Prty Candy Buffet

Christmas, Halloween, or Valentine's Day? Party City has you covered in chocolate and red wrappers either way. Photo: Party City

What: Shares of Party City (NYSE:PRTY) fell as much as 24.7% on Friday morning. The stock quickly recovered to a less terrifying overnight drop of roughly 12% as of this writing, still a very large plunge as even the milder fall counts as an all-time low for the young party supplies vendor.

So what: Party City reported third quarter results on Thursday night, and there was no need to break out the streamers or confetti to celebrate the occasion.

Sales rose 2.3% year-over-year to $555 million, far short of the $569 million consensus estimate. On the bottom line, adjusted earnings per diluted share rose from $0.01 to $0.10, again falling short of estimates at $0.12 per share.

Looking ahead, Party City management now expects full-year sales of roughly $2.30 billion and adjusted 2015 earnings near $1.02 per diluted share. These figures are in line with current analyst expectations. However, meeting these full-year targets would work out to a mixed fourth quarter report, with earnings landing just above the current Street view while top line sales would turn out a little light.

Now what: The third quarter was a disappointment to Party City's leadership as well but not entirely without its bright spots:

"While third quarter retail results were weaker than expected, we are pleased with our Halloween performance, especially in light of bearish industry predictions," said Party City CEO Jim Harrison in a press statement. "As we move into the year-end holiday season, we remain the destination of choice for shoppers looking for holiday decor and entertaining options to celebrate with family and friends."

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Apart from the seasonal sections of big-box retail stores, Party City is indeed the king of local holiday party gear retailing. However, the company also competes with online and catalog sellers, including Berkshire Hathaway division Oriental Trading. Berkshire doesn't break out the results of smaller components such as its party retailer, so it's hard to say exactly how much of a threat Oriental Retailing poses to Party City.

But it's fair to say that betting against Warren Buffett's diverse conglomerate isn't an easy play. But if you can't beat 'em, you join 'em. Party City is currently exploring a new place in the party supplies food chain, where the company would fill online orders for retailers without a party and holiday supplies presence, essentially becoming a white-label OEM supplier.

All of that will take a while, of course. For now, Party City shares are simply trading at all-time lows after missing third quarter estimates all over the place.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

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