Pier 1 Imports returns to profitability in 2nd quarter partly on lower costsBy AP
Thursday, September 16, 2010
Pier 1 Imports returns to profitability in 2Q
FORT WORTH, Texas — Pier 1 Imports Inc. said Thursday that it returned to second-quarter profitability, buoyed by fewer clearance items, lower costs and lean inventory levels.
Pier 1 said it’s the fourth straight quarter that the company has posted a profit, boosting confidence that the retailer’s performance is steadily improving under the helm of CEO Alex Smith.
“The tarnish is nearly removed. We are starting to shine again,” Smith said during a conference call.
The home decor company’s stock gained 52 cents, or 6.5 percent, to $8.48 in afternoon trading. Over the past year, the shares have traded in a range of $2.73 to $9.81.
Pier 1 earned $14.4 million, or 12 cents per share, for the three months ended Aug. 28. That compares with a loss of $15.8 million, or 17 cents per share, a year earlier.
The results surpassed the average forecast for earnings of 11 cents per share from analysts polled by Thomson Reuters, who typically exclude one-time items.
Budd Bugatch of Raymond James said in a client note that Pier 1 showed during the quarter that it could control operating expenses and simultaneously increase sales.
Revenue climbed 8 percent to $309.9 million from $286.7 million, but missed Wall Street’s estimate of $310.1 million.
Revenue at stores open at least a year rose 11.2 percent, a significant turnaround from the prior year’s 7.6 percent decline. This figure is a key indicator of a retailer’s health because it measures results at existing stores rather than newly opened ones.
Smith said Pier 1 got rid of its summer sale this year and replaced it with its “Neat Street” event, which used promotional pricing to partially offset lower clearance inventory.
He said the company will continue to mark down slow-selling merchandise but will only hold two small, short clearance sales per year — in January and July — to get rid of holiday and seasonal summer merchandise, respectively.
Smith said in a statement that the Fort Worth, Texas-based company was “extremely upbeat” about its short and long-term prospects.
During the call, Smith said Pier 1 saw mid- to high single-digit increases in revenue at stores open at least a year for the first three weeks of September.
Despite uncertain economic conditions, Smith said Pier 1 is faring well, as it is benefiting from customers who are nesting and buying products to entertain and cook at home in an attempt to save some money.
Bugatch reaffirmed a “Strong Buy” rating and said Pier 1’s balance sheet is in excellent shape, with $188 million in cash and $26 million in total debt at the quarter’s end.
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