Pier 1 Imports' fiscal Q3 earnings rise to US$26.8M from US$23.7M a year ago as sales rise 9.6% to US$465.5M, comparable-store sales rise 6.9%; CEO says Pier1.com continues to exceed expectations, representing more than 4% of sales in quarter
Cindy Allen
FORT WORTH, Texas
,
December 19, 2013
(press release)
–
Increases Quarterly Cash Dividend 20% to $0.06 Per Share Third Quarter Fiscal 2014 Financial Highlights “We’re pleased to deliver solid third quarter financial results,” stated Alex W. Smith, President and Chief Executive Officer. “Our unique and special merchandise assortments created a well-positioned value offer that resonated with our customers. Our more overtly promotional marketing stance drove strong traffic, and our store and e-commerce teams delivered on conversion. In fact, this year marked a new, all-time sales record for both Black Friday and the full post-Thanksgiving weekend.” “We are delighted with the progress we have made with 1 Pier 1 – our omni-channel strategy. Pier1.com continues to outperform our expectations, representing over 4% of total sales in the third quarter, and reflecting increases in both traffic and conversion. In addition, our re-launched and re-branded Express Request program has been a resounding success with our customers and we anticipate this will remain an important growth driver going forward.” “We feel very good about our positioning and the execution of our holiday plans. Our holiday assortments have been very well received, as have our merchandising, marketing and customer engagement activities. We fully expect to capture additional market share over the holiday period.” Mr. Smith concluded, “Our Board of Directors and management greatly appreciate the support of Pier 1 Imports’ shareholders and remain committed to returning value to them. During the third quarter we announced a new $200 million share repurchase program, reflecting our confidence in the underlying strength of the business and the significant potential ahead of us. Additionally, we have increased our quarterly cash dividend by 20% to $0.06 per share.” Third Quarter Fiscal 2014 Results For the third quarter ended November 30, 2013, the Company reported net income of $26.8 million, or $0.26 per share, compared to $23.7 million, or $0.22 per share a year ago. Adjusted net income (non-GAAP) for the third quarter of last year, as described below under Financial Disclosure Advisory, was $27.1 million, and adjusted earnings per share were $0.25. Total sales for the third quarter were $465.5 million, a 9.6% increase versus $424.5 million in the year-ago quarter. Comparable store sales increased 6.9% compared to last year’s comparable store sales gain of 7.9%. Comparable store sales results for the period were primarily attributable to increases in conversion rate and higher average ticket. Gross profit for the quarter increased to $202.2 million versus $186.3 million in the third quarter of last year. As a percentage of sales, gross profit was 43.4% compared to 43.9% in the third quarter of fiscal 2013 and primarily reflects a slightly increased promotional cadence versus a year ago. Third quarter selling, general and administrative expenses were $149.2 million, or 32.1% of sales, compared to $139.2 million, or 32.8% of sales, in the third quarter of last year. The 70 basis point improvement was primarily due to the leveraging of store salaries and marketing expense. Third quarter EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) increased 13.3% to $53.4 million, versus $47.2 million in the same period last year. Depreciation and amortization was $9.9 million, compared to $8.2 million in the third quarter of last year. Operating income for the third quarter increased 11% to $43.1 million, or 9.3% of sales, compared to $38.8 million, or 9.1% of sales, last year. Year-to-Date Results For the 39-week period ended November 30, 2013, the Company reported net income of $64.9 million, or $0.61 per share, compared to $67.7 million, or $0.62 per share, in the same period last year. The Company’s adjusted net income (non-GAAP) for the 39-weeks ended November 24, 2012, as described below under Financial Disclosure Advisory, was $65.7 million, and adjusted earnings per share were $0.60. Total sales for the 39-week period ended November 30, 2013 increased 8.9% to $1.256 billion compared to $1.153 billion in the year-ago period. Comparable store sales for the 39-week period increased 5.5% versus a comparable store sales increase of 7.3% for the 39-week period ended November 24, 2012. Gross profit for the 39-week period ended November 30, 2013 increased to $531.1 million, or 42.3% of sales, from $488.1 million, or 42.3% of sales in the same period last year. Fiscal 2014 year-to-date selling, general and administrative expenses were $397.3 million, or 31.6% of sales, compared to $367.6 million, or 31.9% of sales, in the same period last year. EBITDA increased 10.1% to $134.5 million for the 39-weeks ended November 30, 2013 versus $122.1 million for the same period last year. Depreciation and amortization for the 39-weeks ended November 30, 2013 was $28.5 million, or 2.3% of sales, versus $21.9 million, or 1.9% of sales in the year ago period. The increase is attributable to the Company’s ongoing investments in both its stores and e-commerce business, including the completed installation of the Company’s new point-of-sale system in the second quarter of fiscal 2014. Operating income for the 39-weeks ended November 30, 2013 was $105.4 million, or 8.4% of sales, compared to $98.5 million, or 8.5% of sales for the same period in fiscal 2013. Balance Sheet and Share Repurchase Program As of November 30, 2013, the Company remained in strong financial condition with $128.2 million of cash and cash equivalents. Inventory totaled $429.1 million, an increase of 2.8% versus a year ago, which was in line with management’s expectations and reflects the Company’s focus on strategically managing its inventory purchases and monitoring its inventory levels to correspond with consumer demand. Capital expenditures totaled $18.6 million for the quarter and were primarily used for new store openings, existing store improvements, and infrastructure and technology development. During the third quarter, the Company completed its $100 million share repurchase program, which was announced on December 13, 2012. Subsequent to the completion of the December 2012 program, a new, $200 million share repurchase program was announced on October 18, 2013. During the third quarter ended November 30, 2013, the Company repurchased a total of 650,000 shares of its common stock under the October 2013 $200 million share repurchase program at a weighted average cost of $21.58 per share, for a total cost of approximately $14.0 million. Subsequent to the end of the third quarter, the Company repurchased an additional 325,000 shares of its common stock at a weighted average cost of $21.19 per share and a total cost of approximately $6.9 million. To date, the Company has repurchased 975,000 shares of common stock under the October 2013 $200 million share repurchase program at a weighted average cost of $21.45 per share and a total cost of approximately $20.9 million. Under that program, $179.1 million remains available for share repurchases. Declaration of Quarterly Cash Dividend The Company today announced that its Board of Directors declared a $0.06 per share quarterly cash dividend on the Company’s outstanding shares of common stock, reflecting a 20% increase from the previous quarterly cash dividend. The $0.06 per share quarterly cash dividend will be paid on February 5, 2014 to shareholders of record on January 22, 2014. As of December 19, 2013, approximately 103.0 million shares of the Company’s common stock were outstanding. Financial Guidance The Company’s fiscal 2014 fourth quarter and fiscal year will include 13 weeks and 52 weeks of operating results, respectively. This compares to the fourth quarter and full year of fiscal 2013, which included 14 weeks and 53 weeks, respectively. As previously disclosed, the Company estimates the 53rd week of fiscal 2013 contributed $29 million to net sales and approximately $0.03 to earnings per share. The Company provided the following financial guidance for the fiscal 2014 fourth quarter on a comparable 13-week basis: The Company provided the following financial guidance for fiscal year 2014 on a comparable 52-week basis: Third Quarter Results Conference Call The Company will host a live conference call to discuss fiscal 2014 third quarter financial results at 10:00 a.m. Central Time today, December 19, 2013. Investors will be able to connect to the call through the Company’s website at www.pier1.com. The conference call can be accessed by linking through to the “Investor Relations” page to the “Events” page, or you can listen to the conference call by dialing 1-800-498-7872, or if international, 1-706-643-0435. The conference ID number is 14321575. A replay will be available after 12:00 p.m. Central Time for a 24-hour period and the replay can be accessed by dialing 1-855-859-2056, or if international, 1-404-537-3406 using conference ID number 14321575. Financial Disclosure Advisory The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). This press release references non-GAAP financial measures, including EBITDA, adjusted net income and adjusted earnings per share. The Company believes that the non-GAAP financial measures included in this press release allow management and investors to understand and compare earnings per share results in a more consistent manner for the 13-week third quarter and 39-week period ended November 30, 2013 and the 13-week third quarter and 39-week period ended November 24, 2012. Adjusted net income and adjusted earnings per share should be considered supplemental and not a substitute for the Company’s net income and earnings per share results reported in accordance with GAAP for the periods presented. A reconciliation of prior year GAAP net income and earnings per share to non-GAAP adjusted net income and adjusted earnings per share is shown below for the 13-week and 39-week periods ended November 24, 2012 (in millions except per share amounts). There were no similar items warranting reconciliation during the 13-week and 39-week periods ended November 30, 2013. EBITDA represents earnings before interest, taxes, depreciation and amortization. Management believes EBITDA is a meaningful indicator of the Company’s performance that provides useful information to investors regarding its financial condition and results of operations. Management uses EBITDA, together with financial measures prepared in accordance with GAAP, to assess the Company’s operating performance, to enhance its understanding of core operating performance and to compare the Company’s operating performance to other retailers. This non-GAAP financial measure should not be considered in isolation or used as an alternative to GAAP financial measures and does not purport to be an alternative to net income as a measure of operating performance. A reconciliation of net income to EBITDA is shown below for the periods indicated (in millions). Management’s expectations and assumptions regarding future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements included in this press release. Any forward-looking projections or statements should be considered in conjunction with the cautionary statements and risks contained in the Company’s Annual Report on Form 10-K. Refer to the Company’s most recent SEC filings for any updates concerning these and other risks and uncertainties that may affect the Company’s operations and performance. The Company assumes no obligation to update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied will not be realized. Pier 1 Imports, Inc. is the original global importer of imported decorative home furnishings and gifts. Information about the Company is available on www.pier1.com. Pier 1 Imports, Inc. Pier 1 Imports, Inc. (0.3 %) Pier 1 Imports, Inc. Pier 1 Imports, Inc.
Fiscal Year 2013
13-Weeks Ended
39-Weeks Ended
November 24, 2012
November 24, 2012
Net Income (GAAP)
$23.7
$67.7
Add back: Income Tax Provision (GAAP)
14.8
33.6
Income Before Income Taxes (GAAP)
38.5
101.3
Interest Expense Adjustment Related to Uncertain Tax Positions
-
(2.8
)
Adjusted Income Before Income Taxes (non-GAAP)
38.5
98.5
Less: Adjusted Income Tax Provision at Estimated 35.6% Annual Effective Tax Rate
13.7
35.1
Estimated Impact of Hurricane Sandy, net of tax
2.3
2.3
Adjusted Net Income (non-GAAP)
$27.1
$65.7
Diluted Earnings per Share (GAAP)
$0.22
$0.62
Interest Expense Adjustment Related to Uncertain Tax Positions, net of tax
-
(0.02
)
Difference of Income Tax Provision at Estimated 35.6% Annual Effective Tax Rate
0.01
(0.02
)
Estimated Impact of Hurricane Sandy, net of tax
0.02
0.02
Adjusted Diluted Earnings per Share (non-GAAP)
$0.25
$0.60
13-Weeks Ended
39-Weeks Ended
November 30, 2013
November 24, 2012
November 30, 2013
November 24, 2012
Net Income (GAAP)
$26.8
$23.7
$64.9
$67.7
Add Back: Income Tax Provision
16.4
14.8
$39.8
$33.6
Interest Expense (Income), net
0.3
0.5
$1.3
($1.1
)
Depreciation and Amortization
9.9
8.2
$28.5
$21.9
EBITDA (non-GAAP)
$53.4
$47.2
$134.5
$122.1
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended
November 30,
% of
November 24,
% of
2013
Sales
2012
Sales
Net sales
$
465,462
100.0
%
$
424,527
100.0
%
Cost of sales
263,232
56.6
%
238,268
56.1
%
Gross Profit
202,230
43.4
%
186,259
43.9
%
Selling, general and administrative expenses
149,217
32.1
%
139,244
32.8
%
Depreciation and amortization
9,919
2.0
%
8,192
2.0
%
Operating income
43,094
9.3
%
38,823
9.1
%
Nonoperating (income) and expense:
Interest, investment income and other
(592
)
(298
)
Interest expense
528
664
(64
)
0.0
%
366
0.0
%
Income before income taxes
43,158
9.3
%
38,457
9.1
%
Income tax provision
16,400
3.6
%
14,772
3.5
%
Net income
$
26,758
5.7
%
$
23,685
5.6
%
Earnings per share:
Basic
$
0.26
$
0.22
Diluted
$
0.26
$
0.22
Dividends declared per share:
$
0.05
$
0.04
Average shares outstanding during period:
Basic
103,319
105,419
Diluted
104,716
107,308
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Nine Months Ended
November 30,
% of
November 24,
% of
2013
Sales
2012
Sales
Net sales
$
1,255,957
100.0
%
$
1,153,260
100.0
%
Cost of sales
724,830
57.7
%
665,179
57.7
%
Gross Profit
531,127
42.3
%
488,081
42.3
%
Selling, general and administrative expenses
397,296
31.6
%
367,596
31.9
%
Depreciation and amortization
28,461
2.3
%
21,936
1.9
%
Operating income
105,370
8.4
%
98,549
8.5
%
Nonoperating expense and (income):
Interest, investment income and other
(1,216
)
(2,169
)
Interest expense (income)
1,846
(629
)
630
0.1
%
(2,798
)
Income before income taxes
104,740
8.3
%
101,347
8.8
%
Income tax provision
39,801
3.1
%
33,607
2.9
%
Net income
$
64,939
5.2
%
$
67,740
5.9
%
Earnings per share:
Basic
$
0.62
$
0.64
Diluted
$
0.61
$
0.62
Dividends declared per share:
$
0.15
$
0.12
Average shares outstanding during period:
Basic
105,018
106,601
Diluted
106,942
108,502
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
November 30,
March 2,
November 24,
2013
2013
2012
ASSETS
Current assets:
Cash and cash equivalents, including temporary investments
of $120,222, $191,568 and $97,064, respectively
$
128,205
$
231,556
$
120,788
Accounts receivable, net
36,557
22,309
34,979
Inventories
429,069
356,053
417,547
Prepaid expenses and other current assets
51,625
49,016
25,417
Total current assets
645,456
658,934
598,731
Properties, net
176,816
150,615
136,736
Other noncurrent assets
50,043
47,666
71,963
$
872,315
$
857,215
$
807,430
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
105,143
$
58,701
$
73,923
Gift cards and other deferred revenue
55,490
51,740
47,800
Accrued income taxes payable
18,020
25,249
16,689
Other accrued liabilities
114,455
112,437
114,628
Total current liabilities
293,108
248,127
253,040
Long-term debt
9,500
9,500
9,500
Other noncurrent liabilities
70,717
62,457
60,440
Shareholders' equity:
Common stock, $0.001 par, 500,000,000 shares authorized,
125,232,000 issued
125
125
125
Paid-in capital
231,316
233,518
231,234
Retained earnings
623,512
574,206
517,732
Cumulative other comprehensive loss
(4,883
)
(4,828
)
(3,214
)
Less -- 21,956,000, 18,906,000 and 18,861,000
common shares in treasury, at cost, respectively
(351,080
)
(265,890
)
(261,427
)
498,990
537,131
484,450
$
872,315
$
857,215
$
807,430
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
November 30,
November 24,
2013
2012
Cash flow from operating activities:
Net income
$
64,939
$
67,740
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization
33,598
27,537
Stock-based compensation expense
10,267
9,141
Deferred compensation
5,372
4,767
Amortization of deferred gains
(2,286
)
(6,198
)
Change in reserve for uncertain tax positions
860
(7,266
)
Other
(582
)
(1,495
)
Changes in cash from:
Inventories
(73,016
)
(95,065
)
Proprietary credit card receivables
(7,441
)
(7,653
)
Prepaid expenses and other assets
(14,829
)
(16,424
)
Accounts payable and accrued expenses
51,671
8,401
Accrued income taxes payable, net of payments
(7,391
)
(3,716
)
Net cash provided by (used in) operating activities
61,162
(20,231
)
Cash flow from investing activities:
Capital expenditures
(60,590
)
(57,741
)
Proceeds from disposition of properties
11,055
165
Proceeds from sale of restricted investments
507
1,238
Purchase of restricted investments
(2,566
)
(3,178
)
Net cash used in investing activities
(51,594
)
(59,516
)
Cash flow from financing activities:
Cash dividends
(15,633
)
(12,759
)
Purchases of treasury stock
(114,025
)
(89,747
)
Proceeds from stock options exercised,
stock purchase plan and other, net
17,888
15,173
Debt issuance costs
(1,149
)
-
Net cash used in financing activities
(112,919
)
(87,333
)
Change in cash and cash equivalents
(103,351
)
(167,080
)
Cash and cash equivalents at beginning of period
231,556
287,868
Cash and cash equivalents at end of period
$
128,205
$
120,788
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