers have made allocations, which has resulted in us having to tap the spot market to increase our near-term helium needs.”

While the company says it was able to find the helium to meet demand, it costs more and took $2 million off gross profit.

This isn’t the first time Party City has been hit hard by rising freight costs and helium supply problems. The company says it has diversified its helium supply and is now taking steps to improve customer retention, including a new website due out in early June.

And: Papa John’s says it can feed a family of four for less than $7 a person

Net loss for the first quarter totaled $26.9 million, or 24 cents a share, after a loss of $14.1 million, or 13 cents a share. The adjusted loss of 22 cents per share was larger than the FactSet consensus for a loss of 12 cents per share. Revenue of $433.0 million increased from $426.8 million and also missed the FactSet consensus of $435.8 million.

“As we look to the remainder of 2022, we expect the supply chain and inflationary headwinds to persist, which is reflected in our updated outlook,” Weston said in an earnings release.

Party City forecasts revenue of $2.225 billion to $2.300 billion. The FactSet consensus puts sales at $2.3 trillion.

Party City shares are down 78.8% year to date. Party City says first-quarter profits were missed due to Omicron, supply chain disruptions and an explosion at a helium plant

Brian Lowry

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