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NAPERVILLE, IL-During the party supplier’s third quarter ended Oct. 29, Factory Card & Party Outlet’s net sales increased 4.7% to $56.2 million compared with $53.7 million during the same period last year. However, the company’s net loss for the quarter totaled $1.2 million, or 39 cents per diluted share, and its net income for the quarter came in at a mere $472,000, or 14 cents per diluted share. Comparable store net sales for the third quarter increased 1%.

According to Factory Card CEO Gary Rada, the company’s expectations for Halloween were higher than its actual results. “We made a substantial investment in store payroll and advertising with the anticipation of a larger and quicker ramp up to the Halloween season,” Rada said in a statement.

The company also said the quarter’s loss could be attributed to $670,000 in pre-tax charges for the litigation settlement with Midwest One Distribution Co., the write-down of assets related to underperforming stores and a greeting card inventory write-down related to the transition of that program.

Rada explained that while the company is disappointed in the quarterly results, management and its board of directors remain committed to improving future financials. The company has taken steps to improve its future, including a newly installed an inventory replenishment system, the revamping its greeting card category, and the launch of an e-commerce website.

The company’s board of directors has also set a return goal of 13.5% on invested capital by the end of 2008. To achieve that goal, Rada said Factory Card would substantially lower inventory and improve its supply logistics. At end of the quarter, Factory Card operated 189 company-owned retail stores in 20 states.

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