Q1 2021 Party City Holdco Inc Earnings Call
[music].
Good morning, everyone and welcome to the party City Q1, 2021 earnings conference call.
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At this time I'd like to turn the conference call over to you Ian Heller, Vice President and Deputy General Counsel.
Please go ahead.
Thank you operator, good morning, everyone and thanks for joining US. This morning, we released our first quarter 2021 financial results you can find a copy of our press release on our website at Investor Got Party City Dot com.
Now I'd like to introduce you to our executive team who are here on today's call. We have Brad Weston, our Chief Executive Officer, and Todd Wilkinson, Our Chief Financial Officer.
We'll start the call with some prepared remarks by Brad and Todd before we opened it up for Q&A.
Please note that in today's discussion management may make forward looking statements regarding their beliefs and expectations about the company's future performance future business prospects or future events or plans.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements.
Although we believe that the expectations reflected in these forward looking statements are reasonable we can give no assurance that such expectations will be realized.
We expressly disclaim any duty to provide updates to our forward looking statements, whether as a result of new information future events or otherwise.
Urge everyone to review the Safe Harbor statements provided in our earnings release as well as the risk factors contained in our SEC filings.
During today's call, we will refer to both GAAP and non-GAAP financial measures of the Companys operating and financial results for more information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Please refer to our earnings release and with that I'll turn the call over to Brad Weston.
Thank you Ian.
Morning, everyone and thank you for joining us today.
I'll start by reviewing our financial and operational results for the first quarter of 2021 and then discuss our progress and plans around our purpose to inspire joy and make it easy to create unforgettable memories.
We'll deliver on this purpose through advancing the fundamental building blocks of our strategy.
Todd will then elaborate on our financial results and provide some thoughts on how we're approaching the remainder of 2021.
We are pleased with our first quarter performance with consolidated total sales of two 7% on a constant currency basis to $427 million.
As a reminder, we anniversaried the onset of the pandemic and subsequent store closures late in Q1, and social gatherings were suppressed for a significant portion of the quarter. This year did that end we are enthusiastic about how the business transition post Christmas with a strong new year's Eve.
Foremen and the cadence of our business improving as we move through the quarter.
Compared to 2019 March was the strongest mark and this momentum carried into April.
The strength in the business was broad based with continued strong performance from our core everyday categories and better than expected performance from our seasonal categories. I am pleased with how our teams are executing against our strategic priorities and navigating the challenges of the environment, including tight supply chain conditions.
For the quarter retail sales were $333 million with brand comparable sales, increasing 35, 9% at that 0.4% relative to 2019.
Our core business was up 11, 2% in the quarter versus 2019, allowing us to drive sales in the quarter that is traditionally heavy in a variety of unique in person parties and celebrations for adults and children.
Despite suppress social gatherings for the vast majority of Q1, we were encouraged by our better than expected seasonal performance, including Super Bowl Valentine's Day, 100 days of school, Dr. Seuss day, St Patrick's day, and Mardi Gras among others.
Digitally enabled e-commerce sales continued to perform very well with healthy double digit growth both year over year end versus 2019.
Doors sort of the hub of our Omnichannel business and strategy with balloons fundamental to the overall experience.
The percent of of our sales that originated online represented 14, 3% of our mix in Q1, an increase of 440 basis points versus 2019, knowing that broadly across retail the majority of shopping trip start online today, we're focused on leveraging our full omnichannel model and.
The strength of each of our channels to provide customers flexibility and the convenience of multiple fulfillment options. Our overall wholesale business was down 15, 8% in the quarter impacted by the January of 2021 sale of a substantial portion of our international business and the smaller impact from the 2020.
Exit of our gifting business. Excluding these two factors the wholesale business was essentially flat to prior year. Despite the challenges of the pandemic on celebrations, especially in markets like Canada, which is an important market for us and remains largely shut down.
Importantly, integrating continued to have solid results in Q1.
Much like our retail business, we were very encouraged by the sequential improvement in wholesale performance versus 2019.
January and February felt the impact of soft franchise in the independent channel, but March and April improved dramatically from a profitability perspective, we saw strong flow through on the sales increase as you can see from our adjusted EBITDA performance. Despite the impact of the new year's Eve shift into Q4 2020.
It was $9 million to adjusted EBITDA, we generated adjusted EBITDA of $32 $4 million in Q1 and from a balance sheet perspective, as previously announced during Q1, we refinanced our term loan which was set to mature in 2022, extending our next meaningful maturity to 2002.
Five I'll now discuss the progress we made in Q1 on advancing the fundamental building blocks of our purpose to inspire joy and make it easy to create unforgettable memories, namely product innovation in store experience being celebration of obsessed and focusing on our north American vertical model starting.
With product innovation as we focus on product innovation, we're continuing to leverage consumer insights and data as we reinforce our position of authority. When it comes to celebrations throughout 2021, we will introduce an unprecedented level of innovation across all of our major categories.
An example is our birthday favors category through a detailed understanding of the consumer we successfully repositioned this category injecting innovation to accurately reflect the giftable items moms are seeking for their party.
While early we are pleased with the initial results investing in quality.
Complementary to our work on innovation is a relentless focus on leveraging consumer end market insights to elevate our assortment quality.
Our opportunity is to deliver better quality across products that can carry higher price points at similar or expanded margins were.
We're beginning to see these improved products resonate with customers at.
As we saw recently for our Easter program.
We upgraded the quality of our Wearables assortment and significantly beat our sales and sell through plans.
Moving to in store experience.
As expected in the first quarter, we opened or remodeled 19, nextgen stores, bringing our total to 41 to date.
Currently results are providing strong rois and as a result, we're planning to open another 16 nextgen stores in Q2 totaling 57 by the ended the first half of this year.
With a targeted payback period on each store of less than three years.
We will continue to execute nextgen stores with new stores and remodels throughout the back half of this year and.
And we continue to assess the long range plans for conversion of the majority of our store fleet, which we will be able to accomplish within our historical annual capital spend range.
We continue to be pleased with the performance of core categories entertaining birthdays and balloons as I mentioned earlier 2021, we'll see unprecedented levels of innovation and quality upgrades throughout of our assortment.
This is the result of better understanding consumer needs and a stronger integration of data in our processes.
We will be updating all major categories. This year and believe customers will be delighted with the changes we're making.
The innovation and quality product upgrades being made will impact both our next gen stores as well as our existing stores and strengthening our relevancy and overall shopping experience.
After making adjustments to our seasonal assortments in 2020. This year is off to a good start.
We intend to stay disciplined and lean on inventory in 2021.
We've invested in our merchandise planning and transportation teams, which has driven a significant improvement in our sell through performance and inventory turns in key season, while achieving sales target.
Finally focus on North America vertical model.
We continue to leverage our streamlined north American vertical model, our improvements to our supply chain remain a work in progress and we will provide updates as we have some of the share in subsequent quarters.
As you are aware there are broadly discuss supply chain headwinds across the industry. As a result, we have seen some albeit minimal disruption and receipt delays. However were actively finding alternatives and working through these challenges.
In terms of our outlook the operating environment remains dynamic so we're still not providing of formal outlook for the full year that said, we're pleased with the momentum we have seen quarter to date at Todd will discuss the specifics of our second quarter outlook shortly.
We're confident in our overall positioning as we head into the summer and graduation season, and we're focused on the right priorities to fortify our industry, leading position as life begins to return to some sales of normal and in person celebrations gradually resume.
So in summary, I am pleased with how our organization is executing as is reflected in our financial performance and the progress, we're making against our strategic priorities.
And now I'd like to turn the call over to Todd to discuss the first quarter results at our 2021 outlook in greater detail.
Thanks, Brad and good morning, everyone.
I'll focus on the key highlights of our first quarter performance and then I'll discuss how we're approaching the rest of fiscal 2021 per.
For details regarding our financial results. Please refer to our earnings press release, and the accompanying slides, which are available on the Investor Relations section of our website.
As Brad discussed, we're pleased with our first quarter results and the broad based strength in our business trends.
So I mentioned on our last call. The 50 <unk> week in 2020 shifted a significant portion of new year's Eve sales into the fourth quarter of fiscal 2020.
Which would otherwise have fallen in the first quarter of fiscal 2021.
This resulted in first quarter headwinds of approximately $32 million in sales and $9 million of EBITDA compared to last year.
Please also note that our first quarter results include the impact from the divestiture of our international wholesale and retail operations.
Which closed at the end of January.
With that in mind for the first quarter consolidated revenues were up three 1% versus 2020.
Brand comparable sales increased approximately 35, 9% driven primarily by strong performance in our core categories, which were up 49% in the quarter.
Versus 2019 brand comparable sales increased 0.4%.
Including an 11, 2% increase in our core categories.
Wholesale revenue declined 15, 8% on a reported basis versus first quarter, 2020, and 29, 6% versus 2019.
Primarily driven by the January sale of our international operations.
And of grant our balloon manufacturing business continued to deliver strong growth with a 49, 7% increase in domestic third party revenues.
In Q1 end of Graham's growth was offset by pockets of softness in the remainder of our wholesale business.
Sales into Canada declined sharply due to government mandated lockdowns, which continue to be in effect and will be of headwind for the near term.
The balance of our wholesale segment was down 20% in the first quarter.
Driven primarily by declines early in the quarter.
We're encouraged by improving sales trends with our franchise and independent customers in March and April at.
It's COVID-19 related restrictions continue do at similarly, changing trends we've generated in the retail segment.
Adjusted gross margin rate for the first quarter expanded 200 basis points from the prior year period.
Primarily due to favorable product mix and fewer retail sales promotions, partially offset by increased cost of delivery services.
Adjusted operating expenses were $138 8 million a decrease of $9 million from the prior year period end of 320 basis point rate improvement, primarily driven by disciplined expense management and leverage on higher sales.
Yeah.
As a result at <unk>.
Adjusted income from operations was $14 $7 million compared to an adjusted loss from operations of $7 3 million last year.
Adjusted EBITDA was $32 4 million compared to $11 9 million in Q1 of 2020.
And adjusted net loss per share was <unk> <unk> compared to an adjusted loss per share of <unk> 28 in the prior year period.
Now turning to our balance sheet and cash flow.
Inventory was down 32% year over year, driven primarily by two strategic items.
First our previously disclosed $88 million disposal of seasonal inventory in Q4 of 2020.
In order to drive higher in season sell through and less annual inventory carryover.
Second $66 million in international inventory that was sold as part of the previously announced international business divestiture.
We continue to prudently manage our working capital and we expect ongoing opportunities to improve our inventory levels.
Q1, operating cash flow improved by approximately $25 million versus prior year period, driven primarily by higher net sales improved operating income and favorable working capital changes.
We're also pleased with where we ended the quarter with a liquidity position of approximately $213 million comprised of $84 million in cash and $129 million and revolver availability.
Our principal balance of debt net of cash was approximately $457 million lower than the prior year period at <unk>.
Just over $1 $3 billion.
As you are aware in February we completed the refinancing of our term loan that would have matured in 2022.
By the offering of senior secured notes of transaction, which emphasizes our focus on strengthening our financial health and flexibility.
Importantly, we now have no meaningful debt maturities for over four years.
Let me now turn my comments to our outlook.
We remain optimistic about the prospects of a sustained economic recovery in 2021, and the eventual return to normal.
However, we recognize the business risks remain elevated from the COVID-19 pandemic. So given these factors in the interim we are not providing specific annual sales and earnings guidance.
In today's earnings press release, we did provide our sales and earnings outlook for the second quarter.
In the second quarter, we expect our consolidated sales to be approximately $475 million to $490 million with the brand comp sales increase in the 92% to 97% range versus the comparable 13 week period in 2020.
Or a mid to high single digit increase versus the comparable period in 2019.
Lastly, we expect Q2 adjusted EBITDA to be in the range of $60 million to $70 million.
For 2021, there are a couple of unique items that will impact our performance, which we just wanted to highlight for your modeling purposes. As a reminder, with the sale of our international operations in January of 2021, there will be an impact on our revenue and other financial metrics as we shared previously in 2019 the internet.
National business generated approximately $250 million in revenue with an immaterial amount of profit.
However for modeling purposes, 2019, EBITDA for the divested business was slightly more skewed towards Q2 and Q3.
And lastly, as mentioned on our last earnings call, we still expect transportation costs headwinds net of our mitigation work of approximately $8 million to $10 million for the remainder of fiscal 2021.
So in summary, we are extremely pleased with our financial and operational performance in the first quarter and we believe the overall strength of our business and progress against our initiatives positions us well for the remainder of the year end with that I'll turn the call over to the operator to start the Q&A session.
Okay.
Ladies and gentlemen at this time, well begin question and answer session.
To ask a question you May press Star and then one using of Touchtone telephone.
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Once again that is star and then one to ask a question.
We'll pause momentarily to assemble the roster.
And our first question today comes from Seth Sigman from Credit Suisse. Please go ahead with your question.
Hey, everybody good morning.
Great Great quarter end of nice progress I'm curious, obviously party city is positioned to benefit from the reopening across the country I'm more curious about market share performance specifically in March and April do you feel like the improved execution and the many strategic initiatives Thats, helping you take more than you.
Our fair share and how are you thinking about that thank you.
Thanks Seth.
We certainly saw.
An uptick of our business as we mentioned in March and April versus January and February.
What we've tried to keep a close eye on is the difference between our core business.
In our seasonal business our core business has remained strong.
Even through Q3, and Q4 of last year and into Q1.
Of this year end.
That has been a tremendous focus.
For us and we feel like we're doing.
Well from a market share perspective.
Our seasonal businesses have continued to beat our expectations.
They've gradually.
Improved through Q3 Q4 and into early spring.
So.
I really anticipate that as we things open up.
People start returning to normal celebrations that we'll continue to see that trend.
Okay, Alright, that's great and then my follow up question is around the flow through of the business for Q2, you are guiding to higher sales versus 2019, which is encouraging but.
But at slightly lower adjusted EBITDA margin I think Todd you mentioned international and maybe transportation costs as part of that at any other drags that we should be thinking about here versus 2019 and at how did those EPS I guess as we move through 'twenty one.
Cash at the Big ones, we had mentioned last quarter that their results sort of just a little bit of.
Helium cost pressure when you look back versus the last couple of years that normalizes as we get into Q3, and then omni channel costs at crews a little bit of delivery cost.
Is embedded in the model and those those normalize as well as we get into well.
As more volume picks up into those categories.
No.
Those are really the biggest things that we look at truthfully, we've set up that cost structure. So that we were in a position with our occupancy where we can gain leverage really quickly.
Sure.
Our costs are have been reset.
At the wholesale level and the manufacturing levels. So the flow through on the incremental sales should start to be very strong, particularly as we get into the second half.
Okay, that's great all right well, thank you very much.
Thank you.
Victor.
I think it comes from Rick Nelson from Stephens. Please go ahead with your question.
At current.
Good morning.
No.
Perhaps.
Yes, hi.
And.
How you are planning from fourth quarter.
Halloween 2021 you mentioned from.
The supply chain.
Jos.
How we should remember that its hard to day.
Your ex Craig patients.
How do you mitigate tariff codes.
Gross challenges.
Yeah.
Yeah. Thanks, Rick.
So theres still a lot of.
Unknowns for the back half.
Net.
Providing guidance with regards to Halloween, we learned a lot last year.
We made additional refinements to our go to market strategy Cross store Assortments, our in store merchandising our digital experience.
Marketing based on those learnings that are really designed to improve.
Improve our result, so for everything in the back half, including Halloween, we've positioned our buys to.
<unk> four.
A range of results so.
We're confident that we've we've planned and positioned our inventory appropriately.
And if consumer behavior.
Continues to Hum.
Show show the.
Sort of rebound of celebrations and social gatherings then.
We're positioned really well with regards to your site supply chain question. This is obviously a broadly discussed issue.
In in the industry, it's hard to say exactly how long it's going to last however.
One thing I would want everybody to notice that we were making supply chain investments.
Really.
Helped mitigate any circumstances that were coming we were also working really hard on driving more efficiency.
Into our supply chain before we entered this more difficult environment.
Environment and so.
As we drive our vertical model. So we were already focused on opportunities to really take time and cost out of the system all of which are really mitigating any any challenges and thus far we've only seen minor disruptions.
We feel good about the positioning.
Relative to delivery on Halloween is.
That product at.
<unk> ports gets on the kits.
It's on the water and it has scheduled arrival so.
We're we're feeling positive about that.
Okay.
From a color also what cost of care about the Nextgen store.
Stores, how those are performing from a.
Comp store.
Standpoint.
Compared to the rest of apparel.
Yeah, I'll I'll speak to the top line and Todd can talk a little bit about what we're seeing in Capex. The next gen stores are outpacing.
Job growth in the balance of the chain of balloon comp growth.
<unk> to be about double of the balance of the chain.
With with quite a bit higher balloon sales penetrations. When you think about the fact that we didn't really opened the first one until last summer.
And the small number by the time, we got to.
The fall season.
We're pleased with what we're seeing in terms of performance.
The returns, we're seeing and the customer reaction, which is really supporting our decision to.
Expand we're still learning a great deal and constantly modifying the prototype.
And if you digest. The fact that were as of last year, we've been creating a new prototype in the midst of of pandemic overhauling our assortments of inventory levels you can appreciate.
The complexity and I think that's just land two thoughts before Todd comments and that's at if we weren't excited by the results, we certainly wouldnt be moving forward in that fashion.
We are but I'd also say that we aren't at the point, where we should model of those results.
Yes, I think thats exactly right and.
At the same time, we are seeing those results that are encouraging.
Stores are outperforming chain averages of customer feedbacks from very strong.
From a landlord perspective.
It really.
Very very few if any.
That have not participated in the cost of the remodels themselves. So that helps with the cost structure dramatically remodel already is significantly less expenses in a new store.
But then with the landlord participation at really does minimize that overall costs.
We plan for next Gen stores from a capital perspective are included in our overall capital budget of $70 million to $80 million. So while we're not going to break them out specifically at this point and gain more detailed economics.
They're embedded in what is an overall normal run rate for us.
And within that.
I think Brian mentioned, Brad mentioned in his script.
We're getting a payback of less than three years on these remodels. So.
Performance is such that they are paying lots of capital quite quickly.
And I think if you look at how.
If you look at the numbers of what we are.
Implementing in Q1, and Q2 numbers as I mentioned.
We will be continuing to expand in the back half.
Okay.
Great current.
From a color.
Good luck kind of as we push forward.
Yeah.
Thank you.
Our next question comes from Joe Feldman from Telsey Advisory. Please go ahead with your question.
Yeah, Hey, guys first one of the top line were there any other.
Regional trends that you've noticed or any differences across the regions, maybe where things are a little more open than areas, where there are less.
So.
It's interesting subside we see.
Potential growth opportunities really across all.
Regions and all of that.
Two year basis, the north thesis has trailed the pace of recovery.
Versus the rest of of the country.
I'd say our geographic results are are choppy at multiple levels. When you look at pandemic and helium history impacts.
Et cetera, so, but we're not seeing anything in the current business that would lead.
Lead to.
Any outsized risks or opportunities with any of our regional performance.
Got it got it that's.
That's good and then.
On inventory.
I know you've talked about supply chain.
Hiccups that well more than hick ups that are happening to the industry right now.
But you mentioned like there's a few categories, where it feels like you're a little lighter than I was just curious if there's anything you could share detail wise or maybe from a competitive standpoint, you don't want to but.
Where you might be light and its youre actually missing some sales in those categories.
So I don't I wouldn't say that we see anything where we're missing any sales as you can imagine.
Demand has changed a little bit by category.
Versus where we were with pre pandemic and even during the pandemic. So you know those.
Those are significant but demand has a little bit of of impact on our supply chain flow.
And then there's some supply constraints in some areas. We don't we're managing all of those.
We're constantly looking at multiple sources of of supply.
To ensure that we're covering.
Our needs. So we're focused on demand, where it's been where it is today and where we see demand by category.
In the near term and long term and then making the supply of adjustments.
That we need to.
Got it okay. Thanks, and good luck with the second quarter guys.
Okay.
Our next question comes from Jenna Giannelli from Goldman Sachs. Please go ahead with your question price hike.
Good morning, Thanks for taking my question.
I'm curious a little bit on just the strong brand comp and the retail sales, obviously better than expectations.
Expectations and at a very sound Crazy and I'm curious if you could just break that down a little bit more of pharmacy.
Some of the trends that you saw last quarter in terms of that smaller gatherings now different mix.
Pricing going to tail end of transactions and traffic just any color in front of at the Kpis underlying growth.
Strong sales trends would be great.
Yes, I think the biggest thing as I said before to pay attention to or.
What what really encourages us as our as our.
Core everyday categories that being entertaining and balloons and solid tableware and birthday products those continue to be.
The strength of our of our business and to me that tells me that.
Gatherings and the milestone celebrations that we want to be there for the customer their destination for one stop shop, and our ability of the films solutions for those occasions that were meeting those needs.
The big if there's a drain at any categories.
This has been true through the pandemic as if its related to social gatherings and at our seasonal business where people typically gather four.
Parties as I mentioned several in the first quarter like Super Bowl and Mardi Gras St Patrick's day.
As you can imagine those have been a little bit more challenged we have seasonal products specific seasonal product for those of.
Celebrations as well as some of our core assortment is is tie ins for those.
And those have been the most challenging.
But the good news is as things open up we're seeing continued improvement.
And we saw they beat our expectations through the first quarter I think they were at the biggest challenge in Q4.
We're not seeing any price resistance, obviously, we did a lot of work last year in getting our prices.
For the consumer at being properly.
Competitive and the unit productivity that we're seeing in those and the production of of margin dollars combined with a reduction in promotions.
Is really driving a good margin as well.
Great. Thanks.
And encouraging.
One more interest on the inflationary pressures I know you called out transportation cost of something to watch Inc. To the rest of the year, but I'm curious if you've seen labor and wages availability of labor has that been at headwinds starting to me of headwind.
As you think about the rest of attorney line.
At.
Sure so.
So as we look at there.
Wages there is theres currently wage pressure.
And what we're doing is going along and measuring and making sure that we're maintaining our competitive position.
But it also mitigating where possible so.
Anything that we have seen.
Included in our guidance and it's in there.
I'd also say on the wage side just historically.
No.
Federal minimum wage gets a lot of cash.
The truth is local minimum wage laws shutdown of increasing fairly rapidly there over time, and we've been keeping pace with that.
With local markets.
So the difference in minimum wage across our store fleet is probably not of Sigma scan as you would expect.
You would expect so.
At this point from everything we're seeing the current trends seem manageable.
And related to the freight side of your question in General I would say that.
We're.
Sure.
We stated in Q1 restate it again.
Now that we've accounted for those.
We see those stayed fairly in line with what we have.
What we've discussed and so feel like those are under our control of them right now.
Okay very helpful. Thank you.
Our next question comes from Carla Casella from JP Morgan. Please go ahead with your question.
Hi, I'm wondering if you could talk here part of that strategy how many.
You are how you are looking at doing them in 2021 versus how that would compare to at 20 or 19.
In terms of just the number and size of any different scope of the stores.
Yeah, and just to clarify by pop up you mean Halloween city Halloween pop up stores.
Exactly.
Yeah exactly yeah.
For strategic reasons.
I'm not going to disclose what our current plans are.
No in 2020.
<unk>, our number of significantly for two reasons, one was not knowing what the conditions for 2020 Halloween we're gonna be.
And taking a conservative approach to.
Our capital Outlay, and then most importantly, though we really wanted to retrench and.
In test.
A few pilots.
But it would allow us to understand how we can compete better.
With with competition in that arena.
And as I mentioned in past conversations that we are.
It really did learn a lot coming out of our pop up pilots last year that.
Of that encouraged us to do more of this year end.
So we will see significant growth but.
Can't get into specific numbers right now we think those learnings will facilitate a better performance.
Okay, Great and then just you talked about Canada can you just give us a little bit of of the magnitude of how big is that business now as a percentage of your total wholesale animas.
And I'm, assuming you don't have a I don't I can't remember if you've kept any retail in Canada.
We didn't so we had 65 stores that we ended up selling in Canada that would have been right.
At the very beginning of Q4 of 2019.
And then Samsung.
<unk> seen some shop in shops with Canadian tire.
I would say the bulk of the volume at this point still coming through those Canadian stores, just given the fact that well.
At that.
At the economy has been shut down due to COVID-19 concerns for a good chunk of the last several months and continues to be.
So we haven't given out specific metrics necessarily on how big of a sales are but.
If you extrapolate gross 65 stores youre going to get a good good good baseline to work from.
I guess I'm, just trying to think more longer term as Canadian business does that 10% of wholesale at 20% longer term.
Or maybe at pro forma what it would've been before COVID-19.
It was if it was at a wholesale business.
If it was a wholesale business so.
The Canadian stores has a very similar structure with U S, where about 80% of what they are selling was coming through wholesale some of those 65 stores.
So it would again proportional with again with what you would've seen for the U S stores and.
Yes that Canadian.
Relationship called for a significant.
Increasing the amount of sales.
Sales of wholesale into Canada, just because of the Canadian tire penetration.
Okay.
Think about it growing and becoming our biggest wholesale customer is certainly where it was at on day, even short to medium term map had had we not run into these issues with COVID-19.
Okay. That's helpful. Thank you so much.
You bet.
Our next question comes from <unk> Martinson from Jefferies. Please go ahead with your question.
Good morning.
Just circling back to the Halloween inventory at certainly positive we're feeling good of what's on the water now what.
When does that inventory kind of have to be in your warehouses some of that.
We can reach the stores just from a timing perspective.
Well as you can imagine.
Halloween really starts to get.
Out on the floor.
Early early sets or in August.
And then we that.
That could set grows.
Through August and September.
So product starts to really hit those stores.
Over the course of June and July.
Okay, and then it hit or a warehouse of that time period.
And given the shipping cadence here you don't have any concerns about that inventory getting end correct.
Well as like everybody we've had to manage.
Those.
The timing.
And with a with a different environment than we've seen over the last couple of years at certainly taken quite a bit of team work, but.
Very proud of the team on the execution.
That we've seen thus far and feeling feeling very positive about where we are right now.
Okay, and when you look at.
The reopening trade are you seeing your digital remaining as strong as it had been and how are customers responding to the offering that you have.
Yeah, we continue to see strength in our digital business digitally enabled sales.
Whether that is shipping.
Shipping out of our D C.
Or what we've all seen is the activity around buy online pickup at store and buy online pick up at curbside and our delivery business.
Continuing to be something that the consumer sees as.
Favorable.
And in this category.
Seeing favorability, there as well it might not be as big as some other categories.
From a penetration perspective, because our stores are often the hub of getting helium and getting balloons and.
And the ability to come in and pick your balloon bouquet fill it with helium.
Tick at home as will has and will be of driver to store traffic.
But we're certainly seeing growth and penetration of our digital business and substantial growth.
And just on helium.
Fully stocked and we have no supply issues correct.
That is correct.
And we are of good outlook on helium.
Thank you very much guys I appreciate it.
And our next question comes from William Reuter from Bank of America. Please go ahead with your question.
Good morning.
I'm curious to hear if you have seen any sort of a boost in your retail sales around the timing of when stimulus checks are sent out do you see any sort of indicators there.
So.
That's a that's a good question we certainly.
Not had anything that would allow us to sort of tie.
Seen some retailers talk about the fact that.
<unk> seen an uptick.
In business in stores, where they've been able to track where stimulus checks of have dropped and that is not something that we have seen obviously the consumer has some is spending.
We're seeing that broadly across retail we know that that is some combination of.
Pent up demand.
A combination of stimulus tax checks combination of.
Increased savings accounts.
Certainly.
Expect that we are a beneficiary of.
Some combination of that our ability to parse out.
The amounts that you would.
Sort of attribute to each of those would be extraordinarily.
<unk>, but.
But we.
We are happy that the consumer has discretionary income we believe we're the beneficiary.
Of that like every other category and also believe.
At the consumer is continuing.
To celebrate.
During the pandemic they found different ways to celebrate which contributed to.
Two of our overall.
Good results.
We would anticipate that that now as things open up that will be the beneficiary of that as well.
Okay and then.
No you weren't willing to share a whole lot on the pop up stores, but.
The last day at hurt in terms of your permanent stores. It was 15, new ones offset by five closures I didn't hear me referenced that in the prepared remarks did I Miss it or is that still the plan.
No that is still the plan.
We are giving guidance last time core 15, new stores since may of closures as well as capex of $70 million to $80 million for the full year and those those still are are valid estimates.
Perfect. Thanks, a lot.
Thank you.
And our next question comes from Hale Holden from Barclays. Please go ahead with your question.
Hi, Good morning, Thanks for taking my call I just had two.
Following up on Bill's question on helium.
I understand your supply is good but I was wondering if you could give us an update on on what your sourcing cost of square and kind of what you were thinking for the remainder of the year.
Sure.
Sure so.
For helium, we are we have put ourselves into a position where we have longer term contracts for our supply that give us a little bit of flexibility at fair amount of flexibility actually on.
Upside or demand increases we have the supply there.
Those contracts were largely in a state where we know what our prices are going to be at or is there some up and down but as a general statement.
We have good visibility into those costs, depending on mix of which suppliers we use so.
We saw an increase in our average cost as we went into the second half of <unk>.
At <unk>.
That was pretty significant.
In the 40% to 50% range.
And since then.
Within a certain round, we've generally stayed in that range and would expect to across the rest of this year.
Great.
And then my.
My last question was.
You know understanding that you don't want to talk about how many pop up Halloween city stores Youre doing but <unk>.
Generally I was hoping you could talk about how competitive you think Halloween will be this year.
It feels like it could be fairly explosive growth, but a lot of people chasing it.
And I was wondering how you thought the competition was going to react.
No I would say that the it's.
It's hard to know what the competition is going to do.
The biggest challenge with 2020 was the lack of trick or treaters in Halloween.
School activities.
Would anticipate this year being more more kid end.
Family friendly if the pandemic allows more.
Normalized activity end.
We would anticipate being the beneficiaries of that.
Okay, great. Thank you very much.
Okay.
And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over to the management team for any closing remarks.
Thank you operator.
Let me close by saying that each of our efforts over the past five quarters have been focused on increasing our relevancy with consumers as the destination.
For celebration solutions, as we inspire joy and make it easy to create unforgettable memories, our entire PCA team, which continues to grow and talent and capability is driving performance that increasingly exceeds expectations across our business.
Our strategy is producing the desired outcomes.
And I am proud of the team's execution. We appreciate your interest in party city and look forward to updating you on our progress next quarter. Thank you.
Yes.
And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.