Pier 1's profit wave slows a bit

By Don Hogsett -- Home Textiles Today, 12/22/2003 12:00:00 AM

FORT WORTH, TX —

Nicked by thinning margins and rising costs, third-quarter profits at Pier 1 Imports Inc. edged up a slender 3.5 percent, to $32.2 million from $31.1 million last year.

Fueled by continued rapid expansion, sales advanced by 10 percent, to $482.4 million from $438.5 million last year. Same-store sales inched up by 1.6 percent.

Soft as comps and earnings were, they mark a substantial improvement over a weak second quarter, when earnings tumbled by 13 percent, and same-store sales declined by 4.2 percent, as the retailer started to feel the pinch that has squeezed most other retailers, following a long run-up in sales and profits.

Holding earnings in check during the third quarter, average gross margin, while strong, narrowed by 60 basis points, or six-tenths of a percentage point, to 43.1 percent from 43.7 percent a year ago. Measured as a percentage of rising sales, costs rose slightly higher, by 10 basis points, or one-tenth of a percentage point, to 29.8 percent from 29.7 percent a year ago.

Providing some relief, borrowing costs were reduced by 42.1 percent, to $322,000 from $566,000 last year, generating a cash savings of $244,000.

In a low interest-rate environment, the company earned less on cash that it had invested, with interest income declining by 26.3 percent, to $462,000 from $627,000 last year.

Tightly controlling its stockpiles, Pier 1 said inventories rose at a slower pace than sales, rising by 5.7 percent, to $404.2 million from $382.2 million last year, well behind the 10.0 percent increase in sales.

Pier 1 Imports Inc.