Celebrate Express Back on the Block

On the heels of a disappointing fiscal third quarter, Kirkland, WA-based party supplies merchant Celebrate Express has hired New York-based investment bank Cowen and Co. after third parties expressed an interest in buying the company.

If this scenario sounds familiar, that’s because Celebrate Express, which includes the Birthday Express, Costume Express, and 1st Wishes brands, hired Cowen and Co. in August 2006 to examine strategic alternatives, including a possible sale. But Celebrate Express officials later concluded “it is in the best interests of the company and its shareholders at this time to continue operating as a stand-alone entity.”

Since then, the company’s fiscal woes have worsened. Last week it reported a third-quarter loss of $13 million — shortly after officials for Celebrate Express said they were mulling a sale of the company. According to a release, the company’s latest quarter was affected by an $8.2 million charge related to income tax expense. Revenue fell to $13.3 million, compared with $16.7 million a year earlier.

What’s more, company officials are pessimistic about the remainder of 2008. “In seven of our eight most recent fiscal quarters, we reported net losses and we expect to report a net loss in the fourth quarter of fiscal 2008 and for fiscal 2008 as a whole,” officials said in a release.

Stuart Rose, a managing director at Wellesley, MA-based investment bank Tully & Holland, notes that there are many catalog/Internet companies that should be sold, and “it appears as if Celebrate Express is one of them.” That the company has interested buyers makes it sound as though a deal might happen. “The question is whether the buyers and sellers can agree on price,” Rose says.

If a company can’t make money — and Celebrate Express is in that mode — “then it either needs a white knight, a real plan to turn around, or liquidation,” Rose says. “We will see more and more of this as time goes by.”

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