Pier 1 loses $58.7M in 4Q
By Clint Engel -- Furniture Today, April 30, 2007
Fort Worth, Texas — Pier 1 Imports said declining sales and a series of one-time charges, the largest of them to write down the value of clearance merchandise, led to a loss of $58.7 million in its fourth quarter ended March 3.
In a conference call with the investment community, new President and CEO Alex Smith called 2006 "a truly horrible year" for the retailer.
He said Pier 1 will close about 60 stores (opening five) this fiscal year as it pursues initiatives to cut costs and revive the long-struggling brand.
The company also suggested that its 36-store Pier 1 Kids stand-alone format eventually will be closed. Chief Financial Officer Charles Turner said the concept isn't viable going forward, noting that about 10 of the stores the retailer will close this year are Kids units. Going forward, Pier 1 Kids will likely be folded into Pier 1 units, he indicated.
Fourth-quarter sales for the Top 100 company were down 6.4% from the comparable period a year earlier to $473.7 million as same-store sales fell 11%.
Excluding the one-time charges, the specialty retailer said its net loss from continuing operations would have been 14 cents per share in the fourth quarter, compared with a 4 cent loss a year earlier. That performance was better than analysts expected, with those surveyed by Thomson Financial predicting a loss of 32 cents per share.
The fourth-quarter net loss of $58.7 million compares with a net loss of $7 million a year earlier. For the year, the loss was $227.2 million, versus a $27.5 million loss in fiscal 2006. The just-ended year's loss included the effects of $114.1 million in one-time charges.
Pier 1 said it took the fourth-quarter inventory charge to write down the value of merchandise, mainly in the modern craftsman style. The company said it made a strategic decision to expedite the clearance of the goods by the end of the fiscal first quarter.
Sales for fiscal 2007 were down 8.6% from the previous year to $1.6 billion, with comparable-store sales falling 11.3%.
In the call, Smith discounted the idea that Pier 1's troubles were connected to increased competition, tying them instead to the retailer's own failure to "evolve and adapt" its merchandise and well as to streamline and become more cost-effective.
He said the company has set priorities this year to help it return to profitability, including reducing costs and streamlining the organization, returning the merchandise assortment to one that appeals to its target customers, reducing supply chain costs and lead times, and creating a cost-effecting marketing plan (spending less this year).
Smith said that when business fell off, Pier 1 made the mistake of changing its assortment dramatically rather that evolving and adapting it to consumer tastes over a longer term. Many of the contemporary goods introduced last year are now being cleared out.
Pier 1 also said it will no longer report sales each month, shifting instead to a quarterly reporting schedule.
| Pier 1 Imports | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 3/3 | 2007 | 2006 | Change |
| (a) Includes net losses from discontinued operations of $3 million in the 2006 quarter, $407,000 in the 2007 year and $12.3 million in the 2006 year. | |||
| Sales | $473,712,000 | $506,022,000 | (6.4%) |
| Operating income | (48,208,000) | 4,097,000 | |
| Net income (a) | (58,696,000) | (9,976,000) | |
| Earnings per share | (0.67) | (0.11) | |
| Year ended 3/3 | 2007 | 2006 | Change |
| Sales | $1,623,216,000 | $1,776,701,000 | (8.6%) |
| Operating income | (175,046,000) | 13,417,000 | |
| Net income (a) | (227,645,000) | (39,804,000) | |
| Earnings per share | (2.60) | (0.46) | |
| Acknowledgements | ||
| News Editor Jay McIntosh contributed to this story. | ||
