Winter weather puts a freeze on Pier 1 profits
04/10/2014 8:14 AM
04/10/2014 8:15 AM
A series of severe snowstorms disrupted operations and lowered profits at Pier 1 Imports in the fourth quarter, but the company’s top executive said Thursday that its revamped e-commerce strategy and expanding merchandise selection have it positioned for a strong year ahead.
The Fort Worth-based home furnishings retailer’s net income for the 13 weeks that ended March 1 totaled $42.6 million, down from $61.7 million for the comparable period last year, which had 14 weeks.
Comparable-store sales, at stores open at least a year, fell 4.6 percent, though they increased 0.6 percent when adjusted to the 13 weeks that ended March 1.
For the full year, net income was $107.5 million, or $1.01 a share, compared with $129.4 million, or $1.20 a share, last year. Pier 1 estimated that a 53rd week in fiscal 2013 contributed $29 million to net sales and 3 cents to earnings per share.
Total sales increased 3.9 percent to $1.77 billion in fiscal 2014, and comparable-store sales increased by 2.4 percent.
On Wall Street, Pier 1 shares (ticker: PIR) fell 2 cents to $18.20.
Alex W. Smith, president and chief executive officer, said that despite the “difficult fourth quarter,” Pier 1 is on track and expects sales and profits to rise in the next year.
“As bumps in the road go, this was navigable,” Smith said during a conference call with analysts.
For the year ahead, Pier 1 projected comparable-sales growth, including e-commerce sales, in the high single digits and earnings per share of $1.16 to $1.24, up 15 to 24 percent.
Smith is particularly optimistic about the online business, which has grown rapidly since it was relaunched in 2012. Last year, online sales made up 4 percent of total sales, and they are on pace to reach the company’s goal of 10 percent of sales by the end of fiscal 2016.
Pier1.com reached 2 million visitors a week, about twice as many as a year ago. The company plans to quadruple the products offered on its website, Smith said, and is building a second fulfillment center in Columbus, Ohio, to support growth.
Smith said the e-commerce performance “is thrilling and exceeding original expectations.”
“We can already see that our online business will be at least as profitable as the stores,” he said.
Because of the disappointing fourth-quarter results, the company readjusted its three-year outlook, pushing back its goal of reaching $225 in sales per square foot by a year, until the end of 2016, and projecting operating margins of 11 to 11.5 percent by that time.
Smith told analysts that there is nothing “sinister” about the change, which was intended as an update after the bad winter weather.
On the brick-and-mortar front, Smith said the company has remodeled or refurbished more than half its stores in recent years and will invest more this year. The company ended the year with 1,071 stores, including 991 in the U.S.
The board authorized a new $200 million stock repurchase program, effective upon completion of the current $200 million program, which has about $5.8 million left. And it announced plans to seek $200 million in new debt.
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