Pier 1 shows signs of turnaround
December 20, 2007,
Fort Worth, Texas -- Home furnishings specialty retailer Pier 1 Imports slashed its net losses, improved margins and generated positive operating results in its third quarter ended Dec. 1, the company reported today – sparking a rally by investors who sent the stock price up nearly 40% in heavy trading this morning.
Alex Smith, president and ceo, said, “Our strategy of profitable sales at sustainable margins, combined with a greater emphasis on lower ticket impulse items, is beginning to pay off. We are pleased with our third quarter margin results, which would have been higher had it not been for the clearance of our Pier 1 Kids merchandise. I am obviously very delighted that we achieved a positive EBITDA for the first time in seven quarters.”
Smith, who took the helm last February, lauded his staff for a range of accomplishments including more “compelling merchandise assortments,” and noted that Pier 1 now has 24 buyers, up from 12 when came aboard. He said he looks forward in the coming year to the company “buying with more precision and better execution.”
Quarterly sales fell 7.1% to $374.2 million – in part due to the closure of 98 stores. Comp sales fell 1.7%. Comps exclude Pier 1 Kids, which is being shut down.
Gross profit margins at the 1,100-store retailer were 33.6% of sales, up 370 basis points from 30.9% in the year-ago period, strong enough to push up gross profit dollars by $1.3 million even as the store count contracted significantly.
By cutting $21.2 million in marketing expense, $10.8 million in payroll and $5.4 in general costs, Pier 1 dramatically reduced SG&A expenses to 33.1% of sales – down from 45.6% in the year-ago quarter.
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