Party City Holdco (PRTY) Q4 2020 Earnings Call Transcript

Party City Holdco (PRTY -60.00%)
Q4 2020 Earnings Call
Mar 11, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Party City fourth-quarter 2020 earnings conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Ian Heller, vice president and deputy general counsel. Please go ahead.

Ian Heller -- Vice President and Deputy General Counsel

Thank you, operator. Good morning, everyone, and thanks for joining us. This morning, we released our fourth-quarter and full-year 2020 financial results. You can find a copy of our press release on our website at investor.partycity.com.

Now, I'd like to introduce our executive team who are here on today's call. We have Brad Weston, our chief executive officer; and Todd Vogensen, our chief financial officer. We'll start the call with some prepared remarks by Brad and Todd before we open 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. We 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 company's operating and financial results. For more information regarding our non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures, please refer to the earnings release. And with that, I'll turn the call over to Brad Weston.

Brad Weston -- Chief Executive Officer

Thank you, Ian. Good morning, everyone, and thank you for joining us today. I'll review our financial and operational results for the fourth quarter in 2020 and then discuss our progress in go-forward plan on our five strategic initiatives. Todd will then elaborate on our financial results and provide some thoughts on how we are approaching 2021.

Before turning to our results, I want to start by expressing my deepest gratitude to the entire PCHI team for their hard work and contributions throughout the year. I could not be more proud of all they accomplished in 2020, rising to the challenges presented by the global pandemic and positioning us to win despite the environment. Their grit and determination during these unprecedented times allows us to maintain continuity of our retail and wholesale operations while continuing to meet the changing needs of our customers who look to continue celebrating in unique and different ways. And they did all this while simultaneously executing against our strategic initiatives, driving progress against each one, enabling our improved financial performance, and setting the stage for further progress and improvement in 2021.

Key among our accomplishments in 2020 were acceleration and expansion of our omnichannel capabilities, including curbside pickup and delivery, dramatically improving fulfillment options and convenience for customers; a more curated and edited assortment in-store and online to better meet customers' changing needs; a continued rationalization of the business to narrow our focus on our core North American vertical model; initial rollout of next-generation store formats in 22 stores to pilot improved store experience and relevance with customers; successful completion of our debt refinancing, which combined with the additional refinancing of our term loan subsequent to quarter-end, significantly strengthens our financial position and flexibility. Importantly, as a result of these transactions, we substantially reduced our debt, and our next meaningful maturity is not until 2025. Our diversity and inclusion work focused on listening to the organization with empathy and evolved our strategy around three core components: raising awareness, creating a learning culture, and developing our infrastructure to embed diversity, equity, inclusion, and belonging into our people practices and everyday behaviors. 2020 was certainly a year without precedent.

Our full-year results reflect the significant impact of the pandemic to the business, including three months where we operated in a closed store environment or with limited stores open. During that time, our response to COVID-19 was centered on supporting the safety and well-being of our employees and customers. Importantly though, in the context of the pandemic, we successfully pivoted our operations and made meaningful progress on our five strategic initiatives as we put in place the foundational building blocks to prepare ourselves for growth, which I will discuss in a few minutes. This enabled a better-than-expected back half of the year, with flat brand comps at retail despite the COVID impact on our business that is centered around social gathering.

Now, let me discuss the key highlights of our fourth-quarter performance. For the quarter, sales were $648 million with brand comparable sales of negative 5.9%. As we shared in January, the rapid surge in COVID-19 cases had a greater-than-expected impact on customer behavior in the month of November and December. As a result, we saw underperformance in regions like the Northeast, as well as in certain categories like tableware that are most impacted by the reduced size of social gathering.

Importantly, we were very encouraged by the strength of our core categories across the fourth quarter, as strength in celebration occasions is a key focus and essential to expanding our relevance with customers. Comparable sales in our core categories were up 6.5% in the fourth quarter, which bodes well as we look forward to the post-pandemic normal we know will come eventually. I will now briefly discuss the progress in 2020 on the five strategic initiatives that underpin our work to stabilize our retail business, which are having demonstrable impact and we'll continue to build momentum going forward. I will then review our plans to advance our key priorities in 2021.

One, developing a more relevant in-store experience. In 2020, we executed work to determine optimal assortment, inventory levels, retail pricing, seasonal transitions, and the next-generation store prototype. We opened 22 next-gen stores for the year, delivering a far superior customer and associate experience. Our work identified and eliminated approximately $88 million of seasonal product at the end of the year that was unnecessary to carry going forward, and we will continue to optimize assortments across our core categories throughout 2021.

These inventory reductions and operational processes are essential to improving the customer shopping experience and creates more time for our store associates to focus on customers. Two, win in balloons. We saw significant success from our work around balloons last year and were rewarded with strong results in the category. As the dominant player in the global balloon business, from manufacturing and wholesale all the way through Party City retail, we are uniquely positioned in the category with an unmatched breadth of assortment, innovation pipeline, and distribution capabilities.

In 2020, we improved our go-to-market approach through customer insight-led product innovation, inspiring experiences, and expanded fulfillment capabilities. We introduced new do-it-yourself balloon product supported by how-to interactive content, making it easier for customers to realize their vision for their celebration. We expanded the category by capitalizing on customer trends, making balloons a more accessible and relevant part of everyday celebrations. Three, address value perception in key categories.

In 2020, we addressed price perception head-on, enforced by customer awareness and new price elasticity modeling, along with trip driver and basket builder product profiling data, we reduced Party City retail prices on over 9,000 SKUs or almost one-third of the total current active SKU count. The customers noticed and responded favorably, with unit sales volume increasing as projected, driving incremental gross profit dollars for the enterprise. As a result, we now have this critical work behind us. However, we will monitor and analyze pricing data correlated with customer data on an ongoing basis to ensure we maintain relevancy based on price perception.

Four, improve our customer engagement selling culture. As the pandemic emerged, we quickly pivoted and adapted our offering and go-to-market approach to meet our customers' evolving needs, enabling them to celebrate life's important milestone in a safe manner. Improving customer engagement across our marketing messages, our product and merchandising approach, as well as digital experiences with our brand became critical to driving greater relevancy. Our dramatic shift in digital content, including new and more relevant content format, carefully curated product assortments, inspirational solutions and new technology has driven growth in consumer engagement, as well as online rates.

Digital workshops and interactive content across our social platforms garnered hundreds of thousands of views and reached millions of consumers, reinforcing our authoritative position as the celebration leader. Five, build on our omnichannel platform. I already touched on the expanded fulfillment options, whose launch was accelerated by the pandemic in spring 2020. We also fast-tracked improvements to our website experience to make omnichannel purchase options simpler and more seamless.

This focus generated buy online, pickup in store; curbside; and delivery growth of approximately 35% in 2020, making these capabilities core to our customer experience. As we look to 2021, armed with greater consumer insights and with a strong foundation to build upon, we're continuing our evolution and transformation. We will take significant steps in furthering our mission to deliver the party platform by advancing the following fundamental building block: product innovation, in-store experience, being celebration obsessed, and continued leverage of our vertical model. Product innovation.

Our focus on product innovation is grounded in consumer insight and data. Our goal is to stay extremely relevant with the consumer, fortifying our position of authority when it comes to celebration. We have significant opportunity to advance our product relevancy with both increased innovation and quality. Our teams are building an aggressive and more expansive innovation pipeline that will make us a better product manufacturer, wholesaler, and retailer.

We're also investing in quality. Our focus is not to drive retail higher with more expensive product, but to bring product to market that is even more relevant and better resonates with the end consumer, enhancing the joy in celebrations. In-store experience. We will continue our relentless focus on improving the in-store experience for customers and making it easier to shop.

The customer and operational insights we generated in 2020 are allowing us to both modify the go-forward prototype for our next-gen stores, as well as improve the experience in our legacy stores. These include new edited and curated assortment across the chain, with corresponding reductions in inventory needs, improved product adjacencies, lowered planogram height, as well as new services and experiences. While we've not yet finalized the exact number of next-gen stores we will open in 2021, all new relocated and remodeled stores will be in the next-gen prototype. We are bullish on the results we have seen thus far with this new prototype and are planning to be aggressive with the number of stores we remodel annually at this point.

By the end of this quarter, we will have 20 next-gen stores remodeled or opened thus far in 2021, bringing our total to 42. We rolled out a comprehensive plan in February to elevate our engagement with customers in our stores. This initiative will support and position team members to better partner with customers to inspire celebration ideas and facilitate solutions for every party need. Enabled by curating our assortments and eliminating unnecessary cash, our team members will be better positioned to partner with customers, increasing satisfaction and basket size.

Be celebration occasion obsessed. New customer insights and basket data illustrate our ability to reinforce our authority and leadership as the celebration occasion destination. It starts with how we market occasion and communicate with our customer as a specialist versus a generalist in the marketplace, which highlights our unique capability. The focus on our core categories, birthdays, balloon, and entertaining, has significantly contributed to our recent performance.

When consumers want to make their celebrations special, our unique value proposition of the best assortments, newest innovation, party planning knowledge, relevant pricing, convenient fulfillment options, including delivery and one-stop shop availability puts us in solid position to take market share. An enhanced social and influencer strategy will introduce celebration inspiration into the consideration set of more consumers, building greater visibility for the complete party solutions and unique one-stop shop opportunity we provide, demonstrating why the brand is the category leader. The selection and purchase process for celebrations on partycity.com will also improve significantly this year. The new UX design includes the ability for customers to build their own customizable party package ready to be picked up in-store or delivered to their home exactly the way they designed it.

We are also focused on our North American vertical model. Following progress on rationalizing our international operations with the 2019 sale of our retail business in Canada, combined with the sale of a substantial portion of our Amscan International business announced in December 2020, we entered 2021 with a streamlined focus on our core North American party platform and with the goal of operating a more effective and customer-led vertical model. A key building block to achieving this is an improved supply chain, which we'll be working on in 2021. This includes driving new efficiencies in transportation, distribution, and inventory levels throughout the vertical model.

We will add new demand forecasting and planning capabilities, along with expanded use of warehouse management systems. Importantly, we expect these efficiencies to help offset some of the increasing transportation and distribution cost headwinds the industry is facing, which Todd will discuss. And finally, we see continued market expansion opportunity as we further evolve our omnichannel capabilities and extend our leadership position in key categories further and deeper across channels. We will begin to deploy new digital commerce channel, particularly in social commerce, enabling us to make it easy for customers to shop us in their channel of choice.

We'll continue to keep you updated on our progress on this front as we have more to share. Turning to our outlook. The operating environment remains far too dynamic to provide any sort of formal outlook for 2021. But I will share that we are pleased with our quarter-to-date performance, and Todd will provide some additional details on our expectations for first-quarter results.

As we think about the remainder of the year, we see more opportunity in the back half as vaccinations take hold, followed by a gradual return to more normal social gathering. Regardless, we will remain disciplined and agile as we demonstrated we have the ability to be in 2020. So in summary, despite the challenges the pandemic presented, we are pleased with how our organization navigated the environment, swiftly pivoting to meet the evolving needs of our customers, all while prioritizing the health and safety of both our associates and our customers. We made important strides on our five strategic initiatives in 2020 and significantly improved our financial position through the successful completion of our debt exchange offering in July and then the term loan refinancing in February '21.

I'm proud of all that has been accomplished thus far, and the hard work and commitment demonstrated by the entire PCHI team as we continue to transform the business. As a result of all this work, we are in a substantially stronger position today as we enter 2021. We see significant opportunity to further strengthen and leverage our position of authority in the industry. And now, I'd like to turn the call over to Todd to discuss the fourth-quarter and full-year results in more detail and share some thoughts on 2021.

Todd Vogensen -- Chief Financial Officer

Thanks, Brad, and good morning, everyone. Today, I'll focus on the key highlights of our fourth-quarter and full-year performance, and then I'll discuss how we're approaching fiscal 2021. For full 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 how the organization navigated the environment during the fourth quarter and throughout 2020 as we swiftly pivoted to meet the needs of the evolving customer demand.

Despite the challenging operating environment, we made strong progress in advance of our strategic initiatives, both operationally and financially. Despite the pandemic, we generated higher free cash flow in 2020 than we did in 2019 and we ended 2020 with approximately $296 million in total liquidity. The fact that we were able to improve our cash flow during this challenging environment speaks highly to the discipline and focus with which we operate our business. Now, turning to our results.

As a reminder, fiscal 2020 in our retail segment included a 53rd week, creating a calendar shift, with the full-year retail calendar ending on January 2, 2021, versus December 28 in 2019. This pulled a significant portion of New Year's Eve sales into the fourth quarter of fiscal 2020, which would have otherwise fallen into the first quarter of fiscal 2021. So in 2020, the 53rd week contributed $40 million in revenue, approximately $12 million in adjusted EBITDA, and approximately $0.08 in adjusted diluted EPS. For the fourth quarter, consolidated revenues were down 11.4%, which includes brand comparable sales decline of 5.9%, the impact of 77 store closures from our 2019 and 2020 store optimization program, and a wholesale revenue decline of 24% on a constant-currency basis.

The brand comparable sales decline was reflective of the rapid surge in COVID-19 cases that Brad discussed. And importantly though, comparable sales for our core everyday categories during the quarter were up 6.5%. The Q4 wholesale decline included four primary components: first, international revenues, including Canada, which declined sharply due to government-mandated lockdowns throughout the quarter; second, mass and value customers domestically, who have been performing solidly but were also impacted by the overall softness in party supply demand during the quarter; next, franchisees and independents who, as a general statement, have lagged our Party City retail stores throughout the COVID time frame; and finally, our balloon manufacturing business, Anagram. As we've said before, Anagram's innovative designs and market strength have resulted in strong, relative category performance but we did have same shipments move out of Q4 and into Q1, resulting in third-party revenues down 6.2% in the third quarter -- fourth quarter, excuse me.

Adjusted gross margin rate for the company declined 50 basis points in the quarter to 39.7% from adjusted gross margin of 40.2% in the prior-year period and primarily due to fixed cost deleverage on the sales decline. Adjusted operating expenses were approximately $200 million, a decrease of $5 million from the prior-year period, largely from our expense management and in response to the revenue declines in the quarter. So as a result, adjusted income from operations was approximately $59 million, compared to adjusted income from operations of $91 million last year. Adjusted EBITDA was approximately $77 million, compared to $120 million in Q4 of 2019, and earnings per share was $0.25 on an adjusted basis compared to adjusted EPS of $0.51 in the prior-year period.

For the full year, consolidated revenues declined 21.3% on a constant-currency basis, which includes brand comparable sales decline of 16.5%, primarily reflecting the impact of COVID-19 on our business; 77 store closures in 2019 and 2020 related to our store optimization program; and a wholesale revenue decline of 21.7% on a constant-currency basis as both domestic and international customers contended with the same pandemic headwinds to demand and store operations all throughout the year. Adjusted gross margin rate declined 290 basis points to 34.2% from adjusted gross margin of 37.1% in the prior year primarily due to deleverage on fixed costs and the sales declines. Adjusted operating expenses were approximately $616 million, a decrease of $82 million from the prior year driven largely by our prudent management of expenses throughout the year, as well as temporary benefits from cost-cutting relating to the pandemic. As a result, for the full year, adjusted income from operations was approximately $21 million, compared to adjusted income from operations of $178 million last year.

Adjusted EBITDA was $96 million, compared to $269 million in 2019, and adjusted loss per share was $0.49 compared to adjusted earnings per share of $0.46 in the prior-year period. Turning to the balance sheet. Inventory was down 37.4% year over year due to three primary drivers. First, we had $88 million in our previously disclosed disposal of seasonal inventory in the fourth quarter as we made a strategic decision to target higher in-season sell-through and less annual inventory carryover.

Next, $66 million in international inventory that was sold as part of the previously announced sale of a substantial portion of our international business. And then finally, ongoing working capital management, which included realizing the benefits of an optimized brick-and-mortar store base. The details of the inventory writedown and the sale of international operations will be included in the 10-K, which will be filed later today. As we look forward to 2021, we continue to plan for improved inventory turns through more curated assortments and improved seasonal sell-throughs, and just overall core inventory management.

At the end of 2020, our balance sheet and liquidity position has significantly improved versus 2019 as a result of multiple actions that we took to strengthen our financial health this year. These include the sale of a substantial portion of our Amscan International business, which closed in January; the successful exchange offer transaction completed in July; last year's sale of our Canadian stores; and our ongoing working capital management. As of the end of the year, we reduced the principal balances of debt, net of cash, by approximately $430 million versus prior-year period. Our year-end liquidity position of approximately $296 million is comprised of $120 million in cash and $177 million of revolver availability.

I'm very proud of all that we accomplished this year to strengthen the business and our financial health. Subsequent to quarter-end, in February, we completed the refinancing of our 2022 term loan through the offering of senior secured notes, which is just yet another step to strengthen our financial health and flexibility and to provide the runway to implement our strategic priorities. To that end, we feel confident as we're entering 2021 in an even stronger financial position. So now, let me turn my comments to how we're thinking about 2021.

While we're optimistic about the prospects for a sustained economic recovery in 2021 and the events will return to normal, we recognize that business risks remain elevated from the COVID-19 pandemic. So given those factors, in the interim, we're not providing specific annual sales and earnings guidance. We are, however, providing select annual guidance for interest expense and capital expenditures. We expect interest expense to be in the $90 million to $100 million range for the full year.

In terms of capital expenditures, we expect our 2021 spend to be in the $70 million to $80 million range, with balanced spend across our next-gen stores, web and e-commerce enhancements, store facility investments, and ongoing investments in our manufacturing and supply chain assets. In terms of sales and earnings, while we're not providing full-year guidance since we are about 75% of the way through our first quarter, we have provided our outlook for the first quarter in today's earnings press release. Based on quarter-to-date results, we expect our consolidated sales for the first quarter to be approximately $397 million to $410 million, with a brand comp sales increase in the 26% to 31% range compared to the 13-week period in 2020. Now, as I mentioned, 2020 was a 53-week year for our retail segment, which creates a shift in the calendar weeks causing New Year's Eve to move into the fourth quarter of 2020 until the first quarter of 2021.

If we unshifted last year's New Year's timing, Q1 comparable sales that are in our guidance would still show an increase of 9% to 14%. Quarter to date, we continue to see strength in our core categories, as Brad mentioned earlier. This core strength has allowed us to drive strong demand through a quarter that is traditionally heavy in many holidays that can end up being meaningful to our business, including things like Super Bowl, Valentine's Day, 100 Days of School, Dr. Seuss Day, St.

Patrick's, Mardi Gras, and several others. So the strength in our core also bodes well as we look for a return to some form of normal as our current cost structure should enable strong leverage, even on modest comparable sales growth. For the first quarter, there are a few unique items that will impact our performance, which we did want to highlight for your planning purposes. First is the impact of New Year's Eve, which we estimate is $9 million in EBITDA that was shifted into 2020 due to the 53rd week.

Next here, a couple of cost factors. Two evolving areas that we get asked about frequently, our helium and omnichannel delivery costs. The total of those two elements is a headwind of approximately $6 million in the first quarter relative to 2018 and 2019 levels. As others have discussed, there are transportation cost headwinds that we are working to mitigate also net of our mitigation work, we expect those headwinds to adjusted EBITDA to be $8 million to $10 million for the full year of fiscal 2021, with the bulk of those costs expected to be recognized in the second quarter through the fourth quarter.

And finally, as we confirm today, we did complete the sale of a substantial portion of our international operations at the end of January. The revenues for those operations were approximately $250 million in 2019 and $55 million in the first quarter of 2020, with an immaterial amount of EBITDA in both periods. So those amounts are going to impact our revenue and metrics as we wrap around on the transaction and continue throughout 2021 to wrap around. We clearly have a lot of missed moving pieces in our financials.

The bottom line is that we are exceeding our expectations in 2021 thus far. And the positive signs that we're seeing in our strategic initiatives and core business give us reason for optimism as we progress through the year. So in summary, 2020 was an unprecedented year, but we are very proud of all that we've accomplished to advance our strategic priorities and to enhance our financial health, while still maintaining the continuity of our retail and wholesale operations. We finished 2020 as a better and stronger company and are well-positioned to capitalize on the opportunities ahead of us in 2021 and beyond.

And with that, I'll turn it over to the operator to start the Q&A session.

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] The first question comes from Seth Sigman of Credit Suisse.

Seth Sigman -- Credit Suisse -- Analyst

Hey, everybody, good morning, and thanks for taking the question. Hey, Brad, you mentioned some regional differences. I was hoping that you can elaborate on that. What are you seeing in markets that are, I guess, considered more open right now? And are there any other leading indicators that you can point to? For example, I think most recently, you talked about unit volume being similar, but sort of a trade down, lower ticket, selling smaller kits.

Is that something that you're starting to see reverse? I'm just curious how you're seeing the spring shape up here. Thanks so much.

Brad Weston -- Chief Executive Officer

Yes. As we said in our -- thanks, Seth. As we said in our January release, COVID-19 cases had a greater impact than expected on customer behavior in the colder months of November and December, which was evidenced by underperformance in regions like the Northeast. As we know, outdoor activities are more conducive to social gatherings as we saw in Q3, so the cold weather impact was certainly there.

One of the questions you referenced about, units is we did recently at ICR in January talked about how our business improved when we got past that Christmas holiday, where we know that in November and December, school and office activities and holiday gatherings were a drag on Q4, but our core business was really good. The New Year's Eve example is that we sell party kits for New Year's Eve in increments of 10, 25, 50, and 100 party guests. We just experienced lower sales because in -- a little bit lower sales in New Year's Eve because we saw a significant increase in the 10-person kit, while the larger kits had declined. As we moved into the celebrations that Todd mentioned such as Valentine's Day, Super Bowl, etc., those were impacted by smaller gatherings.

Mardi Gras, obviously, very large gathering. And now, we're right in that St. Patrick Day's period. But our core business remains really strong.

And so the notion that we can have a really good result with our core categories driving our business around those celebration occasions versus seasonal really bodes well for us.

Seth Sigman -- Credit Suisse -- Analyst

OK. Thank you for that. That's very helpful. My follow-up question is around the gross margin and the recovery opportunity because I do think that's one of the biggest long-term opportunities here.

If you think about, your pricing work seems like based on what you said, is largely behind. Your inventory sounds like it's cleaner. Hopefully, sales are on a better trajectory. I mean, how should we be thinking about the opportunity for gross margin, I guess, in '21 and then thinking longer term as well? Thank you.

Todd Vogensen -- Chief Financial Officer

Sure. Thanks. It's Todd. So in terms of gross margin, at this point, we have done a number of things that put us in a good position from a margin perspective.

We've continued to rationalize some of the promotions in retail. We've looked at how we optimize cost structures across our wholesale manufacturing plants. So margin at this point, it's a comment that Brad made earlier, we really have set that cost structure so that even with modest sales increases, we see that leverage start to flow through really quickly. So the big driver of margin improvements likely will be the top line, but it just does not take that much in the way of top-line growth to result in leverage that does flow through and does drive leverage to the bottom line.

Seth Sigman -- Credit Suisse -- Analyst

OK. Thanks very much.

Operator

The next question is from Rick Nelson of Stephens. Please go ahead.

Rick Nelson -- Stephens Inc. -- Analyst

Hi. Thanks. Good morning. Thanks for taking my question.

Brad, any insight into how you're planning for Halloween 2021 at this point? I realized you don't have guidance out there, but any color around that would be helpful.

Brad Weston -- Chief Executive Officer

Yes. Clearly, we're not going to talk too much about any detail around Halloween as a big period in our back half of our year. What I'll tell you is that we had a lot of really great learnings last year. We made some changes to our in-store experience, to our digital experience into our marketing, which all created a better-than-expected Halloween for us.

We're going to take those learnings. Our inventories are obviously cleaner. As we mentioned, as our writedown on seasonal was -- had Halloween as a piece of it. And so our newness and freshness and some of the innovation that will come into all of our categories will be improved this year.

And to answer your follow-up question on Halloween City, we had a lot of really good learnings in Halloween City as well. And as we talked about before, we piloted several different ways to be more competitive with that experience. And we're going to take those learnings and turn that into a more aggressive posture this year.

Rick Nelson -- Stephens Inc. -- Analyst

Perfect. And the next-gen stores, if you could speak to the comps there, maybe versus the rest of the chain, anything you can share on economics. And I know you mentioned new stores would incorporate the next-gen. Kind of how many new stores are you thinking about for 2021?

Brad Weston -- Chief Executive Officer

Yes. Let me address a little bit of sort of the experience on a reaction, and Todd can talk a little bit about cost and return and how we're thinking about that. We really focused, as I've talked about before, on optimizing those assortments, optimizing the inventory levels, and getting a shop-in-shop environment where we really focus on celebration occasions and end-use versus just categories of product. As we set out to do that mostly in the back half of the year last year, we opened 22 next-gen stores and had quite a bit of learnings.

Clearly, we would have liked to have learnings from the entire year instead of just the back half. But those results as we've modified and have made us increasingly optimistic and bullish about the concept, especially based on the customer reactions that we're getting, as well as the easier operating model that it provides to our associates. We're bullish enough to tell you that we opened 20 and we will have opened 20 in Q1. Not ready to discuss exactly what the final number is going to be for '21 because we're still working through that.

But we're getting a lift, we're finding optimization by category. We're finding optimization in cost, and we're excited to continue to be aggressive with this rollout. Todd?

Todd Vogensen -- Chief Financial Officer

Yes. And the only things that I would add are the overall capital expenditure guidance we gave of $70 million to $80 million does include the cost of any next-gen remodels or new stores this year. So that tells you we're bullish, as Brad said. We're marching forward, but we're also managing the overall cost in a very efficient way.

Remodels cost is a pretty significant amount less than new stores. And so we're making sure that we're doing things and getting to the point in the process where we can cost engineer maybe some of the things that we're doing much more effectively. We do have in the plans for the coming year, 15 new stores approximately and approximately five closures. So we continue to do our real estate workaround where we might have white space or nodes of opportunity and where it's probably better to be optimizing out of space.

I would say, at this point, that is going to be an ongoing part of the strategy. We continue to see opportunities on both sides of that equation, where our store footprint is in a position where it's spread out appropriately. And we can fill in, in markets where there is a demographic that's growing, that's an opportunity for us.

Brad Weston -- Chief Executive Officer

One thing, Rick, I might add to that is we were certainly expecting that the customer reaction would be very positive to next-gen stores. Our associate reaction would be very positive to next-gen stores. One thing that's really been exciting is landlord response to our next-gen stores. People are -- they're obviously eager in this environment to have something new.

And when we're a brick -- when our stores are the hub of our omnichannel experience and our ability to draw consumers in their centers with helium and helium balloons and the excitement that comes with family shopping in that environment, they're coming to the table with tenant allowances that keep us in line and tie back to what Todd said about our overall capital expenditure with this rollout.

Rick Nelson -- Stephens Inc. -- Analyst

Very good. So overall, do you see the store count higher in 2021, lower, or about where you are today?

Todd Vogensen -- Chief Financial Officer

We would expect to see a net 10 increase across the course of the year. So not a material move one way or the other. Like I said, we've gone through our geographies and feeling like we've got good spacing on our stores and relative good density, and it's more an opportunistic move for us. Same, we've gotten the question about franchisees and would we look at acquiring franchisees.

Same concept applies, say, I think, while there may be opportunities where there's a franchisee that we can work with to get a deal that gets us in a market and owning stores efficiently, that's something we are open to. But there certainly is no big push to go out and spend money on franchise stores or anything like that.

Rick Nelson -- Stephens Inc. -- Analyst

Great. Thanks for answering the questions, and good luck as we push forward.

Brad Weston -- Chief Executive Officer

Thanks, Rick.

Todd Vogensen -- Chief Financial Officer

Thanks, Rick.

Operator

The next question is from Carla Casella of J.P. Morgan. Please go ahead.

Carla Casella -- J.P. Morgan -- Analyst

Hi. My question relates to the inventory adjustment that you took. It's a little higher than what you had guided. Can you just say what changed from the last time you guided until today's reporting?

Todd Vogensen -- Chief Financial Officer

Yes. Thanks for asking the question. This is Todd. So we had said that we were going -- we had disposed of about $80 million in inventory, and we did.

As we were going through and doing the final tie-outs, we identified a little bit of additional inventory that we were not able to physically dispose of but wanted to reserve for that was in exactly the same category, seasonal inventory that we didn't see, the need for next year, especially as we were going through and doing all of our postmortems on Halloween. So I would characterize it more as final reconciliation and cleanup than anything more broad.

Carla Casella -- J.P. Morgan -- Analyst

And can you give us any sense for what kind of inventory, how much of it is Halloween or costumes versus how much of it may be party goods that you've changed the SKU assortment?

Todd Vogensen -- Chief Financial Officer

So all of the investment during inventory that we're talking about was seasonal inventory. So that will cut across everything from Valentine's, New Year's, Easter, so forth. The bulk of it was Halloween. Halloween is obviously the bulk of our seasonal sales, but also as we're shifting the focus of our Halloween City stores, there was opportunity within that as well.

So large portion of that is indeed Halloween inventory.

Carla Casella -- J.P. Morgan -- Analyst

And then are you done with the process of evaluating it? Or do you think we could see further charges into 2021?

Todd Vogensen -- Chief Financial Officer

I wouldn't go so far as to predict if there may or may not be charges. If we do, there was a charge, we would take it. But we are absolutely continuing to look at inventory. I think there continues to be opportunity, particularly -- we've looked at seasonal but as we go more into some of our core categories, there's opportunity to be more efficient with our inventory.

And we're going through that process of analyzing it and figuring out what that might look like going forward. At the very least, without a doubt, we are committed to turning our inventory quicker, having more newness, and ensuring that we have what it is that she's looking for on our shelves, and it's easily shoppable.

Carla Casella -- J.P. Morgan -- Analyst

OK. That's great. And then did you provide -- I know you have in the past, same-store sales excluding e-comm?

Todd Vogensen -- Chief Financial Officer

I do not believe that we provided that specifically. The digitally enabled sales were up 27%. So we did have that in there. To be really honest, I think we would love to move away from segregating stores versus digital because the overlap is getting so intense.

The amount of digital sales that are ending up being fulfilled in-store at curbside is becoming a pretty significant portion of our digital sales. So that dynamic means we'll probably move away from segregating. And this year, given COVID, it just felt like the right thing that we had to do to show what the true digital orders were, but we'll probably shift away from that in the future.

Carla Casella -- J.P. Morgan -- Analyst

OK. And did you say the digital penetration this quarter?

Todd Vogensen -- Chief Financial Officer

No. We did not break that out separately. We have said it was 10% in the past. So clearly, we're getting more activity online.

And so the goal for us is really to translate those online interactions into ideation and into party planning that can then drive a store trip or an order online. But I don't know that we have a strong preference on that, it's where, really, she wants to buy from. So no, we didn't break out specifically the amount of e-commerce penetration, but the online activity clearly growing significantly.

Carla Casella -- J.P. Morgan -- Analyst

OK. And I just have one other financial question. So you've got some -- you guided to capex, and you've got some exciting investments between next-gen and renovating stores. How much of your capex would you call maintenance at this point?

Todd Vogensen -- Chief Financial Officer

Yes. It's always such a hard thing. In the past, we've said we're in the $30 million to $40 million of maintenance capex, 2020, clearly, we pulled back pretty significantly, and you saw our capex get down to $50 million. There was a little bit of what I would call growth or initiative capex in there.

So that $30 million to $40 million for modeling purposes is probably a good starting point for you.

Carla Casella -- J.P. Morgan -- Analyst

OK. Thank you so much.

Brad Weston -- Chief Executive Officer

Absolutely.

Todd Vogensen -- Chief Financial Officer

Thanks, Carla.

Operator

The next question is from Joe Feldman of Telsey Advisory Group. Please go ahead.

Joe Feldman -- Telsey Advisory Group -- Analyst

Yes. Hey, guys. Thanks for the questions. Actually, I wanted to follow-up on some of the inventory questions that Carla was asking.

So you're talking about turning it faster even again in '21. I guess my question is down 30%, 38% for the year, that seems low to me. And I guess I'm curious as to where it should end up maybe. Like could you give us -- like should it be down 5% at the end of '21? Or is it going to be up a little relative to 2020? Or how should we think about the level of inventory at the end of the year?

Todd Vogensen -- Chief Financial Officer

Yes. We're not probably getting a little bit further than where we're at this point since we're still going through the analytics. I would say, as you look at cash flow for the year, we did carry over some deferred rents from 2019, about $40 million that we'll be paying back in the course of 2020, more front half-weighted. That should be at least offset by inventory efficiencies as we go through the year.

The exact amount we're, like I said, still working through some of the details, particularly in the core categories. But there is opportunity there. I would say just as maybe making that number seem a little bit more tangible. We did have $88 million of seasonal inventory we wrote off.

There is about $66 million of inventory in international, which now obviously moves outside the company. And then we did have our 77 store closures. So roughly 10% of the chain where that inventory obviously goes away with the stores. So we did have some structural elements, as well as just playing core inventory management, which should be ongoing.

Joe Feldman -- Telsey Advisory Group -- Analyst

Got it. That makes sense. Thanks for clarifying that. And then two other quick ones.

The next-gen prototype, I guess the question I have is more about are there things -- I know you're learning a lot in those stores. But are there things that you've learned that you can quickly roll out to the rest of the chain that might actually have a nice impact this year in terms of the business?

Brad Weston -- Chief Executive Officer

Yes. I made a comment in our prepared remarks that much of those learnings, we can roll into our legacy stores. It doesn't quite provide the environment or the layout that we'd like to. But our reduced assortment, our reduced inventory can bring our planograms down quite a bit and make them more shoppable, more reachable for the average consumer that we weren't executing to in the past.

So the fixtures might still be higher, but the height of the product will be reachable instead of going all the way to the top. That will be the most significant change in the shopping experience. But we will continue to roll all of our assortment rationalization in our curated assortments across the chain.

Joe Feldman -- Telsey Advisory Group -- Analyst

Got it. Thank you. And then just the one other one, Brad, I know you have mentioned more to come on it, but I'll ask anyway. You mentioned social commerce and the making more of a play there and selling through social media.

I guess if you could share any more color. Like is this Instagram or, I don't know, Facebook? Or how are you guys kind of approaching that to go forward? Thanks.

Brad Weston -- Chief Executive Officer

Well, if you think about the places that our category shows up sort of the best and the most, yes, Pinterest; yes, Instagram; yes, Facebook; and now even TikTok are elements where our brand shows up. So when we look at that and we look at the inspiration we're able to provide and the amazing ideas and the innovation in product and the ability to showcase customers using the product and doing amazing things really gives us the ability to translate those into some levels of commerce where that's available. Our brand shows up great on social media, and so that remains an opportunity for us.

Joe Feldman -- Telsey Advisory Group -- Analyst

Got it. That makes sense. And thanks and good luck with this quarter. Thank you.

Brad Weston -- Chief Executive Officer

Thanks, Joe.

Operator

The next question is from Jenna Giannelli of Goldman Sachs. Please go ahead.

Jenna Giannelli -- Goldman Sachs -- Analyst

Hi. Thanks for taking my questions. My first one is just on the wholesale business. You outlined the four factors that really drove the decline.

I guess first question, were all of those roughly equal? Did that include any divestitures in there? And then I guess, just a follow-on. I mean, this is the first quarter it seems that we saw that level of divergence between retail and wholesale. So granted the comparability versus the prior year was a little bit different, but was there anything that kind of changed for one versus the other? Do you see it as more temporary or permanent in nature, specifically related to the value customer you spoke about? Thanks.

Todd Vogensen -- Chief Financial Officer

Certainly. So definitely not all equal. It's fair to say that franchise and independent stores have had a rougher go of it versus our retail stores. That's been true really throughout the pandemic.

And it makes sense because there's just not the same infrastructure around omnichannel and so forth. So it has been a little bit slower go on that footprint, though we're still working closely with those teams. International has had a lot of headwinds, then international including Canada in that. I know we've gone back and forth on that in the past.

So for both Canada, as well as our European and Australian businesses, there just have been a lot of fairly significant government shutdown regulations requirements. And so that's just a natural barrier for wholesale that we wouldn't necessarily see in the U.S. store base. And then for the others, it kind of follows along a similar path with what we see in our retail business.

During the quarter, clearly as we got into more of the seasonal time frame where there's celebration time frame, where there's both work and family celebrations that were scaled down, there were just headwinds there and that translated itself across all of the customers.

Jenna Giannelli -- Goldman Sachs -- Analyst

OK. Thanks. That's super helpful. And then just to follow-up to make sure I understood correctly.

The $6 million headwind expected, that's just for the first quarter for helium and omni? Is that --

Todd Vogensen -- Chief Financial Officer

That's correct, yes. Yes, that's the total of this year. Yes.

Jenna Giannelli -- Goldman Sachs -- Analyst

OK. And then would you feel comfortable breaking these out if it leans more toward one or the other? I mean, I guess because I've been thinking about '21 helium is sort of flattish relative to '19 is not an incremental headwind. Is that wrong? Is that not the right way to think about it? And then, I guess, based on the visibility that you have, should we, in fact, model it in as a headwind for the full year off of a '19 base?

Todd Vogensen -- Chief Financial Officer

As you're comparing back to 2019, there is an increase in cost there. But 2019 had a lot of ups and downs. But as a general rule, helium costs have kind of settled into a level that is -- it's a good 40% to 50% higher than where it historically had been pre the shortage. So there will be a little bit of headwind there.

I would say, for the $6 million, if there was one that was dramatically more or less, then we probably would have put more emphasis on that. So you can assume it's relatively spread.

Jenna Giannelli -- Goldman Sachs -- Analyst

OK. Great.

Todd Vogensen -- Chief Financial Officer

I think another way to think about helium too is in back in '19, the helium shortage really extended through the first half of 2019 and the recovery really started in late Q3 and Q4 of 2019.

Jenna Giannelli -- Goldman Sachs -- Analyst

OK. All right. Perfect. That's helpful.

And then just finally on capex. I know you gave the broad stroke breakdown of the spend, but just maybe a little more granularity on what specifically you'll be spending on this year that you didn't spend on last year and how that might flow through to top line as we go through the back of the year?

Todd Vogensen -- Chief Financial Officer

Not sure. So from a capital spending perspective, a few things versus last year. First, we obviously pulled back quite a bit on store facilities, what I would call semi-maintenance spend. And so you are going to see a little bit more investment in things like air conditioners and things that make our stores fresh and the way that they should be.

It will be pretty spread in that we are going to have more in the road, e-commerce and technology spend as we get going more on some of the e-commerce capabilities that Brad talked about. And then next-gen stores, we would expect to ramp up across this year with 15 new stores that's hired and we've done a little bit. So a little bit of new stores, but just as a general rule of thumb, technology is probably a little bit more meaningful to the overall total.

Brad Weston -- Chief Executive Officer

Yes. I mean, you can imagine we're doing quite a bit of work as we plan our capital expenditures to really ensure that they're focused on the investments that are going to drive future results in a little bit more of a surgical way than we may have done in the past.

Jenna Giannelli -- Goldman Sachs -- Analyst

Thanks for all the color.

Brad Weston -- Chief Executive Officer

You bet. It's my pleasure.

Operator

The next question is from William Reuter of Bank of America. Please go ahead.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks for taking the question. It was good to hear about the retail tailwinds here in the first quarter. I think it implies that wholesale is going to be a little bit weaker than maybe I was expecting.

In the guidance for both revenue and brand comps, what does that imply for wholesale?

Todd Vogensen -- Chief Financial Officer

Well, we're probably getting further than we would normally go in terms of guidance. I would say, if this helps, we would expect to continue to see portions of the business like the franchise and independents perform short of what our retail performance is, and so there is more of a comeback from the pandemic. That's just, I think, a structural thing that we'll correct over time. And we have seen ongoing pullback or shutdowns really in Canada that have extended into the quarter as well.

So tough to overcome when the economy is shut down. Those are probably two of the more meaningful pieces. And yes, I think we see wholesale having a lot more opportunity as we get further into the year. So hopefully, that gives you a little bit.

Brad Weston -- Chief Executive Officer

And certainly, once vaccines take hold and celebratory behavior until we return to normal, not only would we expect increased improvement in our retail business, but then in broader retail businesses, then the wholesale business follows.

William Reuter -- Bank of America Merrill Lynch -- Analyst

OK. Yes, some companies have calculated comparable brand sales differently based upon when stores were open and closed. But I guess it does imply that wholesale is down in the second quarter -- or sorry, in first quarter. Is that right?

Todd Vogensen -- Chief Financial Officer

I think that would be fair. With the revenue guidance we gave, I think it does clearly imply that there's headwinds there just like there have been as we've gone through the last several quarters.

William Reuter -- Bank of America Merrill Lynch -- Analyst

OK. And then just thinking about the lack of -- or I guess potential port congestion. Are you expecting that you're actually short on inventory and it may be tough to get inventory to the places you need it over the next couple of quarters if demand increases?

Todd Vogensen -- Chief Financial Officer

We actually have put a lot of work into supply chain. Part of the capital that we're spending is around supply chain this year to improve our overall efficiency and effectiveness there. There's cost sense wins there that we talked about on the call. From a timing perspective, there are little things around availability of shipping containers.

But by and large, most of our goods come into the U.S. through East Coast ports. And because of that, we don't face the same level of pressure in congestion that maybe a lot of other retailers do. The team really has actually been doing a good job from an importing perspective, making sure that things are getting through the ports and to us on a timely basis.

So we feel good about the flow of supply there.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Great. All right. That's all from me. Thank you.

Brad Weston -- Chief Executive Officer

Thank you.

Operator

The next question is from Karru Martinson of Jefferies. Please go ahead.

Karru Martinson -- Jefferies -- Analyst

Good morning. Certainly hear you on colder months hitting the outdoor gatherings. I was wondering though in the first quarter, the impact, can we quantify the impact of the Texas storms, the weather up here, and that we've had in the Northeast, kind of what was that drag on the performance?

Todd Vogensen -- Chief Financial Officer

So there has clearly been an impact, always quantifying weather is as much art as science. But based on what we've seen so far, it has been a little bit more than a percentage point of impact on our quarter-to-date sales. We are wrapping around on a year that didn't have a lot of weather impact last year. So that does really did have an impact on us.

And if you think about it as about 1%, that's probably a good range.

Brad Weston -- Chief Executive Officer

Yes. There was a period of time where we had approximately 200 stores that were closed or had limited hours over a few days based on the severe weather that we saw, which drove a -- that's a fair piece of the chain that was impacted for a few days.

Karru Martinson -- Jefferies -- Analyst

OK. And I noticed there was an income tax receivable, about $57.5 million. I was wondering, is that cash that's coming in here during 2021? And how should we think about cash taxes for the year?

Todd Vogensen -- Chief Financial Officer

Yes. So we do, coming off of 2020, have a taxable loss that we'll be claiming as part of the tax return process that typically takes place in the back half of the year. And then there's a normal refund process, the IRS goes through it. If all goes according to plan, that means that we would get that cash back this year, probably toward the later part of the year.

Looking at estimated payments going forward, probably the best way to think about future cash or 2021, other cash taxes. As we get back into an income position, we'll be making estimated payments where our cash taxes should roughly reflect the amount of tax expense, if you use that 25-ish percent tax rate going through the year.

Karru Martinson -- Jefferies -- Analyst

OK. And then just post the refinancing, where do we stand today on the revolver balance and the liquidity, having cleared the structure now with the refinancing that you did?

Todd Vogensen -- Chief Financial Officer

And I think we gave the specific update on exactly where we're at from a liquidity perspective. But part of what we did do was to also extend out our ABL. So we've got the ABL in place for another five years with similar borrowing base and calculations and so forth. So the core structure has stayed the same.

We did pay off a $700 million, a little less than that, term loan with $750 million so that also helps to provide just a little bit of liquidity to cover cost of the transaction and a little extra. So as a general statement, we're feeling good about where we're at on a liquidity perspective. We continue to manage cash tightly. But with the positive signs we're seeing as we go toward the back half of the year, I think we're feeling like we're in a solid position.

Karru Martinson -- Jefferies -- Analyst

Thank you very much, guys. I appreciate it.

Brad Weston -- Chief Executive Officer

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Brad Weston for closing remarks.

Brad Weston -- Chief Executive Officer

Thank you, everybody, for joining us today. In conclusion, 2020 was a monumental year for us, and I'm extremely proud of all that we accomplished. We were keenly focused on stabilization of our retail business, to which our flat brand comp at retail in the back half of the year as a testament despite the pandemic impact on social gatherings. On the financial side, we made significant efforts to address our debt, which drove down the overall amount of debt and dramatically increased our financial flexibility, including the extension of our first maturity out to 2025.

As we begin 2021, we're in a very different position as a company, both operationally and financially than we were just a year ago. With the building blocks for future growth that we put in place in 2020, we have a strong foundation upon which to build this year. We remain intensely focused on the consumer and more effectively operating and leveraging our unique North American vertical model as we continue our transformation and further strengthen our industry leadership position. So thanks, again, everyone, for joining us this morning.

Operator

[Operator signoff]

Duration: 74 minutes

Call participants:

Ian Heller -- Vice President and Deputy General Counsel

Brad Weston -- Chief Executive Officer

Todd Vogensen -- Chief Financial Officer

Seth Sigman -- Credit Suisse -- Analyst

Rick Nelson -- Stephens Inc. -- Analyst

Carla Casella -- J.P. Morgan -- Analyst

Joe Feldman -- Telsey Advisory Group -- Analyst

Jenna Giannelli -- Goldman Sachs -- Analyst

William Reuter -- Bank of America Merrill Lynch -- Analyst

Karru Martinson -- Jefferies -- Analyst

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