Specialist
Former executive at Party City Holdco Inc
Agenda
- Competitive landscape update – Party City (NYSE: PRTY), Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), Target (NYSE: TGT), Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR)
- Divestiture of Amscan wholesale business and retail outlook
- Seasonal performance update and post-pandemic expectations
- Macro industry trends – online penetration rates and balloon and helium trends
- Near-term risks and longer-term expectations
Questions
1.
What’s your overview of the party supplies retail industry, including a couple of key trends and themes you think the investment community should monitor right now?
2.
Do you have any thoughts on the sale of Amscan’s European business to a PE firm? Did it make sense to you, especially at the price it was sold?
3.
How can Party City better focus the US Amscan business and get back to growing its sales and market share?
4.
Do you think Party City could ever sell the Amscan US business? If so, what sort of scenarios could make sense and how should we think about how to value it?
5.
Could you provide an overview of Party City’s earnings call from a couple of days ago? Did the positive results and outlook for the remainder of the year surprise you?
6.
Could you elaborate on your comment that Party City is more of a balloon store than a party store at this point?
7.
What could be the implications of Party City’s emphasis on balloons, given what has happened historically around factors such as helium shortages and the supply chain issues?
8.
What share of purchases at Party City would you estimate include a balloon? Do you think it would be wise for the company to drive up that figure? How high could that realistically go?
9.
Party City CEO Brad Weston gave an upbeat outlook for H2 2021 on the recent earnings call. Does this seem right to you? Do you have any reason to believe management is being too optimistic?
10.
You mentioned the weakness of Party City’s business around Halloween 2019. How could the company fix that weakness and ensure that it doesn’t repeat that poor performance this Halloween?
11.
It seems that you don’t think Party City’s sponsored costume business has much of a competitive advantage. What could it do to reverse that?
12.
Do you expect consumables such as plates and cups will become less relevant in the industry? It seems that they’re becoming a smaller part of Party City’s business. Is the company losing market share in this segment? Is the industry flat?
13.
Could you elaborate on your comment that Party City’s e-commerce business is quite poor? Why do you think it is poor and how can the company fix this?
14.
What share of the company’s sales would you say are online? Where do you think that could realistically get to? Some retailers get to above 40% of all sales done online. Do you think that is out of the realm of possibility for Party City?
15.
What sort of pent-up demand do you expect in the industry? Do you think that will result in a really strong Q2 and Q3 2021 and then a drop-off in Q4 2021 sales?
16.
What have you noticed around the balloons supply chain, given the historical issues there? There are a lot of supply chain constraints in the US right now.
17.
Do you think there could be any significant changes in Party City and the wider industry’s labour models over the next couple of years as online sales rise? Could there be lower staffing levels in stores or even roles changing to become more cost-efficient?
18.
Do you think the company is still over-stored? If so, how many stores do you think it should close over the next couple of years and why?
19.
Do you think there is room for Party City to explore or relocate into smaller format stores, maybe down from that 12,000ft statistic you mentioned? What might the ROI be on smaller format stores, and why?
20.
Do you suspect that most Party City stores are profitable right now? D you think that rent costs are impacting profitability?
21.
Do you think Party City could make any further divestitures beyond the Amscan European business? It seems you think it wouldn’t make sense for it to divest from the Amscan US business.
22.
How do you suspect that the party supplies industry and Party City specifically have permanently changed since the coronavirus pandemic and why?
23.
Do you have any comments around Party City’s leadership team or Brad Weston in particular? How confident are you in management’s ability to drive the turnaround? How encouraged or discouraged are you from what it’s done since that disappointing Halloween in 2019?
24.
Do you think it’s inevitable that Party City continues to lose market share to the mass merchants, the dollar store chains and Amazon?
25.
Do you think Party City could ever get acquired either in full or if someone wanted to acquire the retail business and not Amscan? What could make sense here?
26.
What do you think are the best- and worst-case scenarios for the company over the next 2-3 years and why?
