Pier 1 sales spike drives 3Q profits

By Don Hogsett -- Home Textiles Today, 12/24/2001 12:00:00 AM

FORT WORTH, TX —

As consumers focus more on the comforts of their homes following September's unsettling terrorist attacks, third-quarter sales shot up at a hefty double-digit pace at home goods retailer Pier 1 Imports, while profits jumped up by more than 6 percent.

In a tricky environment for most U.S. retailers, Pier 1 sales advanced by 12.8 percent, to $387.4 million from $343.5 million last year. Crucially, the acid-test gauge of same-store sales shot up by 5.1 percent, a level bested by few merchants this year.

Hacking away at long-term debt, and whittling down its interest expense, Pier 1 pushed its earnings higher by 6.3 percent, to $25.0 million from $23.6 million last year. With a smaller number of shares outstanding, earnings per share — the number Wall Street watches — climbed by 8.3 percent, to 26 cents a share, compared with 24 cents the prior year.

The company is gaining traction moving into the holiday quarter, as Marvin Girouard, chairman and ceo, revised its earnings forecast for the all-important Christmas quarter. "With the sales momentum that has continued into early December, we are revising our earnings forecast up for the fourth quarter to a range of 40 cents to 42 cents per share from the consensus estimates of 37 cents to 38 cents a share."

Proving a big lift to the bottom line, the retailer cut its interest expense by 47.9 percent, to $571,000 from $1.1 million last year. Long-term debt was reduced by more than half, or 53.9 percent, to $25.4 million from $55 million a year ago.

Margins held relatively steady, but costs climbed sharply higher during the quarter. Average gross margin came in at 42.7 percent vs. 42.8 percent last year. But measured as a percentage of sales, costs climbed higher by 110 basis points, to 29.7 percent from 28.6 percent a year ago.

Pier 1 Imports Inc.