"The essence of this company is that we really have unmatched market positions," Dan Sullivan, Party City finance chief, told TheStreet after reporting earnings.
Party City reported a first-quarter net loss of $1.1 million, or 1 cent per share, down about 77% from the same period last year, when the company tallied a loss of $4.7 million, or 4 cents per share. Party City easily topped Wall Street's estimates, which called for earnings of 3 cents per share on a $3.5 million loss.
Revenue in the quarter rose to $507.8 million, up 6.5% from last year and topping estimates. Retail sales increased 7.2%, driven in large part by square footage growth through store acquisitions. Same-store sales grew 2.4%, falling slightly short of FactSet analysts' 2.8% forecast.
According to Sullivan, Party City's unique vertically integrated business model not only means it has a hand in everything from design to manufacture to retail, it also means the company doesn't have to rely on just same-store sales increases to expand its top line growth.
Party City operates on what Sullivan called "almost un-retail-like economics." Though it operates more than 900 company-owned and franchise locations, it also manufactures and distributes party goods in over 40,000 retail outlets worldwide.
The moats against Amazon and the ever-present online intrusion are widened by the nature of Party City's category. Sullivan said party supply shopping is largely experiential -- people want to look at decorations and buy things that they can coordinate in-store.
"It's that experience," Sullivan said. "We're not just shipping you something in a bag."
But its vertical integration also means Party City operates across the globe, with operations throughout Asia, Latin America and North America. And in the current geopolitical climate, that means trade agreements won't always be favorable for multinational corporations.
According to Sullivan, Party City is hedging its bets for trade. It manufactures about 30% of what it sells, but the other 70% comes from countries such as China, the CFO said. Given the tit-for-tat trade disagreements between the Trump administration and China, Party City has begun moving its operations out of the country. It's instead focusing on growing relationships in other Asian countries and in Latin America.
"With this administration, I don't think there's anything you can rule out," Sullivan said.
Part of Party City's plans for diversifying its supply chain include M&A, which most recently opened markets in Mexico for the company. Sullivan said part of the company's "secret sauce" is its ability to maneuver tuck-in acquisitions, assimilating smaller tie-ins into the company with ease. He said that strategy of inorganic growth isn't set to slow anytime soon.
Looking ahead, Party City said Wednesday it expects total 2018 revenue to come in between $2.44 billion and $2.49 billion, with profit between $143 million and $154 million. Given the nature of the category, Party City is a largely seasonal company.
Sullivan said that, although Halloween represents 25% of Party City's retail business, the summer has become an increasingly important part of the company puzzle. With summer celebrations and graduation on tap, Party City can capitalize on the fact that it manufactures six in every 10 metallic balloons in the entire world.
Party City stock pared opening gains as the session continued, trading lower 0.17% in afternoon action. The stock is higher 6% year-to-date.