"We believe that our every day prices are completive in market but our prices and items have become too predictable," Laube said. "We're striving to become more creative with our promotions to create a sense of urgency in the market."

While the company admitted sales and earnings results for the third quarter were "very disappointing," it quickly boasted the implementation of several important strategic initiatives in the period, such as an extensive array of new non-seasonal products and coordinated assortments, and its repositioning in corporate stores to support the new products and promote better in-store merchandising.

"We have a solid foundation," Rick Griner, chief operating officer, told investors. "In this quarter, we had the physical reset of stores ready for delivery of new project on time and under budget."

In the last nine months, Party City has opened one store and closed three stores, compared with eight store openings and one store closing during the same period last fiscal year. The company also added three franchise stores and closed one franchise store in the first nine months of fiscal 2005. Party City currently operates 247 company-owned stores and has 258 franchise stores in the United States and Puerto Rico.

Griner also said Party City will open a new corporate store by Halloween and has told franchisees it is willing to expand into new territories. Employees working in Party City's corporate offices will also be relocating to a new facility, which is expected to "boost productivity and moral" for the company.