Pier 1 stock declines on lower profit, slashed forecast

Shares of Pier 1 Imports dropped 12 percent on Friday after reporting disappointing results for its fiscal second quarter and slashing its full-year guidance.

The Fort Worth-based home furnishings retailer said late Thursday that net income totaled $3.2 million, or 4 cents a share, in the three months that ended Aug. 29, down from $9.2 million, or 10 cents a share, a year ago. The results fell well short of Wall Street expectations, where the consensus estimate called for earnings of 8 cents per share.

Revenue totaled $430 million, up 2.7 percent from the previous year but still short of Wall Street expectations. Same-store sales increased by 2.5 percent.

“We are disappointed with our second-quarter sales and earnings results,” President and CEO Alex W. Smith said in a statement. “During the period, our margins were impacted by increased promotional and clearance activity, as well as inventory-related issues within our distribution center network.”

The results were released after the close of trading Thursday. On Friday, Pier 1’s stock (ticker: PIR) closed down $1.06, or 12 percent, to $7.61, after being down more than 20 percent earlier in the session.

On a conference call with analysts, Smith said bloated inventories in its distribution centers will affect operations for the rest of the year. “This is particularly frustrating, and we are disappointed about the impact it’s having on our margins and profitability,” he said.

Pier 1 now expects full-year earnings of 56 to 64 cents per share, down from the range provided in June of 83 to 87 cents. For the third quarter, it expects comparable-store sales growth in the low single digits and earnings of 10 to 14 cents a share.

The company’s stock has struggled since February, when it fell 25 percent after Smith announced that the longtime chief financial officer had departed because of faulty sales and expense forecasts. Pier 1 shares have lost more than half their value this year.

Earlier this week, the Occupational Safety and Health Administration fined Pier 1 $86,100 for safety violations at two Fort Worth-area distribution centers.

This story was originally published September 24, 2015 at 4:29 PM with the headline "Pier 1 stock declines on lower profit, slashed forecast."