Party City to team up with Amazon
Party City has joined the growing list of retail companies that are making deals with Amazon.
Amid strong second quarter results, the party supplies retailer and wholesaler announced it is launching a pilot program to sell product on Amazon.com. The pilot will launch in advance of Party City’s biggest selling season—Halloween—and will initially offer a curated assortment focused largely on the costume category.
Party City plans to expand the assortment later this year to include products for Christmas and New Year’s celebrations. Further expansion is possible in 2019.
The deal is the latest example of Party City’s strategy to expand its reach. In June, the company announced plans to open about 50 pop-up stores under the Toy City banner for the holiday season.
“The Amazon pilot we are launching will complement PartyCity.com’s category leading capabilities and serve to advance our overarching strategy of having Party City products available to consumers wherever they choose to shop,” said James M. Harrison, CEO, Party City Holdco. “As a vertical retailer, the program also creates an additional channel of distribution that allows us to leverage our dynamic manufacturing and distribution capabilities while attracting new customers to the Party City brand, including Millennials, who have shown a propensity to shop across online channels.”
More and more retailers are finding it easier to team up with Amazon than just fight it. Sears, Kohl’s, Best Buy, Nike, and Chico’s are among the companies that have deals with the online giant.
In separate news, Party City reported second-quarter earnings and revenue that beat Street expectations. Net income rose to $28.0 million for the quarter ended June 30, from $25.0 million in the year-ago period. Adjusted income per share increased 42.9% to $0.40 from $0.28 in the second quarter of 2017.
Total revenues increased 3.0% to $561.0 million. Retail sales increased 2.9%, driven primarily by square footage growth from store acquisitions.
Same-store sales inched up 0.1% despite headwinds from a shift in the timing of Easter.
“As we enter the third quarter, we continue to make good progress on our strategic growth initiatives and are well-positioned for the upcoming Halloween selling season,” said Harrison. “The recent announcements of the expansion of our seasonal pop-up store offering with 50 Toy City locations and our seasonal pilot program with Amazon will only strengthen the offer for customers. Given performance to date and the outlook for the second half of the year, we are reiterating our full year 2018 guidance.”
Party City’s retail operations include approximately 950 stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites.
Analysis: Rite Aid faces ‘questionable future’ after scrapped merger
The proposed merger by Albertsons and Rite Aid [which was called off on Wednesday evening] was always one based on an overly optimistic view that combining the two businesses would generate incremental revenue and profit.
There was some logic in that the deal would have given Albertsons more scale in the high-growth pharmacy and health space. It would have also granted it access to some geographic areas it does not currently serve with a pharmacy offer.
However, both of these things are about “one plus one equaling two.” They are not compelling reasons for a complex and costly merger.
A huge question mark always hung over how the combination of the two businesses would have boosted growth and created meaningful transformation. The parties talked enthusiastically about evolving themselves into a food, health and wellness powerhouse but never spelled out what form this would take or how it would come about.
A rebranding of Osco and Sav-on concessions in existing Albertsons stores was also rumored. However, that would have been a cosmetic rather than a material change to create a leaner or more dynamic business — and certainly not a sufficient reason for a merger.
The idea of creating a food, health, and wellness giant was always fanciful. Neither Albertsons nor Rite Aid are stellar retailers. The former has a tired and shabby store portfolio that is in desperate need of investment, while the latter also has a retail proposition that is far from cutting edge. In our view, Albertsons should focus on investing in and boosting its existing business rather than getting involved in corporate deals.
In our view, the deal was simply an acquisition that would have added some new revenue to Albertsons while injecting another entity into an already overly-complex corporate structure.
The future for Rite Aid is now questionable. After the sell-off of stores to Walgreens, it lacks scale. Given that scale is now more critical than ever in the pharmacy and health market, it will no doubt be casting around for another entity with which it can combine.
Toys “R” Us settlement wins court approval
The long, drawn-out saga of Toys “R” Us is nearing an end.
A bankruptcy court has approved a compromise among Toys “R” Us, its lenders, vendors and other creditors, according to Marketwatch.
Under the deal, the retailer’s vendors and other creditors will receive a cash payment of approximately 22 cents on the dollar with potential for higher recoveries, the report said. In return, the vendors and creditors will forgo their right to sue the group of lenders who ultimately decided to send the bankrupt Toys “R” Us from reorganization into liquidation.
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