Pier 1 betters assortment, tightens operations

By Staff -- Home Textiles Today, 9/5/2008 1:46:00 PM

New York – Specialty retailer Pier 1 Imports narrowed its second-quarter loss and is on track to continue its turnaround, said president and ceo Alex Smith, speaking at the Goldman Sachs Global Retailing Conference here.

Pier 1 said second-quarter comparable store sales fell “approximately” 1.7% (full results will be released on Sept. 18), which Smith said resulted from traffic being up but average ticket down.

EBITDA (earnings before interest, taxes, depreciation and amortization) not including special charges was projected at a loss of $15 million to $17 million – better than last year’s $23 million measure.

Smith said results would have been better had Pier 1 not been compelled to take heavier-than-planned markdowns on the outdoor furniture and garden accessories categories at summer’s end. He noted this defect was especially pronounced in the chain’s Sunbelt locations.

Looking ahead, Smith glowed about the improvements to the Pier 1 merchandise mix. “More and more of what our merchant team selects is on target,” he said. “Conversion rates, unit sales increases and unit per transaction support this statement.”

Pier 1 inventory levels are currently “slightly better” than planned, he reported, noting that operations are “leaner” than last year by virtually every measure. Smith said there are further supply chain savings ahead, and announced that Pier 1 has hired Michael Benkel as the new svp of planning and allocation. Benkel, who hails from the operations side of the Pottery Barn division of Williams-Sonoma, will start with Pier 1 on Sept. 17.

On the company’s cash position, Cary Turner, evp and cfo, noted that Pier 1 this summer sold its headquarters building for over $100 million, now has “just under $200 million” in cash, and has a $325 million line of credit which it intends to use solely for capital spending on infrastructure. “We will continue to be very conservative,” Turner noted.