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Pier 1 reports first profit in three years

FORT WORTH -- Pier 1 Imports, achieving what its chief executive called a "dramatic turnaround," Thursday announced its first quarterly profit in three years and its first gain in comparable-store sales in 17 quarters.

"A year ago, this company was looking into the abyss," Alex Smith told analysts during a conference call. "We had just lost $227 million and we were burning through cash at an alarming rate. The business had lost its way."

By cutting costs, dumping $500-ticket furniture, improving shipment time and recreating a "treasure hunt" feel for customers in its stores, Smith said the Fort Worth-based home furnishings retailer strengthened its margins and achieved profitability.

"What a difference a year makes," said Smith, who joined Pier 1 in February 2007. "While we knew these results were possible, we exceeded our own internal expectations."

The company earned $13.7 million from continuing operations for the three months ended March 1, compared to a loss of $58 million during last year's fourth quarter. Sales at stores open at least a year rose 2.5 percent in the period.

Expenses dropped $50.2 million from the same period a year ago. Cutbacks included $13.6 million in labor costs, $9 million in marketing and $11.9 million in general administrative costs.

For the full fiscal year, Pier 1 reported a net loss from continuing operations of $96 million, or $1.09 per share, and total sales declined 6.9 percent to $1.5 billion. Chief financial officer Cary Turner said 2008 would see a few new store openings and the shuttering of 25 stores, but that bigger store closings were behind it. Moreover, some stores that had been earmarked for closing had seen improved sales and would now remain open, he told analysts. Pier 1 is generally pleased with its current nationwide presence but might exit some under-performing markets, he said without elaboration.

Pier 1 expects to complete the sale of its Fort Worth headquarters to Chesapeake Energy by June 30, he said. The company has said it will lease 250,000 square feet in the building for an initial seven-year term, with an option to extend for three years. The company has the right to terminate the lease after five years.