Pier 1 cuts loss to $30.2 million

Sales decline 7.2% in second quarter

Clint Engel -- Furniture Today, September 18, 2008

FORT WORTH, Texas - Pier 1 Imports reported a fiscal second quarter net loss of $30.2 million or 34 cents a share, and said it was withdrawing its earnings guidance for the year due to economic uncertainties.

The loss for the period ended Aug. 30 was an improvement over a net loss of $43.4 million or 49 cents per share in the same quarter a year ago.

Through the six months, the Top 100 home furnishings chain posted a net loss of $63 million or 71 cents per share, compared with a net loss of $99.8 million or $1.14 per share in last year's first half.

President and CEO Alex Smith said the second quarter merchandise margins were not what the company had hoped for, "but we took the necessary steps to clear seasonal inventory and to prepare our stores for the arrival of our fall and harvest merchandise."

Early results show margin improvements in the fiscal third quarter, he said.

Second quarter sales declined 7.2% to $320 million and same-store sales were off 1.7%. Through the first six months, sales were off about 10% to $631 million and same-store sales were down 3.9%.

Pier 1, which has been struggling to return to "profitability and beyond," as Smith says, said it will not provide guidance for the rest of its fiscal year and withdrew previous guidance due to "the difficulties and uncertainties surrounding the macroeconomic environment."

It said its turnaround hinges on merchandise margins and operating profits and "year-over-year comparisons of these metrics will better indicate the company's progress in this challenging retail environment."

In the second quarter, merchandise margins improved to 49.3% from 47% a year earlier.

"As we embark on the fall holiday selling seasons, we expect that our marketing, merchandising and in-store strategies will continue to improve conversion rates and drive incremental traffic," Smith said.

He said the company has the right strategies to return to profitability and that despite the economic factors that are slowing the process, "we remain confident that we are on the right trajectory."