follow us

Pier 1 Bullet Harder to Bite

Don Hogsett -- Home Textiles Today, September 18, 2006

Hit by a fistful of one-time charges, and with sales sliding, margins thinning and costs and interest expense both soaring higher, Pier 1 Imports danced closer to the edge of the tar pit, recording a second-quarter loss of $73.1 million, more than seven times the size of a year-ago loss of $10.2 million.

Unable to find the merchandise mix or presentation to draw consumers through its doors, sales remained in freefall, falling 12.5% to $370.7 million, an unnerving shortfall of $53.0 million from a year-ago level of $423.7 million. As bad as that sounds, it gets even worse, as the acid-test measure of same-store sales dropped by 14.8% for the quarter, worsening steadily through the first six months of the year. By contrast, six-month comps fell at a slower pace of 10.9%.

Acting as a drag on the bottom line, the retailer recorded a total of $37.7 million in mostly non-cash, one-time charges covering a number of issues, including the valuation of deferred tax assets; the settlement of labor litigation; store-level asset impairment; the cost of relocating Pier 1 Kid's headquarters and warehousing; and the cost of stock-based compensation.

But even pulling out all the one-time charges, the retailer still lost $29.3 million from continuing operations, almost 5 times the size of the prior-year loss of $6.4 million.

Virtually every key operating metric soured during the second quarter. In addition to the sliding sales, average gross margin thinned by 340 basis points, or 3.4 percentage points, to 28.5% from 31.9% a year ago. At the same time, costs rocketed higher when measured as a percentage of dwindling sales, up 940 basis points, or 9.4 percentage points, to 41.3% of sales from 31.9% last year. Even as sales plummeted by 12.5%, costs measured in absolute dollars jumped up by 13.5%, to $153.1 million from $135.0 million during the same period a year ago, costing the company $18.2 million more.

The inventory picture was mixed. Stockpiles looked controlled, compared with year-ago levels, declining by 14.9% to $404.1 million from $474.9 million in August 2005. But over the last six months, as sales progressively weakened, stockpiles actually got out of whack once again, jumping up by 9.5% from $369.0 million in February.

Pier 1 imports inc.

Qtr. 8/26 (x000) 2006 2005 % Change
Sales $370,698 $423,675 -12.5
Oper. income (EBIT) (61,252) (14,002) --
Net income (73,059) (10,185) --
Per share (diluted) (0.84) (0.12) --
Average gross margin 28.5% 31.9% --
SG&A expenses 41.3% 31.9% --
(loss)


Featured Video

  • Online Moves From Afterthought To Main Thought For Textiles Suppliers

    Camera Icon More Videos

Other Home Furnishings Sites

Casual Living
Gifts and Decorative Accessories
Home Accents Today
Kids Today
Furniture Today