Elgin Area Chamber Of Commerce: Party City Looks To Improve Its Next-Generation Store Model, With Plans Touching Up To 125 Locations

Press release from the Elgin Area Chamber of Commerce:

March 01, 2022

Party City, the biggest retailer of party goods in North America, will be tweaking the prototype for its next-generation stores starting next month as it presses ahead with plans to remodel or open 100 to 125 of those revamped brick-and-mortar locations this year.

The Elmsford, New York-based company, which now has 759 party-supply stores, plans to “enhance and refine the prototype,” introducing several new features “to increase the level of inspiration in the store experience,” CEO Brad Weston said Monday on a fourth-quarter earnings call. That initiative will start in March, with Party City looking to quickly study the results of the enhancements “and whether they meet our required financial thresholds,” he said.

By the end of 2022, about a third of Party City locations will be converted to the “next-gen” format, according to Weston.

Party City is one of a number of retailers, such as Union, New Jersey-based Bed Bath & Beyond, that looked to declutter their stores, update their layouts, cut down inventories and upgrade online-ordering capabilities even before the coronavirus pandemic started in earnest in 2020. For Party City, that also meant redesigning store floors by creating shop-in-shop sections and eliminating grocery-store-style aisles.

The company accelerated the rollout of its next-gen stores in 2021 by remodeling or opening 73, with 21 of those in the fourth quarter, for a year-end total of 95, “with encouraging store economics and returns,” Weston told Wall Street analysts.

The modernized stores continue to average a mid-single-digit sales increase with improved gross profit compared to control stores, with a payback period on each store of less than 24 months on average, he said.

“As a result of this strong performance, we remain committed to an aggressive roll-out plan in 2022 and beyond,” Weston said.

Asked about the changes to the prototype, the CEO said, “We see the biggest opportunity is to continue to create more inspiration in the store. One [thing] that the customers gets excited about in their feedback is their ability to visualize the art of the possible.“

That means, for example, creating digital and merchandising elements at stores so patrons can “see something and create that [which] they maybe did not think was possible on their own,” according to Weston.

Ballooning Business

Party City also is looking to build on the success of its balloon business at it next-gen stores, by expanding the assortment, and to improve the presentation of seasonal merchandise at the front of those stores, Weston said. The retailer is focused on its goal of being “celebration-occasion obsessed.“

In the fourth quarter, Party City’s net sales were $698.3 million, an increase of 7.7% compared to the prior-year quarter, mainly driven by strong retail sales growth that was partially offset by the divestiture of a significant portion of the firm’s international operations in the first quarter of 2021. Total retail sales increased 12.6% compared with the prior year, driven by strong comparable sales in its core categories, partially offset by incremental sales from the 53rd week in 2020.

Despite an overall strong fourth quarter, officials said sales at the end of December into January slowed down as there were fewer social gatherings because of the omicron variant, particularly in the Northeast.

Officials also discussed Party City’s plans to consolidate offices it has in New York, New Jersey and California at a new headquarters building at 100 Tice Blvd. in Woodcliff Lake, New Jersey. Part of the financial burden of that consolidation will come from the $120 million to $130 million that the company plans in capital expenditures this year.

But Party City’s cost for the move will be partially offset in the short term and long term by a tenant-improvement allowance it’s getting from its new landlord, Signature Acquisitions, and from $10 million in New Jersey tax incentives, over a 10-year-period, for relocating its headquarters to the Garden State from New York, according to company officials. Long term, the relocation will cost $5 million from a capital perspective, officials said.

Party City told New Jersey officials it planned to invest more than $32 million to lease the entire 208,911-square-foot office building on Tice Boulevard for 16 years.

Source: www.CoStar.com

This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author’s own.