Pier 1 3Q profits climb 45%

By Don Hogsett -- Home Textiles Today, 12/11/2000

FORT WORTH, TX -Propelled by higher sales, stronger margins, lower costs and a deep cut in interest expense, third-quarter profits at Pier 1 Imports, a specialty retailer of decorative home fashions and gifts, jumped up by 45.9 percent, to $23.6 million from $16.2 million last year.

With same-store sales moving up at a double-digit pace, sales climbed higher by 15.2 percent, to $343.5 million from $298.2 million the prior year. The crucial gauge of same-store sales increased by 10.6 percent.

Providing support to the bottom line, average gross margin widened by 50 basis points, to 42.8 percent from 42.3 percent. Gross margin dollars shot up by 16.8 percent, to $147.2 million from $126.0 million the prior year. In another big boost to profits, operating profits were whittled back by 100 basis points, to 28.6 percent of sales from 29.6 percent.

Bulked up by the stronger margins and lower costs, operating profits shot up by 39.5 percent, to $38.3 million from $27.4 million. The retailer recorded a strong operating margin-operating profits measured as a percentage of sales-of 11.1 percent, up 160 basis points from 9.5 percent the preceding year.

In a further big lift to profits, the retailer slashed its interest costs by 45.3 percent, to $1.1 million from $2.0 million last year. Long-term debt cut by more than a third, or 34.5 percent, to $55 million from $84.1 million.

Marvin Girouard, chairman and ceo, commented, "We are extremely pleased with the execution of our plan. The exceptional improvement in earnings is the result of maximizing sales but not at the expense of gross margin and profits. Effective expense control at the stores, distribution centers and headquarters ensured that the strong sales gains resulted in improved profitability."