Woodcliff Lake-based Party City on Tuesday said that after Halloween sales came in at the lower end of its expectations, it is taking action to best position the business for the long term. One such action is a 19% cut to its overall headcount, according to Party City CEO Brad Weston.
“We delivered third quarter results that were broadly in line with our expectations against a macro backdrop that has our core customer facing significant inflationary pressures,” Weston stated. “Looking ahead, we anticipate the current macro backdrop to persist and are taking action to best position the business in this environment and for the longer term. We will continue on the path of progressing our transformation strategy but will be addressing structural cost opportunities and increasing operating efficiencies given the challenging environment.”
Overall, total net sales for the third quarter 2022 were $502.2 million, a decrease of 1.6% compared to the third quarter 2021 primarily driven by the cycling of strong sales performance from 2021, in addition to the continued impact of inflationary pressures on customer demand.
Total retail sales decreased 1.0% versus third quarter 2021 primarily driven by lower sales of core product in everyday categories and the lapping of strong prior year retail results as well as the impact on demand from the current inflationary environment; partially offset by solid performance in seasonal categories.
The total number of corporate Party City stores was 761 as of Sept. 30, 2022 compared to 754 in the prior year period.
Total gross profit margin decreased 440 basis points to 31.6% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin decreased approximately 420 basis points to 32.0% of net sales
Interest expense was $26.9 million during the third quarter of 2022, compared to $23.9 million during the third quarter of 2021. The increase is driven by higher amounts of net debt outstanding and higher interest rates versus prior-year period.
“We are focused on $30 million of savings, with work already underway to deliver this target in 2023, including a corporate workforce reduction of 19% through a combination of position eliminations and not backfilling a significant number of open positions. We regret the impact on our employees who are affected. Importantly, our execution of these initiatives is deliberate and thoughtful to ensure we make progress toward our profitability targets without compromising our long-term growth potential,” Weston added.