Pier 1 not riding high retail wave

FORT WORTH, TEXAS — Even though retailer sales and profits both have been rising broadly higher lately, Pier 1 Imports, the Texas-based specialty chain, looks like it's missed the boat, with same-store sales stalled, stockpiles ballooning, margins thinning out and costs rising higher.

After launching a strong recovery and rebuilding its business over the past two years, the retailer of decorative home furnishings and gifts has lately run out of steam, and earnings during the opening quarter sank 38.4 percent, to $11.7 million from $19.1 million last year.

Helped by continued expansion, sales at the retailer of imported products moved up 7.3 percent, to $432 million from $402.7 million during the same period a year ago. But the crucial gauge of same-store sales slipped 1.8 percent. And same-store sales are expected to slide even further, by 2 to 4 percent, during the current second quarter, the retailer cautioned.

Hit by markdown pressure and stepped-up promotional sales, average gross margin thinned by 200 basis points, or 2 percentage points, to 39.8 percent from 41.8 percent during the prior-year period. Acting as a further drag, costs climbed higher by 120 basis points, or 1.2 percentage points, to 32.4 percent from 31.2 percent.

With sales weak, inventories climbed sharply higher, rising 13.5 percent, almost twice as fast as sales, to $384.2 million from $338.5 million during the first quarter of 2003.

Marvin Girouard, chairman and CEO, commented, "Even though the first quarter started out positive, sales slowed after the Easter holiday and remained weak. We were disappointed with our performance for the quarter."

Girouard added, "After identifying several reasons for Pier 1's soft sales and traffic, including less effective advertising, merchandising issues, and inconsistent store performance in certain areas of the country, we are developing strategies, both near- and longer-term, to drive customer traffic, increase conversion rates and gain market share."

Ticking off some recent developments, Girouard said, "June's Wicker Sale began last weekend and a new Thom Filicia television commercial begins airing in July. The Fourth of July holiday weekend sales will primarily benefit the fiscal month of July, as will the summer clearance that starts with our 'One Big Sale' newspaper insert the first weekend of the month. Additionally, we anticipate positive customer response from the new transitional assortment of back-to-college merchandise."