Pier 1 Imports shares surge as 2nd-quarter sales rise 8 percent on better margins, traffic

Thursday, September 2, 2010

Pier 1 Imports shares rise on 2Q sales growth

FORT WORTH, Texas — Pier 1 Imports Inc. said Thursday its second-quarter sales rose 8 percent year-over-year as more customers shopped in its stores and the retailer enticed more browsers to buy its furniture and home accessories.

Traffic and the average amount spent by customers both increased during the second quarter, and all merchandise divisions saw gains in all parts of the country, Pier 1 said. Total sales rose to $310 million from $287 million a year ago, with sales at stores open at least a year up 11.2 percent.

The latter is an important metric because it measures sales growth at established stores rather than new or recently closed locations. In last year’s second quarter, sales at stores open at least a year fell 7.6 percent.

Smith said merchandise margins were very strong at about 58 percent of sales and forecast second-quarter earnings of 10 cents to 12 cents per share for the quarter that ended Aug. 28.

Analysts polled by Thomson Reuters, on average, expect earnings of 11 cents per share on sales of $310.2 million.

Shares jumped $1.11, or 17 percent, to close at $7.65 on more than twice average daily volume.

After years of losses, Pier 1 has been steadily improving its results under the turnaround efforts of CEO Alex Smith. The company in June posted a surprise first-quarter profit.

Keybanc Capital Markets analyst Bradley B. Thomas said Thursday that while he remains cautious on the outlook for home-related spending, especially looking ahead to 2011, he is encouraged by management’s ability to drive sales and margin expansion. In a client report, Thomas noted that the August sales results were solid given that Pier 1 didn’t hold a clearance event as it did last year.

He kept a “Hold” rating on the stock, saying negative housing turnover results could weigh on investor sentiment for home-related names. But he thinks Pier 1 and other home-related retailers should see favorable sales trends through the rest of this year.

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