Dive Brief:
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Party City Holdco Inc. is considering selling itself after a private equity firm offered a leveraged buyout, unnamed sources told Reuters Thursday.
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It would be deja due for the party supplies and costumes retailer: Private equity firm Thomas H. Lee Partners LP took the company public in April 2015 after acquiring it via a leveraged buyout.
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Last year the company expanded its store base by 38 net new stores in the U.S. and Canada, which helped boost its year-over-year retail sales by 1.2% on a reported basis (1.6% on a constant currency basis), although same-store sales fell 0.4% in 2016, according to a company press release.
Dive Insight:
Party City runs or franchises 900 specialty retail party supply stores (approximately 160 are franchise stores) throughout North America, operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.
The category is has been a boon for physical retail, perhaps because people want to touch and feel their costume and decorating choices, and because of last-minute party needs.
“Our performance in 2016 demonstrates the resiliency of our business, the repeat purchase nature of our everyday product categories and the strength of our unique vertical model,” CEO James M. Harrison said in a statement in March regarding its fourth quarter and full year results.
“Despite an unfavorable calendar shift affecting Halloween, our most important holiday, we were able to deliver our seventh straight year of record revenues in constant currency as a result of our diversified revenue model that reaches across multiple channels," he said. "We are pleased that 2016 was also our 16th consecutive year of record EBITDA, which has been driven by consistently growing our share of shelf1 and continually increasing our operational efficiencies.”
The company emerged from private equity ownership two years ago and has been thriving. Not all retailers do so well in such circumstances, particularly when they need time and investment for a turnaround. Gymboree is one recent mall-based retailer that stumbled in the face of declining store traffic and had a debt burden piled on by its private equity owner, Bain Capital. The Limited and Wet Seal in recent months have also thrown in the towel, closing stores, laying off workers and filing for bankruptcies that are unlikely to result in those retailers’ survival.