ANNUAL REPORT - s2.q4cdn.com

ANNUAL REPORT

This year was all about strengthening our foundation.

Our vertical model. Our omni-channel strategy. Our unique product assortment. Our numerous digital platforms. Our retail stores.

Taking insights from our updated CRM platform, we learned more of what makes our consumers tick.

We expanded our offerings ? heading deeper into alternative channels and creating personalized product experiences.

Brand visibility is up, having brought the party to Amazon and picked up more licensing agreements with major brands.

With our redesigned website and enhanced in-store experiences, we've even changed the way we interact with consumers, making the entire process more seamless.

More clearly than ever, we understand the partiers of today, tomorrow and beyond. Wherever they go, however they celebrate, we're ready.

Dear Shareholders, Customers and Employees:

At Party City, we strive to "Make Every Occasion a Celebration" for our customers. We continue to deliver on this goal through our unmatched positioning in the party goods industry with our national retail store footprint, growing e-commerce platform and distribution in more than 40,000 rooftops around the globe. Our expansive assortment both in-store and online, global presence, and wholesale and manufacturing capabilities differentiates Party City and positions us well to gain share of the party wallet of the customer celebrating life's occasions.

While fiscal 2018 was not without its challenges, I am proud of how our teams navigated those challenges to deliver another year of solid performance and growth for Party City. Importantly, we continued to invest in key areas across the business to better position our Company for consistent long-term growth

Key 2018 highlights include:

? Grew revenue by 2.2% in constant currencies driven by our diverse business model; ? Increased e-commerce comparable sales by ~18%. when including Buy Online Pick-Up In Store sales; ? Broadened international presence while realizing 1.7% constant currency growth in international wholesale revenues

driven by almost 9% constant currency growth in core commercial markets of Australia, Europe, the UK and Mexico; ? Increased retail store base by 63 net new stores, totaling approximately 8% in net square footage growth,

including 58 franchise and independent acquisitions; ? Leveraged manufacturing assets and expanded product personalization capabilities; ? Grew adjusted EPS to $1.61 per share from $1.24 per share.

2018 was an important foundational year in which we made meaningful progress against several growth strategies as we continue to target our goal of becoming a world-class vertical retailer. We focused on the customer shopping experience at our retail locations, implementing retail productivity initiatives within our stores, thereby improving the operational performance of the stores, simplifying store operating procedures, improving the flow of product and optimizing labor. The savings associated with these initiatives have served as a catalyst for reinvestment into the Party Planner program at the store level, enhancing the level of customer engagement and elevating our customer experience.

As the lines between brick-and-mortar and online continue to blur, we have expanded our e-commerce presence while improving the shopping experience for our customers. We completed a broad site re-platforming in 2018 that included improved product visuals and site content. This re-platforming has resulted in better usability, easier check-out flow and a more facile browsing experience for consumers, especially when using their mobile devices. We also have leveraged this technology to support the consumers' desire to seamlessly shop the category through the expansion of our Buy Online, Pick-Up In Store program, as well as improved product availability checks online.

In October, we announced the expansion of our digital initiatives with the creation of a Party City-branded storefront on Amazon Marketplace. This move has allowed us to further expand the reach of our brands and unique product offerings, while complementing the website.

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We also invested to improve and expand our CRM capabilities in 2018. These efforts have and will continue to allow us to gain a deeper understanding of our consumer and create more targeted marketing campaigns, delivering a more personalized experience for our consumers.

In 2018, we also made progress on our consumer products business. Domestically, we gained significant new customers in both the grocery and mass channels as we continue to diversify our customer mix beyond the franchise and independent party specialty retail channel. Our North American consumer products business was also successful in increasing penetration into non-traditional party channels, or alternative channels, including movie theaters, zoos and sporting and entertainment venues. Internationally, we deepened our relationship with key retailers in Australia, Europe, the UK and Mexico. Education and curation of the SKU assortments are creating inroads in many new markets.

As I look at the road ahead, I am excited for the future of Party City. In 2018, we made much-needed investments in support of our top and bottom line objectives. These investments across all pillars of the business are generating operational efficiencies in manufacturing, distribution and retail, positioning us well for 2019 and beyond. Party City is a highly profitable, cash generative business and in 2019 our capital allocation priority will be debt pay-down, as we remain disciplined in executing our strategies and driving lasting shareholder value.

In closing, I would like to thank our more than 20,000 year-round team members who are dedicated to serving our many customers and consumers. I am truly grateful for their efforts. Finally, on behalf of our board and the entire Party City team, I want to thank you, our shareholders, for your ongoing support.

Sincerely,

James Harrison

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