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Party City Stock Falls 15.4% After Rough Earnings Report

Shares of Party City Holdco  (PRTY)  fell more than 15% Thursday after the retail chain posted worse-than-expected earnings and offered weak forward guidance, partly blaming the results on high helium costs for its balloons.

“Our top-line results for the fourth quarter were slightly below expectations in large part due to helium-supply pressures that persisted from the third quarter,” CEO James Harrison said in releasing the report.

PRTY’s earnings per share came in at $1.08 vs. the $1.09 that Wall Street had expected. Revenue likewise totaled just $805.63 million, missing analysts expectations of $817.91 million.

Additionally, Party City reported that comparable-store sales decreased 2.9% year over year, while total gross profit margin decreased 20 basis points. The company blamed the smaller margins on increased freight and distribution costs and growing commodity pressures, including higher helium costs.

Management also guided 2019 full-year adjusted EPS to between $1.62 and $1.72, well below Wall Street’s previous $1.85 expectations. Party City also guided full-year 2019 revenues to a range of $2.49 billion to $2.54 billion vs. analysts’ prior expectations of $2.54 billion.

On the plus side, PRTY said improved productivity partly offset its other increased costs. The chain also reported that e-commerce sales rose 11.9% during the quarter. Party City told us in August that a new partnership with Amazon (AMZN) should compliment PRTY’s broader retail business.

Harrison added Thursday that “as we begin fiscal 2019, we plan to capitalize on tailwinds that will present themselves, including a Thursday Halloween, significant new licensed properties and benefits from supply chain investments that we made following disruptions that impacted the business in 2018.”

Still, the earnings and revenue misses pushed PRTY shares down 15.4% to close at $10.41. All told, the stock is down some 25% in the past year.