Posts tagged with "Eliminate shortfall"

Party pooper: Helium shortage forces Party City to close 45 stores

May 13, 2019

The party’s over. Party City is struggling to find enough helium gas to fill balloons—among the company’s most profitable services—and will, therefore, close 45 of its 900 locations in North America this year to make up for lost earnings, CNN Business reports.

Helium is the second-most abundant element in the galaxy, yet supplies have been running short on Earth. Over the past few years, some drillers have claimed to find troves of helium buried underground, but those haven’t always panned out. Party City said it really started feeling the pinch in August 2018.

The company’s mylar balloon sales fell 8% last quarter, dragging overall sales down 1.4% at Party City stores open at least a year. Sales would have risen if not for the Party City’s balloon problems, the company said on May 9.

Filling balloons with helium is among the company’s most profitable services, Barclays’ Matt McClintock told the cable news network. Helium brings people into the store, and those customers usually buy other items instead of purchasing on Amazon or at another store

The good news for Party City is that the company has signed an agreement with a new helium supplier. Party City believes the new supplier can help it return its balloon business back to normal starting in the summer, and it hopes the supplies will last for the next two-and-a-half years.

“We believe this new source should substantially eliminate the shortfall we are experiencing,” said Party City CEO James Harrison in a statement.

The bad news is Party City said its helium shortage will continue through the spring. That’s bad timing: May is a big month for balloons.

“Obviously graduation is a big season for balloons, no doubt about that,” said Harrison on a conference call with Wall Street analysts on May 9.

And once Party City gets its helium back, its new supplier will charge more than its last provider. So it will have to raise balloon-filling prices, CNN said.

Helium still remains cheap, and Party City doesn’t expect the higher prices to hurt sales in the long-run. It may also be able to eat some of that cost over time, Harrison predicted. But he said higher helium prices may be here to stay.

“Over time, will helium come back down in price? Nobody knows. We’ll see,” Harrison said.

Research contact: @PartyCity