Celebrate Express, Inc.

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Celebrate Express, Inc.

11220 120th Avenue N.E.
Kirkland, Washington 98033
U.S.A.
Telephone: (425) 250-1064
Fax: (425) 828-6252
Web site: http://www.celebrateexpress.com

Public Company
Incorporated: 1994 as Birthday Express
Employees: 293
Sales: $51.9 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: BDAY
NAIC: 454111 Mail-Order Houses; 454113 Electronic Shopping; 322230 Stationery Product Manufacturing; 453220 Gift, Novelty, and Souvenir Stores

Celebrate Express, Inc., sells children's party supplies, costumes, and clothing over the Internet and via mail-order catalogs. The company operates through business units called Birthday Express, Storybook Heirlooms, and Costume Express. Four-fifths of its sales come from Birthday Express, which offers a complete range of supplies for children's parties in more than 100 different themes, many of which feature popular characters like SpongeBob, Lil' Bratz, and Harry Potter. Storybook Heirlooms sells holiday and special event clothing for young girls, and Costume Express offers children's and family costumes for Halloween and other dress-up events. Cofounders Mike and Jan Jewell own more than one-third of the company.

Beginnings

Celebrate Express was founded by the husband-and-wife team of Mike and Jan Jewell in Kirkland, Washington. Mike Jewell had gotten his entrepreneurial feet wet in high school by starting a company that sold handmade hotplates to retailers like Neiman Marcus, and after getting an MBA he had worked as an executive for high-tech firms like Credence Systems, Advanced Technology Partners, and Engineering Animation, Inc. By the early 1990s he had become interested in the possibility of selling goods via the World Wide Web, then still in its infancy, and began looking for a product to sell.

The three-months premature birth of the Jewells' third child, in May 1992, proved a pivotal event in their lives both personally and professionally. The boy's birth weight was just one pound, ten ounces, and he required a long period of hospital care before he was healthy enough to take home. Jan Jewell organized a special celebration for his first birthday, and this event gave her the inspiration for their new business: a one-stop source of party supplies for children's birthdays.

After performing market research to determine that consumers were interested in the concept, the new company, dubbed Birthday Express, began operations in June 1994. Initial funding came from $1.5 million in savings the Jewells had accumulated. Although it would start out as a catalog operation, they planned to create a web site when the business was successfully up and running. Two years later, in April of 1996, the company went online as Birthday Express.com. During this time Mike Jewell had continued to work for Engineering Animation, Inc.

Birthday Express offered a full range of party supplies, including invitations, plates, napkins, and decorations. Children's parties were often put together with a specific theme in mind, and the company initially offered customers generic choices like unicorns and dinosaurs. Over time, the firm began to license the rights to children's entertainment properties like the Magic School Bus, Madeline, and Raggedy Ann, as well as buying other licensed items from outside vendors.

In 1995, its first full year of operation, Birthday Express sold 44,000 party packages, and sales nearly doubled the next year, to 80,000. Supplementing the mail-order sales, the company opened a retail outlet in the corner of its printing, manufacturing, and distribution center near Seattle. In April of 1997 the firm bought Great Days Publishing, Inc., a maker of personalized scrolls that listed noteworthy events from a particular date. Its product line would be marketed under the Birthday Express name.

In 1997 the number of packages jumped to 140,000, and it increased again in 1998 to 200,000. By 1999 Mike and Jan Jewell were running the firm as co-CEOs, and employing nearly 200.

1999: Venture Capital Funds Expansion

In August of 1999 the company received $13.1 million in new funding from Arch Venture Partners, Advanced Technology Ventures, and Sigma Partners, which was combined with $12 million in internally generated money to fund a $25.1 million national expansion. In the fall adult-themed party goods were added via the newly created Celebrate Express.com web site. Its party themes included "Black Tie New Year's Affair" and "Autumn Vine Wine Party," along with other seasonal and holiday offerings. Packages like the "Golden Reindeer" dinner for eight included invitations, disposable dinner and dessert plates, cups, plastic stem glasses, knives, forks, spoons, napkins, confetti, baskets, a table cover, and a papier-mache golden reindeer, all for $64.95.

In December of 1999 Birthday Express leased a 32,000-square-foot distribution center in Greensboro, North Carolina, which tripled its distribution capacity. The new site, which was intended to speed up delivery to East Coast accounts, was located near a U.S. Postal Service bulk mail center and a planned Federal Express cargo hub. Half of the firm's shipments were sent via U.S. mail, with the rest shipped United Parcel Service and Federal Express. One-fifth were expedited for next-day delivery.

The company's online business was now booming, with about a third of its total coming from Internet orders. This category had consisted of less than 2 percent just a year earlier. For 1999 the firm reported sales of $13 million and a loss of $1.1 million.

Since its founding Birthday Express had accumulated a deficit of nearly $5 million, as the cost of building infrastructure and attracting customers consistently exceeded earnings. With a new wave of publicly traded competitors like GreatEntertaining.com and iParty.com nipping at its heels, in January of 2000 the firm announced that it was preparing for its initial public offering (IPO) of stock on the NASDAQ exchange, hoping to raise $40 million. The company also changed its name to CelebrateExpress.com, reflecting the success of its new venture and a desire to brand itself as a source for all types of celebrations.

In March 2000 the company received its one-millionth order, and in July it formed a marketing alliance with Sears Portrait Studio. The company was also busy reaching agreements with a variety of Web-based firms to help bring in customers, giving them a sales commission of up to 18 percent. Nearly 6,000 web sites featured links to the company's sites by mid-summer. The firm now employed 250, and was operating a 24-hour call center out of its Kirkland headquarters.

In August of 2000 CelebrateExpress.com abandoned its plans to go public. The IPO market had turned sour in the spring, and the firm's public competitors had seen their stock prices fall. Over the next year the company instead raised $14 million in new capital from outside sources. During 2000 the firm fulfilled 420,000 orders, which averaged about $70 worth of goods each.

Storybook Heirlooms Acquired in 2001

The first half of 2001 saw Celebrate Express revamp its Birthday Express web site and purchase Storybook, Inc., a retailer of clothing for pre-teen girls via catalogs and the Internet under the Storybook Heirlooms brand name. Its operations were moved to Kirkland. The company also added several new lines of licensed partyware to its offerings, including Curious George, Lego, and Rokenbok.

During 2001 Celebrate Express began a cross-promotional venture with baked goods giant Pillsbury. In January the latter firm placed $5 coupons for Birthday Express in 3.5 million cans of Happy Birthday Cookies, while Birthday Express included coupons for the cookies in its catalogs. In the summer the Pillsbury marketing continued with two Birthday Express contests that were featured on millions of dessert and cake mix packages. Both firms cross-promoted on their web sites, and a Pillsbury coupon appeared in Birthday Express catalogs and in outgoing orders. Pillsbury also created a number of cakes that complemented the firm's party themes. The Birthday Express web site was now recording one million visits per month, while 12 million copies of its quarterly catalogs were being mailed each year.

The company also was continuing to sign new licensing deals, in early 2002 adding popular movie character E.T. The Extraterrestrial to its party theme offerings. In the spring, the Storybook Heirlooms web site was re-launched, after the firm had sorted out problems integrating its operations. The site, and a catalog, offered girls' clothing for celebratory events like weddings and first communions, and holidays like Christmas and Easter. During the year Mike Jewell became the company's sole CEO, while Jan Jewell took the title of chief creative officer.

In 2003 Celebrate Express launched a new brand, Costume Express. Its web site and catalog offered a wide selection of children's costumes and accessories, primarily for Halloween.

Company Perspectives:

Celebrate Express is a leading provider of celebration products for families with young children. We currently operate three brands, Birthday Express (high-quality children's party products), Storybook (girls' specialty apparel) and Costume Express (children's costumes). Our goal is to help busy parents celebrate the special moments in their children's lives. We market our products via the Internet and catalogs. Our strategy utilizes branded Web sites, complemented by catalogs, to offer products as completely coordinated assortments. We support our customer's purchasing experience with detailed product information, knowledgeable event planning advice, and responsive customer service.

IPO Completed in 2004

In 2004 the company again set its sights on a public stock offering. The market for IPOs had rebounded, and Celebrate Express, Inc. (as the firm was now known) had grown substantially since its failed attempt of four years earlier. In the fiscal year ended mid-2004, the company reported sales of $51.9 million and operating income of $300,000. The October stock sale brought in more than $38 million, which was used to pay down $5 million in long-term debt and provide funds for future acquisitions. An additional $18.8 million went to existing shareholders who participated in the offering.

Growth continued in the fall, with the company's sales up 43 percent from a year earlier. Costume Express in particular was doing well, with a wider variety of Halloween costumes boosting sales. The company was still hungry for growth, and with its factory and distribution facilities operating at less than half of capacity, it was well situated for future expansion. It had recently added 24,000 square feet to the Greensboro center.

The company's success was attributable to a variety of factors. Birthday Express maintained a 98 percent in-stock rate and offered as many as 35 different items for each of its 100-plus themes, while allowing customers to order for as many partygoers as they wished. This gave it a distinct advantage over bricks-and-mortar competitors who typically sold in packs of eight, forcing a parent inviting nine children to a party to purchase goods for 16, for example. The company's web site and catalog also offered party planning advice, and informational booklets were shipped with orders. Online and telephone assistance was offered live 24 hours per day, as well.

Celebrate Express now had a database of more than two million customers. The company generated 80 percent of its revenues from Birthday Express, which was logging an average order of $78.03. Storybook Heirlooms orders averaged nearly $100, while those for Costume Express were closer to $70. Nearly half of the company's orders came from previous customers, and almost three-fifths were made online. The firm also continued to publish catalogs, believing that children used them to pick a party theme or costume, with parents doing the ordering online or over the phone. The firm had by now quietly shut down the CelebrateExpress.com adult party business to focus exclusively on children's items.

In little more than a decade Celebrate Express, Inc. had grown from a small catalog operation into one of the leading mail-order children's party goods suppliers in the United States. Having successfully completed its IPO, the company was preparing for further expansion in the years to come.

Principal Subsidiaries

Birthday Express; Storybook, Inc.; Costume Express.

Principal Competitors

Target Corporation; Wal-Mart Stores, Inc.; Party City Corporation; iParty Corporation; Party America; Hallmark Cards, Inc.

Key Dates:

1994:: Mike and Jan Jewell found Birthday Express to sell children's party items.
1996:: Internet sales begin.
1997:: Great Days Publishing is purchased.
1999:: The company gets $13.1 million in new funding to expand operations.
1999:: Celebrate Express.com is launched with a line of adult party goods.
2000:: The company changes its name to Celebrate Express.com; a new distribution center opens; an initial public offering (IPO) is announced, but abandoned after the IPO market turns sour.
2001:: Storybook Inc., maker of girls' celebration/holiday clothing, is acquired.
2003:: Costume Express is formed to market costumes online and via catalog.
2004:: The firm, now known as Celebrate Express, Inc., raises more than $38 million in an IPO.