Pier 1 Reports $29 Million Income in First Quarter
June 18, 2009
Specialty home retailer Pier 1 Imports (PIR) has reported net income of $29 million for the first quarter, compared to a $33 million net loss posted in the first quarter of last year.
Total sales for the quarter declined to $281 million from $310 million in the year-ago quarter. The company attributed the sales decline to a reduction in store count and the decline in comparable store sales of 7.5 percent.
Merchandise margins for the quarter were 54 percent of sales compared to 51 percent of sales in the same period last year. The increase in merchandise margin was the result of reduced supply chain costs and decreased clearance activity, due in part to lean inventory levels.
First quarter selling, general and administrative expenses were $106 million compared to $109 million in the year ago quarter. SG&A expenses consisted primarily of $13 million in marketing, $69 million in payroll, and $24 million in other G&A costs. Selling, general and administrative expenses included approximately $7 million in special charges resulting from lease termination charges, store closing costs, and severance versus $3 million in special charges during the same period last year.
In outstanding letters of credit and bankers' acceptances, $61 million remained available for use by Pier 1 for working capital purposes. The retailer did not utilize its secured credit facility during the first quarter for any purpose other than its customary letter of credit needs. Management expects to continue the conservative approach to merchandise purchases, expense planning, and capital expenditures throughout this fiscal year.
Pier 1 ended the quarter with 1,073 stores in North America. As a result of on-going negotiations with landlords to achieve rental reductions across locations, the retailer has reached agreements in principal to terminate the leases on 22 stores and will close 5 additional stores for which termination or rental reduction agreements have not been reached. Pier 1 estimates total charges of approximately $8 million in cash and non-cash termination charges related to these closures, of which $5 million were incurred in the first quarter of fiscal 2010. The cash portion of these charges will be partially offset by the liquidation of inventory in the closing stores. To date, Pier 1 has achieved about $9 million in rental savings for fiscal 2010 and expects to close about 50 locations. Going forward, the retailer will focus its negotiation efforts on achieving rental reductions.
Total sales for the quarter declined to $281 million from $310 million in the year-ago quarter. The company attributed the sales decline to a reduction in store count and the decline in comparable store sales of 7.5 percent.
Merchandise margins for the quarter were 54 percent of sales compared to 51 percent of sales in the same period last year. The increase in merchandise margin was the result of reduced supply chain costs and decreased clearance activity, due in part to lean inventory levels.
First quarter selling, general and administrative expenses were $106 million compared to $109 million in the year ago quarter. SG&A expenses consisted primarily of $13 million in marketing, $69 million in payroll, and $24 million in other G&A costs. Selling, general and administrative expenses included approximately $7 million in special charges resulting from lease termination charges, store closing costs, and severance versus $3 million in special charges during the same period last year.
In outstanding letters of credit and bankers' acceptances, $61 million remained available for use by Pier 1 for working capital purposes. The retailer did not utilize its secured credit facility during the first quarter for any purpose other than its customary letter of credit needs. Management expects to continue the conservative approach to merchandise purchases, expense planning, and capital expenditures throughout this fiscal year.
Pier 1 ended the quarter with 1,073 stores in North America. As a result of on-going negotiations with landlords to achieve rental reductions across locations, the retailer has reached agreements in principal to terminate the leases on 22 stores and will close 5 additional stores for which termination or rental reduction agreements have not been reached. Pier 1 estimates total charges of approximately $8 million in cash and non-cash termination charges related to these closures, of which $5 million were incurred in the first quarter of fiscal 2010. The cash portion of these charges will be partially offset by the liquidation of inventory in the closing stores. To date, Pier 1 has achieved about $9 million in rental savings for fiscal 2010 and expects to close about 50 locations. Going forward, the retailer will focus its negotiation efforts on achieving rental reductions.
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