Factory Card Q2 Disappoints

NAPERVILLE, IL-Due to the launch of a new greeting card program, Factory Card & Party Outlet Corp. experienced a 50% loss in net income compared to the same period a year earlier. For the quarter ended July 30, net income for the second quarter of 2005 was $1 million, or 30 cents per diluted share, compared to $2 million, or 56 cents per fully diluted share in 2004.

Same-store sales for the first quarter also fell by 0.5%, while net sales increased 1.2% to $62.9 million compared with $62.2 million in the second quarter of last year.

During the company’s second quarter earnings call Tuesday, Gary W. Rada, president and CEO, attributed positive sales trends to an improvement in the greeting card and graduation categories. In the coming months, Rada said the company is looking to take advantage of the Halloween season, adding 150 more costumes to its inventory and offering more through its web store.

During the second quarter, the company opened two new stores, which outpaced older stores in ticket sales by $2.50 but only brought in 70% to 75% of what existing stores typically generate. “We have not reached our potential yet of these stores,” Rada said in response to an investor’s query of the lagging stores. “The most recent results shows the group of stores are turning a profit overall.”

For the six months ended July 30, net sales decreased 0.4% to $118.6 million compared with $119.1 million in the same period of last year. Net income for the first six months of 2005 was $1.4 million, or 40 cents per diluted share. Comparable store net sales for the first six months decreased 2.3%.

Factory Card & Party Outlet currently operates 186 Company-owned retail stores in 20 states, offering a wide selection of party supplies.