Pier 1 sales drop 6.1% in 1Q as chain posts loss
By Janice Chamberlain -- Furniture Today, July 4, 2005
Fort Worth, Texas — Pier 1 Imports same-store sales dropped 12% as overall sales slipped 6.1% in its first quarter as the specialty retailer posted a $12.5 million net loss, compared with profits of $11.7 million in the same period a year ago.
Sales in the quarter ended May 28 were $405.7 million, down from $432 million in the comparable 2004 period. Despite the sakes dip, both the cost of merchandise sold and selling, general and administrative expenses were up 1.9% and 4.9%, respectively.
As a result, gross margin percentage in the latest quarter was 34.7% versus 39.8% in the year-earlier period.
In a conference call with analysts, Chairman and CEO Marvin Girouard said the company was seeing "small incremental improvements in critical areas" of its business after nearly three months of focusing on three initiatives: increasing store traffic, improving sales performance and achieving earnings growth.
He said it was still "too early to declare success or failure" of the initiatives.
Chief Financial Officer Cary Turner said the company had "aggressively managed inventories by marking down and clearing older inventory, adjusting reorder quantities and pushing out purchase orders to ensure inventories are in line with sales projections."
During the first quarter, Pier 1 had $14 million in capital expenditures and expects full-year expenditures of $55 million to $65 million, down from previous projections of $65 million to $75 million. The company plans to replace all cash registers, giving sales associates access to real-time inventory status.
The chain opened 17 stores and closed four in the quarter. In the coming months, Pier 1 plans to open 55 net stores in North America, off from the 60 stores it planned earlier. As of Feb. 26, the company operated 1,258 stores worldwide.
Girouard said Pier 1 implemented a new marketing campaign in late March, with national TV, print, radio and Internet advertising. The company is testing different ad media and conducting customer surveys in an effort to increase store traffic.
During June, Pier 1 is conducting store exit interviews with over 600 customers, measuring their satisfaction with pricing, overall in-store experience and merchandise quality, uniqueness and style. It plans to survey customers again this autumn.
In September, the Top 100 chain is set to issue an 80-page catalog in all U.S. markets, its first national catalog, with about 2 million catalogs sent out.
Pier 1 is projecting a second-quarter same-store sales decline in the mid- to high-single-digit range, with earnings per share in a range of 3 cents to a loss of 7 cents per share.
| Pier 1 Imports | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 5/28 | 2005 | 2004 | Change |
| (a) Includes a $7.4 million income tax benefit. | |||
| Sales | $405,709,000 | $432,027,000 | (6.1%) |
| Operating income | (6,042,000) | 32,079,000 | — |
| Net income | (a)(12,462,000) | 11,737,000 | — |
| Earnings per share | (0.14) | 0.13 | — |
