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Pier 1 Profits Down 43 Percent

Don Hogsett, Staff Staff -- Home Textiles Today, September 20, 2004

With same-store sales slacking, margins thinning and costs climbing, second quarter profits at Pier 1 Imports Inc. tumbled 43.3 percent, to $10.4 million from $18.4 million last year.

Sales at the home furnishing import specialist rose 5.7 percent, to $452.3 million from $427.8 million, boosted by new store openings. But with consumers holding on tight to their wallets and shunning the malls, the crucial gauge of same-store sales declined 3 percent.

Putting earnings under heavy pressure, in addition to the lower comps, average gross margin was squeezed 210 basis points, or 2.1 percentage points, to 37.4 percent from 39.5 percent the preceding year. But even so, gross margin dollars held relatively steady at $169 million, supported by the increase in overall sales.

Adding an extra dimension of pressure to the bottom line, when measured as a percentage of sales, costs climbed 70 basis points, or seven-tenths of a percentage point, to 30.6 percent from 29.9 percent. Measured in absolute dollars, costs jumped 8.5 percent, to $138.6 million from $127.7 million during the same period a year ago.

Pulling even more dollars away from the bottom line, stockpiles climbed twice as fast as sales during the second quarter, shooting up 11.9 percent, to $413.3 million from $369.2 million, way outpacing the 5.7 percent increase at the top line.

Looking to reduce the retailer's overhead, Marvin Girouard, chairman and CEO, said, “We continue to evaluate all costs, especially marketing expenditures. This fall, our marketing program will primarily include newspaper inserts, national magazine advertising, direct marketing, and e-commerce marketing through Pier1.com. In early October, we plan to name a new advertising agency.” (see related story on page 2)

Pier 1 imports, inc.

Qtr. 8/28 (x000) 2004 2003 %change
a-Second quarter results include $351,000 in interest and investment income, compared with $524,000 during the year-before period.
b-Six month results include $820,000 in interest and investment income versus $1.2 million during the same period a year ago.
Sales $452,271 $427,831 5.7
Oper. Income (EBIT) 30,435 41,387 -26.5
Net income 10,446a 18,436a -43.3
Per share (diluted) 0.12 0.20 -40.0
Average gross margin 37.4% 39.5% --
SG&A expenses 30.6% 29.9% --
Six months
Sales 884,298 830,543 6.5
Oper. Income (EBIT) 62,514 83,806 -25.4
Net income 22,183b 37,498b -40.8
Per share (diluted) 0.25 0.41 -39.0
Average gross margin 38.6% 40.6% --
SG&A expenses 31.5% 30.5% --


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