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Pier 1 on road to recovery with gains in comps, sales and profit for quarter

Reports best margin since 1999

Fort Worth, Texas – It has been three years since Pier 1 Imports’ president and ceo Alex Smith joined the home furnishings chain to oversee in its turnaround. That shift has not quite been realized, but upon the closing of its fourth quarter and fiscal 2010, the retailer is seeing some definite signs of recovery.

“I didn’t know then what the economy was going to throw at us. So the recession has obviously extended our turn-around time line,” Smith said to analysts during the retailer’s quarterly call today. “But we’ve arrived here today stronger, leaner, more effective and more determined to take market share than ever before.”

While every product category has shown gains over the last year, said Smith, “we still have significant room for further improvement. Opportunities exist to grow sales in all major categories, including furniture. I have every confidence that our buyers will continue to raise the bar as they struggle to reach our Shangri-La – the perfect assortment.”

For the fourth quarter, ended Feb.27, net income for the quarter was $35 million, or 30 cents per share, representing a $64 million improvement over the net loss of $29 million, or 33 cents per share, at the same time last year.

Sales grew 1.8% to $396 million, despite Pier 1’s starting the quarter with 49 fewer stores than in the year-ago quarter. The sales increase was primarily attributable to a comparable store sales gain of 6.5%,  which rose as a result of traffic improvements in December, and higher average ticket, average unit retail and conversion rate for the quarter.

Merchandising margins improved to $221 million, or 55.8% of sales, a 1,150 basis point boost over $173 million, or 44.3% of sales reported for the same period last year.

“A fourth quarter merchandise margin rate at this level has not been achieved since fiscal 1999,” noted Charles Turner, evp and cfo.

For the fiscal year, net income was $87 million, or 86 cents per share, versus a net loss of $129 million, or $1.45 per share, last year.

Sales fell 2.27% to $1.29 million. Pier 1 pointed to a net store count reduction of 38 stores, which was partially offset by an increase in comparable store sales of 1.5% for the year. Excluding the January clearance event, traffic increased over the second half of the year, and Pier 1 experienced increases in average ticket, conversion rate, and average unit retail.

The company ended the year with 1,051 Pier 1 stores – 973 in the United States and 81 in Canada.

Looking ahead, comp store sales are expected to outpace total sales gains by 500 basis points in the first quarter and 400 basis points in the first half of the year due to the significant store-count reduction that occurred in the first half of fiscal 2010. For the year, comp store sales will outpace total sales by about 200 basis points, the company projected.

 “Comparable store sales face a tougher comparison in the second half of the year as we cycle back around to the 9.7% comp store gain achieved over the last six months of last year.”

Merchandise margins will further increase and should be at least 55% of sales for the year. It is anticipated that 10 to 15 stores will be closed in fiscal 2011 and Pier 1 will open three to five new stores.

“We believe that we have huge organic growth potential in our business – we are still well below our historical highs in annual sales per square foot and merchandise margin. Although it is a long time until Christmas, the year has started well,” said Smith.

 

 

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