Pier 1 drives 2Q profits up 59.9%

By Don Hogsett -- Home Textiles Today, 9/23/2002 12:00:00 AM

FORT WORTH, TX —

Second-quarter profits at Pier 1 Imports rocketed up by 59.9 percent, to $22.1 million from $13.8 million last year, as the home goods retailer bulked up its margins and kept cutting costs.

Pier 1 sales, still on the fast track, climbed by 15.0 percent, to $410.9 million from $357.2 million, as the company layered on $26 million in new sales through a combination of strong same-store sales and rapid expansion. The crucial gauge of same-store sales rose by 5.8 percent during the period, far outpacing growth for most other American retailers, and illustrating the continued resilience of home goods suppliers in a in an otherwise weak retail environment.

Fueling an earnings jump of almost two-thirds, Pier 1 boosted its average gross margin by 160 basis points, or 1.6 percentage points, to 40.1 percent from 38.5 percent the prior year. Gross margin dollars swelled by 19.9 percent, to $164.9 million from $137.5 million last year. In another big lift to the bottom line, the retailer kept chopping away at costs, reducing its expense rate by 50 basis points, to 28.9 percent of sales from 29.4 percent.

Setting itself apart from most other heavily leveraged retailers, Pier 1 actually earned more in interest income on money that it banked than it paid in interest expense. Interest income totaled $699,000, compared with interest costs of $645,000.

Marvin Girouard, chairman and ceo, commented, "We ended the second quarter with $150 million of cash while growing inventory in our distribution facilities and spending capital to support 62 new Pier 1 and 12 new Cargokids stores opening in the second half of the fiscal year. Also during the first six months of the fiscal year, we repurchased over $40 million of Pier 1 stock."

Girouard added, "The company's focus is on new store openings; increasing traffic, average ticket and customer conversions through effective marketing and training programs; managing inventory levels and all expenses; and growing operating margins. We are confident with our ability to remain flexible as the business environment changes and affects our customers."

Pier 1 Imports Inc.