Pier 1 Imports' fiscal Q1 earnings fell 25.6% year-over-year to US$15.1M as sales rose 6.1% to US$419.1M, comparable sales rose 6.3%; company expects to achieve e-commerce sales of at least US$200M in fiscal 2015, US$400M in fiscal 2016

FORT WORTH, Texas , June 19, 2014 (press release) – Raises e-Commerce Sales Contribution Target;

Adjusts Fiscal 2015 Earnings Per Share Guidance


Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the first quarter ended May 31, 2014. “We achieved company comparable sales growth of 6.3% in the first quarter, reflecting strong traffic to the Pier 1 Imports brand,” stated Alex W. Smith, President and Chief Executive Officer. “We are pleased to see increasing strength in e-Commerce, which exceeded our plans and reached 9% of sales for the quarter. At the same time, our stores continue to serve as an important and productive gateway to Pier1.com, with approximately one-quarter of our online transactions originating at the store and one-third of orders placed at home being picked up in-store. Given the momentum we are experiencing, we now anticipate that sales through Pier1.com will exceed $200 million in fiscal 2015. Nevertheless, the retail environment remains highly promotional and is pressuring gross profit in the near-term. As a result, we are adjusting our full-year earnings forecast accordingly.”

“Our expanded spring and outdoor assortments resonated with customers and were buoyed by a strong marketing message. Our talented merchants continue to curate exceptional merchandise which, combined with our ‘1 Pier 1’ strategy, creates an engaging shopping experience. We believe this is an exciting time to be a retailer – we’re seeing a profound shift in the shopping behavior of our customers. Our timely transformation from a brick-and-mortar retailer to one with full omni-channel capabilities has us well positioned to seize upon this change and drive brand growth.”

First Quarter Fiscal 2015 Results

For the first quarter ended May 31, 2014, the Company reported net income of $15.1 million, or $0.16 per share, compared to last year’s first quarter net income of $20.3 million, or $0.19 per share. Total sales for the first quarter were $419.1 million, a 6.1% increase versus $394.9 million in the year-ago quarter. Company comparable sales increased 6.3% during the first quarter, attributable to increases in total brand traffic, conversion and higher average ticket.

Gross profit for the quarter was $167.7 million, approximately flat compared to gross profit of $167.6 million for the same period last year. As a percentage of sales, gross profit in the first quarter of fiscal 2015 was 40.0%, compared to 42.4% in the year-ago period.

First quarter selling, general and administrative expenses leveraged slightly to $131.5 million, or 31.4% of sales, compared to $125.5 million, or 31.8% of sales in the first quarter of last year.

First quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was $36.4 million compared to $42.3 million in the first quarter of last year. Operating income for the first quarter was $25.8 million compared to $33.2 million in the first quarter of fiscal 2014.

Net interest expense for the first quarter was $1.7 million, compared to $0.4 million during the same period last year. The increase is primarily attributable to the Company’s new $200 million senior secured term loan, which closed in the first quarter.

Balance Sheet and Share Repurchase Program

As of May 31, 2014, the Company remained in strong financial condition with $220.6 million of cash and cash equivalents. The Company had $200 million outstanding under its senior secured term loan, and no cash borrowings under its $350 million asset-based revolving credit facility. Inventory totaled $417.6 million, an increase of 9.0% compared to $383.3 million in the year-ago period, which was in line with management’s expectations. Capital expenditures totaled $15.3 million for the quarter and were primarily used for new store openings, existing store improvements and infrastructure and technology development, including work on the Company’s new e-Commerce fulfillment center in Columbus, Ohio and enhancements to the Company’s e-Commerce platform.

The Company repurchased 5,701,812 shares of its common stock during the first quarter at an average cost of $18.84 per share and a total cost of approximately $107.4 million. Of this amount, 630,000 shares were purchased at an average cost of $17.92 per share and a total cost of $11.3 million under the new $200 million share repurchase authorization announced in April 2014. Subsequent to the end of the first quarter, the Company repurchased an additional 390,000 shares of its common stock at an average cost of $17.55 per share and a total cost of approximately $6.8 million. To date the Company has repurchased 1,020,000 shares of common stock under the April 2014 $200 million share repurchase program at a total cost of approximately $18.1 million and $181.9 million remains available for future repurchases under the program. As of June 18, 2014, approximately 93.5 million shares of the Company’s common stock were outstanding.

Fiscal 2015 Financial Guidance

The Company provided the following updated financial guidance for fiscal year 2015:

  • Company comparable sales growth, which includes e-Commerce, in the high-single digits;
  • Selling, general and administrative expenses relatively flat as a percentage of sales compared to fiscal 2014;
  • EBITDA growth in the range of 9% to 14%, compared to previous guidance for growth of 11% to 17%;
  • Interest expense of approximately $11 million;
  • Earnings per share in the range of $1.14 to $1.22, utilizing a fully diluted share count of 95 million shares, representing year-over-year growth of 13% to 21%. This compares to previous guidance of $1.16 to $1.24 utilizing a fully diluted share count of 96 million.

Updated Growth Targets

In response to the early success of its ‘1 Pier 1’ omni-channel strategy, the Company also announced that it now expects to achieve e-Commerce sales of at least $200 million in fiscal 2015, and e-Commerce sales of at least $400 million in fiscal 2016. This compares to previous expectations for e-Commerce sales to represent 10% of total sales by the end of fiscal 2016. The Company reiterated its previously stated goals for sales per retail square foot of $225 and operating margins of approximately 11% to 11.5% by the end of fiscal 2016.

First Quarter Results Conference Call and Annual Meeting of Shareholders Information

The Company will host a live conference call to discuss fiscal 2015 first quarter financial results at 10:00 a.m. Central Time today, June 19, 2014. 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 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 51384062.

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. The conference ID number is 51384062.

The Company will host its annual meeting of shareholders on Friday, June 20, 2014 at 10:00 a.m. Central Time. The meeting will be held on the Mezzanine Level, Conference Center Room C, Pier 1 Imports, Inc. Headquarters, 100 Pier 1 Place, Fort Worth, Texas 76102.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). This press release references a non-GAAP financial measure, EBITDA.

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).

    Three Months Ended
         
    May 31, 2014   June 1, 2013
         
Net Income (GAAP)   $ 15.1   $ 20.3
Add Back: Income Tax Provision     9.0     12.5
Interest Expense, net     1.9     0.6
Depreciation and Amortization     10.4     8.9
EBITDA (non-GAAP)   $ 36.4   $ 42.3
             

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 projections or 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, and other filings. 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 projections or 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 home décor and furniture. Information about the Company is available on www.pier1.com.

                       

Pier 1 Imports, Inc.

                       
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                       
          Three Months Ended
          May 31,   % of   June 1,   % of
            2014     Sales     2013     Sales
                       
Net sales         $ 419,059     100.0 %   $ 394,853     100.0 %
                       
Cost of sales         251,345     60.0 %     227,256     57.6 %
                       
Gross Profit         167,714     40.0 %     167,597     42.4 %
                       
Selling, general and administrative expenses     131,466     31.4 %     125,470     31.8 %
Depreciation and amortization       10,418     2.4 %     8,912     2.2 %
                       
Operating income       25,830     6.2 %     33,215     8.4 %
                       
Nonoperating (income) and expenses:                
Interest, investment income and other     (275 )         (352 )    
Interest expense         2,001           749      
            1,726     0.4 %     397     0.1 %
                       
Income before income taxes       24,104     5.8 %     32,818     8.3 %
Income tax provision         9,049     2.2 %     12,471     3.1 %
                       
Net income       $ 15,055     3.6 %   $ 20,347     5.2 %
                       
Earnings per share:                    
Basic         $ 0.16         $ 0.19      
                       
Diluted       $ 0.16         $ 0.19      
                       
Dividends declared per share:     $ 0.06         $ 0.05      
                       
Average shares outstanding during period:                
Basic           94,656           105,989      
                       
Diluted         95,925           107,790      

 

               
Pier 1 Imports, Inc.
                 
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
                 
                 
        May 31,   March 1,   June 1,
          2014       2014       2013  
ASSETS                
                 
Current assets:                
Cash and cash equivalents, including temporary investments            
of $185,245, $121,446 and $202,316, respectively   $ 220,607     $ 126,695     $ 241,898  
Accounts receivable, net       21,824       24,614       20,418  
Inventories         417,643       377,650       383,321  
Prepaid expenses and other current assets     51,519       47,547       50,453  
Total current assets       711,593       576,506       696,090  
                 
Properties, net         187,804       183,352       154,026  
Other noncurrent assets       46,276       43,765       45,830  
        $ 945,673     $ 803,623     $ 895,946  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY            
                 
Current liabilities:                
Accounts payable     $ 133,476     $ 84,238     $ 108,977  
Gift cards and other deferred revenue     60,553       57,428       53,206  
Accrued income taxes payable       7,013       14,025       17,963  
Current portion of long-term debt       1,500       -       -  
Other accrued liabilities       103,420       110,278       97,353  
Total current liabilities       305,962       265,969       277,499  
                 
Long-term debt         206,026       9,500       9,500  
Other noncurrent liabilities       78,541       78,722       64,870  
                 
Shareholders' equity:              
Common stock, $0.001 par, 500,000,000 shares authorized,            
125,232,000 issued       125       125       125  
Paid-in capital         223,704       235,637       223,666  
Retained earnings       669,551       660,040       589,280  
Cumulative other comprehensive loss     (4,833 )     (6,114 )     (4,813 )
Less 31,360,000, 26,517,000 and 18,174,000            
common shares in treasury, at cost, respectively     (533,403 )     (440,256 )     (264,181 )
          355,144       449,432       544,077  
        $ 945,673     $ 803,623     $ 895,946  

 

 

Pier 1 Imports, Inc.

         
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
         
    Three Months Ended
    May 31,   June 1,
      2014       2013  
         
Cash flow from operating activities:        
Net income   $ 15,055     $ 20,347  
Adjustments to reconcile to net cash provided by        
operating activities:        
Depreciation and amortization     12,031       10,679  
Stock-based compensation expense     3,232       4,054  
Deferred compensation     1,467       2,237  
Deferred income taxes     2,748       1,987  
Amortization of deferred gains     (893 )     (729 )
Other     227       (1,358 )
Changes in cash from:        
Inventories     (39,993 )     (27,268 )
Proprietary credit card receivables     (264 )     (888 )
Prepaid expenses and other assets     (3,924 )     (19 )
Accounts payable and accrued expenses     44,824       37,282  
Accrued income taxes payable, net of payments     (7,377 )     (7,286 )
Net cash provided by operating activities     27,133       39,038  
         
Cash flow from investing activities:        
Capital expenditures     (15,325 )     (14,070 )
Proceeds from disposition of properties     33       2,542  
Proceeds from sale of restricted investments     494       356  
Purchase of restricted investments     (823 )     (1,551 )
Net cash used in investing activities     (15,621 )     (12,723 )
         
Cash flow from financing activities:        
Cash dividends     (5,544 )     (5,273 )
Purchases of treasury stock     (105,796 )     (16,992 )
Stock options exercised,        
stock purchase plan and other, net     (915 )     6,317  
Issuance of long-term debt, net of discount     198,000       -  
Debt issuance costs     (3,345 )     (25 )
Net cash provided by (used in) financing activities     82,400       (15,973 )
         
Change in cash and cash equivalents     93,912       10,342  
         
Cash and cash equivalents at beginning of period     126,695       231,556  
         
Cash and cash equivalents at end of period   $ 220,607     $ 241,898  

 

Contacts

Pier 1 Imports, Inc.
Cary Turner, 817-252-8400

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