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Bear of the Day: Party City (PRTY)

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Party City is a party goods giant, supplyingpaper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery. Its locations are primarily located in the U.S. and Canada, and the company is based in Elmsford, New York.

Shares of Party City have slumped about 35.5% since January, and lower-than-expected results in its third-quarter earnings report didn’t much help the stock.

Overall, Q3 was challenging for PRTY.

Analysts had been expecting the company to report revenues of $592 million on pro forma earnings of 17 cents per share. Party City instead came out with revenues of just $553 million and pro forma earnings of 8 cents per share; GAAP earnings were just 3 cents.

Sales dipped 1.3% year-over-year, while brand comparable sales decreased 1.0%. Net third-party wholesale revenues fell 9.4% as well.

In the company’s earnings release, management blamed "temporary operational disruptions, increased inflationary pressures associated with distribution costs and helium shortages and slightly lower sales than expected" for the earnings miss.

Party City revised its guidance for the year as a result of its weak performance during Q3.

It now expects fiscal 2018 revenues between $2.43 billion and $2.46 billon, with comps flat to slightly down. GAAP earnings should fall somewhere between$1.22 to $1.27 per share.

It didn’t take long for analysts to lower their estimates for fiscal 2018, and six have slashed their earnings outlook in the last 60 days; our consensus has fallen 21 cents from $1.83 to $1.62 per share. But, earnings could see growth of around 30% for the time period.

The consensus estimate has fallen for next fiscal year, too, down 19 cents from $2.03 to $1.84 per share. Six analysts have also cut their estimates for this time period as well.

CL is a Zacks Rank #5 (Strong Sell).

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