Party City will close 45 stores this year, but contrary to some reports, the closures are unrelated to a shortage of helium.
Earlier this month, widespread reports linked two pieces of news relating to the New Jersey-based retailer of party goods and toys. Yes, the company will be closing more stores than usual, and there is a global helium shortage, but the two have little, if anything, to do with one another.
“It’s important to note that Party City’s decision to close an increased number of stores in 2019 is completely unrelated to the global helium issue, said Party City CEO James Harrison in a statement issued last week. “These are two separate topics, the latter of which we’ve made significant in-roads in addressing. The decision to close 45 stores in 2019 is part of our network optimization process focusing on maximizing store performance on a market basis. We believe that the opportunity to recapture much of the business conducted in the closed stores in other Party City locations within the market, will provide for overall improved profitability for our company. It is also important to note that most of the stores being closed were themselves profitable on a stand-alone basis.”
As for the shortage of helium, Harrison revealed during the company’s first quarter earnings report that a new source has been identified.
“Most importantly, we have signed a letter of agreement for a new source of helium which, subject to final execution of a definitive contract, would provide for additional quantities of helium beginning this summer and continuing for the next 2.5 years,” notes Harrison. “We believe this new source should substantially eliminate the shortfall we are experiencing at current allocation rates and improve our ability to return to a normal level of latex and metallic balloon sales. We remain encouraged by the 2019 tailwinds that will present themselves later this year, including a strong IP calendar, a Thursday Halloween and anticipated benefits from supply chain investments that we made following disruptions that impacted the business in 2018.”
Party City, which has increased its toy selection over the past year in addition to its holiday Toy City pop-up stores, generally closes 10 to 15 stores in a given year.
The company reported an overall sales increase of 4% for the first quarter, accompanied by a revenue increase of 1%. Looking ahead, Harrison states that key initiatives include “developing plans to test new store concepts, implementing pricing initiatives designed to improve value perception, and increasing product competency in the area of paper straws as part of a focus on environmental sustainability.”