Winter deals Pier 1 a difficult fourth quarter
Pier 1 Imports president and CEO Alex W. Smith described fiscal 2014 as a transformational year for the company, emphasizing the company’s continued focus on its ‘1 Pier 1’ strategy, which has evolved its operating model from a broad portfolio of stores to a true omnichannel retail business.
But the company had a difficult fourth quarter marked what it described as an unusually high number of snowstorms, which impacted approximately two-thirds of its selling days in many of its key markets.
“During the year we added new functionality and services to our e-commerce capabilities and began positioning our stores as facilitators and ambassadors for Pier1.com,” said Smith, emphasizing the positive. “We are working hard to improve the Pier 1 Imports brand experience in every way — strengthening our store portfolio with new and relocated stores and continually enhancing our ability to provide customers with a seamless shopping experience. As a testament to the early success of ‘1 Pier 1’, e-commerce delivered 4% of total sales in its sophomore year — well on its way to achieving our targeted sales contribution of 10% by the end of fiscal 2016.”
Smith added that in fiscal 2015 the company is anticipating a comparable store sales increase in the high single-digits and earnings per share growth of 15% to 23%.
“We expect growth to be driven by our ‘1 Pier 1’ strategy, expanded product assortments and increased customer engagement. With the spring season officially underway, we are enthusiastic about the strong customer response to our merchandise — including our latest seasonal offerings — and believe the business is well positioned to regain momentum,” added Smith.
Net income for the 13-week period ended March 1 — which had one fewer week than last year’s fourth quarter — was $42.6 million, or $0.41 per share, compared to $61.7 million, or $0.58 per share in the 14-week period ended March 2, 2013.
Total sales for the quarter were $515.8 million compared to $551.6 million in the 14-week period last fiscal year. Comparable store sales decreased 4.6% compared to the 13-weeks ended February 23, 2013. Adjusting for the additional week in fiscal 2013, comparable store sales for the quarter actually increased 0.6% over the 13-week period ended March 2, 2013.
Gross profit in the fourth quarter totaled $214.4 million compared to $255 million in the fourth quarter of fiscal 2013. As a percentage of sales, gross profit totaled 41.6% versus 46.2% last year, reflecting increased promotional activity during the period, coupled with a deleveraging of occupancy costs resulting from lower sales.
Net income for the full year was $107.5 million, or $1.01 per share, compared to $129.4 million, or $1.20 per share in the 53-week period ended March 2, 2013. The company estimates that the additional week of fiscal 2013 contributed $29 million to net sales and approximately $0.03 to earnings per share.
Total sales for the year increased 3.9% to $1.8 billion, from $1.7 billion in the 53-week period last fiscal year. On a 52-week basis, comparable store sales for fiscal 2014 increased 2.4% versus an increase of 7.5% for fiscal 2013.
Gross profit increased to $745.6 million, or 42.1% of sales, compared to $743.1 million, or 43.6% of sales, in fiscal 2013.
In conjunction with its fourth quarter and full year results, the company said that it is seeking commitments for a $200 million senior secured term loan B facility due in 2021. Bank of America Merrill Lynch and Wells Fargo Securities are serving as joint lead arrangers for the proposed transaction. The proceeds from the new term loan are intended to be used for general corporate purposes, including for working capital needs and capital expenditures, and share repurchases and dividends permitted under the debt agreement. The proposed transaction is subject to market conditions, negotiation and execution of definitive documents and satisfaction of customary closing conditions.
Looking ahead, because of the challenging fourth quarter and lower-than-expected financial results in fiscal 2014, management is updating its three-year growth plan. The company now expects to achieve sales per retail per sq. ft. of $225 and operating margins of approximately 11% to 11.5% by the end of fiscal 2016. This compares to previous expectations for sales per retail sq. ft. of $225 and operating margins of 12% by the end of fiscal 2015. The company remains on track to achieve e-commerce sales representing at least 10% of total sales by the end of fiscal 2016.