Pier 1 Imports profit hurt by higher costs
Pier 1 Imports Inc. said its earnings fell 54% as higher costs related to the home-goods retailer’s distribution revamp and other expenses offset sales growth during the quarter ended in May.
Still, shares rose 4.5% to $12.55 in recent after-hours trading.
In a news release Wednesday, Chief Executive Alex Smith said per-share earnings for the latest quarter were in line with the company’s expectations, reflecting revenue growth and “careful attention to expense control.”
During the latest quarter, sales at existing locations rose 2%, or 2.8% excluding currency impacts, below expectations for an increase of roughly 4%.
However, Mr. Smith said Pier 1 exited the quarter with May comparable sales growth of 4%, while March sales nearly as strong, and some slower weeks in April were similar to many others in the industry. “Now that we are into June and at the leading edge of our summer clearance event, company comparable sales are trending in excess of May results,” Mr. Smith stated.
For the period ended May 30, Pier 1 reported a profit of $6.9 million, or eight cents a share, down from $15.1 million, or 16 cents a share, a year earlier. The company expected per-share profit of seven cents to eight cents.
Revenue increased 3.1% to $432 million, below analysts’ estimates for $434 million. Excluding negative impacts related to a weaker Canadian dollar, revenue rose 3.9%.
Merchandise margin fell to 57.4% from 58.8%, reflecting higher costs related to its distribution network. Overhead costs increased 5.5%.
For the year ending in February of 2016, Pier 1 now expects sales growth of 3% to 5% at existing stores, compared with its previous forecast for sales growth in the mid-single digits. Pier 1 also reduced its guidance for merchandise margins to roughly 57%, from its previous outlook of 58% to 58.2%. The company affirmed its forecast for per-share profit of 83 cents to 87 cents.
For the current quarter, Pier 1 forecast per-share earnings of seven cents to eight cents, while analysts polled by Thomson Reuters expected per-share profit of eight cents.
The company said in April that its spring assortment was receiving a strong response from consumers and that it expected its inventory increases to level off in the second half of the current business year.
Also in April, the company announced plans to close an additional 100 stores over the next three years, mostly through lease expirations and relocations in a move it expects will reduce store-occupancy costs and payroll expenses.
Write to Tess Stynes at [email protected]
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[“source – marketwatch.com”]