Shares of Party City recovered losses from a fickle trading session Thursday. The stock closed more than 2 percent higher after falling nearly 2 percent in early trading,and dipping more than 9 percent a day earlier, ahead of earnings.
The company beat Wall Street earnings estimates by a penny but posted a surprise drop in revenue.
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Same-store sales for Party City dropped by 1.5 percent, while retail sales rose by 2.6 percent, thanks to the addition of 38 new stores in the past year. The company reiterated full-year guidance.
"We are pleased with our first-quarter results, which were generally in line with our expectations," said CEO James Harrison, in a statement. "We continued to make progress executing against our growth strategies."
Party City cited Easter as a reason for a downturn in key same-store sales. The holiday fell into the first quarter as opposed to the second quarter last year. But some analysts were not sold on the justification.
"While this argument seems plausible, we do not buy the excuse, mainly because the earlier timing of Easter should also have had a positive impact on the quarter's sales," said Carter Harrison, retail analyst at research firm Conlumino, in a note. "The wider truth is that other factors are playing a role in diminishing growth."
Harrison cited strong comparatives from Frozen merchandise and a "reorganization of the company's gifting category". Soft consumer sentiment could have also played a role, Harrison said.
Source: FactSet
The Elmsford, NY-based company's third-party revenue dropped by 5.4 percent on a constant currency basis, which it said was due to the addition of new stores, thereby eliminating some of external sales.
Party City recently acquired Festival, a costume manufacturer located in Madagascar, which it said will help fuel "positive momentum in international markets". The company acquired 19 franchise locations in the first quarter, increasing the owned-store base to 731.
The stock is down more than 5 percent this week, and 38 percent year over year. Shares of Party City closed at $13.45 Thursday, down from the 51-week high of $22.60.
