Pier 1 Shows Hint of Turnaround
Michael J. Knell -- Furniture Today, January 7, 2008
Home furnishings specialty retailer Pier 1 Imports slashed its net losses, improved margins and generated positive operating results in its third quarter ended Dec. 1, the company reported — sparking a rally by investors who sent the stock price up nearly than 40% in heavy trading the morning of the announcement.
The company's 3Q loss of $10.0 million — narrowed from the $72.7 million loss for the same period last year — was built on a positive EBITDA of $2.9 million.
Alex Smith, president and ceo, said, "Our strategy of profitable sales at sustainable margins, combined with a greater emphasis on lower ticket impulse items, is beginning to pay off. We are pleased with our third-quarter margin results, which would have been higher had it not been for the clearance of our Pier 1 Kids merchandise. I am obviously very delighted that we achieved a positive EBITDA for the first time in seven quarters."
Smith, who took the helm last February, lauded his staff for a range of accomplishments including more "compelling merchandise assortments," and told analysts on the earnings call that Pier 1 now has 24 buyers, up from 12 when he came aboard.
Smith said he looks forward in the coming year to the company "buying with more precision and better execution."
Quarterly sales fell 7.1% to $374.2 million — in part due to the closure of 98 stores. Comp sales fell 1.7%. Comps exclude Pier 1 Kids, which is being shut down.
Gross profit margins at the 1,100-store retailer were 33.6% of sales, up 370 basis points from 30.9% in the year-ago period, strong enough to push up gross profit dollars by $1.3 million even as the store count contracted significantly.
By cutting $21.2 million in marketing expense, $10.8 million in payroll and $5.4 in general costs, Pier 1 dramatically reduced SG&A expenses to 33.1% of sales — down from 45.6% in the year-ago quarter.
Pier 1 Imports, Inc.
|Qtr. 12/1 ($millions)||2007a||2006b||% change|
|a. Fiscal 2008.
b. Fiscal 2007.
c. 3Q 2007 selling, general and administrative expenses included $6.5 million in special charges compared to $28.8 million reported in the same period last year, a decrease of $22.3 million. Excluding the impact of these charges, adjusted SG&A expenses for 3Q declined $37.4 million from the year-ago period and for the year declined $91.0 million when compared to the first nine months of fiscal 2007.
|Oper. Income (EBIT)||(8.2)||(71.0)||—|
|Per share (diluted)||(0.11||(0.83)||—|
|Average gross margin||33.6%||30.9%||—|
|Oper. Income (EBIT)||(104.0)||(166.2)||—|
|Per share (diluted)||(1.25)||(1.94)||—|
|Average gross margin||28.0%||31.1%||—|
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