Textiles Help Pier 1 Toward Black Ink
By Cecile B. Corral -- Home Textiles Today, 10/1/2007
Fort Worth, Texas — As home furnishings specialty retailer Pier 1 Imports pursues its turnaround effort, the new merchandise mix of decorative pillows, rugs, window panels and chair pads is seeing "some nice sales gains," with entry-level price points "particularly strong," said president and ceo Alex Smith during the company's second-quarter earnings call.
Smith singled out "home textiles" as one of the bright spots in an otherwise droopy quarter.
Pier 1 reported a loss for the quarter ended Sept. 1 of $43.4 million, or 49 cents per share.
That was worse than analysts' expectations of a 44-cent per share loss, but slashed the year-ago loss of $73.1 million, or 84 cents per share.
Sales dropped 7% to $344.6 million. Comps fell 3.6%, excluding results at Pier 1 Kids, clearance stores and e-commerce.
The 1,157-unit chain has been repositioning itself away from high-ticket furniture items and closer to its roots as a source of "impulse pick-up items and lower average selling prices, and more, smaller, decorative furniture items," said Smith.
"This shift will reduce the impact the market-wide decrease in spending on high-ticket home products will have on our business," he said.
The roll-out of 2,000 or so new skus has begun. While it is too early for the retailer to provide concrete results on the sales of these goods, Smith pointed out "some of the seedlings of success we are seeing" in several categories in addition to the new home textiles offerings.
The first-time introduction of Halloween goods, paired with harvest seasonal assortments, has already proven to be a winner. In fact, Smith said, Pier 1's biggest percentage of sales in one September week stemmed from festive décor items related to the Oct. 31 holiday.
The reintroduction of classic Pier 1 scents, including candles, has been another plus: in September, candles have been Pier 1's top unit sales department.
By Oct. 15 the stores will be set with holiday décor ornaments and related items. By Nov. 15, "we should be pretty well set" with holiday, said Charles Turner, evp and cfo.
Pier 1 will issue four new mailers in the fourth quarter, including an expanded 40-page edition highlighting Christmas decorating and gift items.
These will go out to a subset of the retailer's 20 million names in its database, "to both our best as well as some of our new customers," Smith said. "These mailers have a good feel and increasingly reflect what our company is all about."
| Qtr. 9/1 ($millions) | 2007 | 2006 | % change |
| Sales | $344.6 | $370.7 | (7.0%) |
| Oper. Income (EBIT) | (40.8) | (61.2) | — |
| Net income | (43.4) | (73.1) | — |
| Per share (diluted) | (0.49) | (0.84) | — |
| Average gross margin | 47.0% | NA | — |
| SG&A expenses | 34.1%a | 41.3%a | — |
| Six months | |||
| Sales | $700.9 | $746.8 | (6.1%) |
| Oper. Income (EBIT) | (95.9) | (95.2) | — |
| Net income | (99.8) | (96.2) | — |
| Per share (diluted) | (1.14) | (1.10) | — |
| Average gross margin | NA | NA | — |
| SG&A expenses | 35.6%a | 40.3%a | — |
| (loss) a.Selling, General and Administrative expenses for the second quarter of 2007 included $7.4 million in special charges, compared to $10.3 million in 2006. The classification of these special charges included: lease termination charges, impairment charges, litigation settlements, Pier 1 Kids relocation, and severance/outplacement costs. |
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