The mood isn’t very festive at Kirkland-based Celebrate Express where today the

Published 7:00 am Monday, April 14, 2008

The mood isn’t very festive at Kirkland-based Celebrate Express where today the company announced a $12.9 million loss during the third quarter of fiscal 2008, ended Feb. 29. It comes at the end of a string of disappointing results that led the company to announce on April 9 that they were approaching people about selling off the birthday greetings and Halloween costume that had been a profitable enterprise until last year. During the same quarter 2007, they posted a $137,000 loss but were still operating in the black. Wall Street doesn’t like it and the stock is in freefall, currently trading around $4.50 after pushing up toward the $6 mark a week ago. So what happened, don’t people like parties?The answer lies on the top line of Celebrate’s earnings statement: sales. For the same quarter last year (a day shorter without the leap day bump) the company sold $16.7 million worth of noise-makers and tiaras. This year that number fell to $13.3 million, a 20 percent drop. The sales problem can be traced straight back to that infernal internet the kids seem so fond of. As shoppers increasingly go online for items, getting to the top of a search engine is more and more important. Companies need the top of the Google search and as the demand increases, so goes the cost of getting that prime online real estate. For a smaller company like Celebrate Express it becomes cost-prohibitive. “The rates for purchased listings have significantly increased. If one or more of the search engines on which we rely for purchased listings modifies or terminates its relationship with us or if the rates for purchased listings continues to rise, our online marketing expenses as a percentage of revenue could rise, we could lose customers, we could be forced to look for other advertising avenues and traffic to our website could decrease,” the company reported in its quarterly filing to the SEC.Add increased costs in basic advertising materials like paper for catalogs and postage and you’ve got a real problem on your hands for a company like Celebrate. According to the report, earnings are expected to continue to fall short for at least another quarter if not beyond. Doesn’t exactly inspire an impromptu Chicken Dance.