Pier 1 has "pretty damn good" 3Q

HTT Staff -- Home Textiles Today, 12/16/2010 12:09:50 PM

Fort Worth, Texas - Home furnishings chain Pier 1 Imports remained diligently on track on its road to recovery in its third quarter, when the retailer reported its fifth consecutive period of net income - although year-over-year profit fell despite higher margin.
Alex Smith, president and ceo, said this return to profitability has the company feeling "pretty damn good." He attributed the period's success to sales and margins that "significantly" exceeded Pier 1's expectations coupled with an overall leveraging of expenses.
Also buoying the quarter's favorable sales results were gains in traffic, average ticket, average unit retail, and conversion rate, he added.
"We are absolutely delighted with our third quarter results," Smith said. "We continue to demonstrate our mission to return our well loved company to profitability...one customer and one sku at a time."
Net income was $21.0 million, or 18 cents per share, compared to last year's third quarter net income of $38.8 million, or 37 cents per share, which included a $55.9 million income tax benefit from the Worker, Homeownership and Business Assistance Act of 2009, enacted during Pier 1's same period last year, offset by non-operating charges of $18.3 million associated with the voluntary conversion of the company's 9% convertible senior notes due 2036 during last year's third quarter.
Quarterly total sales were $353.8 million, up 8.2%, and comparable store sales increased 10.2% on top of last year's 13.7% increase.
Smith said Pier 1 experienced "success" in all of its major merchandise categories and in all regions of the country.
Also strong for Pier 1 in the three-month period were merchandise margins at $208.5 million, or 58.9% of sales, compared to $185.0 million, or 56.6% of sales, in the same period last year. The 230-basis-point improvement "continues to be positively impacted by decreased clearance activity, reduced vendor and supply chain costs and well managed inventory levels," Pier 1 said.
Net income of $43.1 million, or 37 cents per share, versus $52.3 million, or 55 cents per share, which included a $49.7 million gain on the retirement of debt, a $10.0 million litigation recovery and a $55.9 million income tax benefit, offset by non-operating charges of $18.3 million associated with the voluntary conversion of debt as previously discussed above.
Sales rose 8.4% to $969.9 million, with comps up 11.8% compared to 0.6% in the year-ago period.
With the holiday selling season well underway, Pier 1 is seeing sales momentum "continuing in December," Smith said, with sales of holiday merchandise "excellent, with good sell-through rates today."
He added: "We do not need a robust economy to drive our improvements...nor a healthy housing market."