Provides Fiscal 2018 Second Quarter Guidance
and Updates Full-Year Outlook; Declares Quarterly Cash
Dividend
Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results
for the first quarter ended May 27, 2017.
“During the first quarter, our teams continued to make progress
against our key initiatives around merchandising, marketing, supply
chain, real estate and cost,” said Alasdair James, President and
Chief Executive Officer. “Whilst we’ve shown operational
improvement for several consecutive quarters, there is still much
to be done to build the business to its full potential,
significantly strengthen our profitability and increase shareholder
value.”
Mr. James continued, “My first few weeks with the Company have
provided an enhanced perspective on our strong brand equity and
competitive omni-channel platform – supported by exceptional people
and a culture that is committed to success. Pier 1 Imports has a
loyal customer base, productive store portfolio, large and growing
e-Commerce presence and strong balance sheet. Looking ahead, we
will be focused on uncovering additional opportunities to leverage
these assets to broaden our customer reach, enhance our
competitiveness and drive growth. I look forward to sharing more
detail in the coming months.”
First Quarter Fiscal 2018 Results of Operations
First quarter fiscal 2018 net sales totaled $409.5 million,
compared to $418.4 million in the same period last year. Company
comparable sales on a constant currency basis were flat compared to
the first quarter last year. Including a 20 basis point impact
attributable to the year-over-year decline in the value of the
Canadian Dollar relative to the U.S. Dollar, company comparable
sales decreased 0.2% year-over-year. The average number of stores
operating in the first quarter of fiscal 2018 decreased
approximately 1% compared to the first quarter last year.
E-Commerce sales totaled $99.3 million, representing year-over-year
growth of approximately 23%. E-Commerce represented approximately
24% of net sales in the first quarter, as compared to approximately
19% of net sales in the first quarter of fiscal 2017. See
“Financial Disclosure Advisory” for an explanation of constant
currency, merchandise margin, contribution from operations and
EBITDA, which are non-GAAP financial measures.
Gross profit in the first quarter totaled $151.6 million, or
37.0% of net sales, compared to $149.0 million, or 35.6% of net
sales in the first quarter of fiscal 2017. First quarter
merchandise margin (the result of adding back delivery and
fulfillment net costs and store occupancy costs to gross profit)
totaled $240.2 million, or 58.6% of net sales, compared to $232.5
million, or 55.6% of net sales in the first quarter of fiscal 2017.
The year-over-year improvement in merchandise margin is primarily
attributable to improved operations within the Company’s supply
chain and also decreased clearance. For the three months ended May
27, 2017, contribution from operations (gross profit less
compensation for operations and operational expenses) totaled $74.9
million, compared to $68.7 million during the same period last
year. As a percentage of net sales, contribution from operations
increased 190 basis points to 18.3% in the first quarter of fiscal
2018.
First quarter fiscal 2018 selling, general and administrative
(“SG&A”) expenses were $140.2 million, or 34.2% of net sales,
compared to $142.7 million, or 34.1% of net sales, in the year-ago
period. Cost initiatives implemented in the first quarter enabled
the Company to achieve a significant reduction in compensation for
operations. Those savings were partially offset by increases in
other areas, primarily incremental investments in marketing,
including television and digital advertising. The following table
details the breakdown of SG&A expenses for the first quarter of
fiscal 2018 as compared to the same period last year (in
millions).
Three Months Ended May 27, 2017 May 28, 2016 Expense
% of Sales Expense % of Sales Compensation for
operations $ 56.1 13.7 % $ 60.2 14.4 % Operational expenses 20.6
5.0 % 20.1 4.8 % Marketing 29.5 7.2 % 28.6 6.8 % Other selling,
general and administrative 34.0 8.3 % 33.8 8.1 %
Total selling, general and administrative $ 140.2 34.2 % $
142.7 34.1 %
First quarter fiscal 2018 operating loss was $2.3 million
compared to an operating loss of $7.8 million in the same period
last year. Net loss for the quarter ended May 27, 2017, was $3.0
million, or ($0.04) per share, compared to a net loss of $6.0
million, or ($0.07) per share, in the year-ago period. First
quarter EBITDA (earnings before interest, taxes, depreciation and
amortization) was $11.6 million, compared to $6.8 million in the
first quarter of fiscal 2017.
Balance Sheet Highlights and Share Repurchase Program
As of May 27, 2017, the Company had $161.6 million of cash and
cash equivalents, compared to $128.0 million at the end of last
year’s first quarter, $194.5 million outstanding under its senior
secured term loan and $9.5 million outstanding under an industrial
revenue bond. The Company had no working capital borrowings
outstanding under its $350 million secured revolving credit
facility. Inventories at the end of the first quarter of fiscal
2018 totaled $418.4 million, a decrease of approximately 1%
compared to inventories of $421.1 million a year ago.
During the quarter ended May 27, 2017, the Company repurchased
500,000 shares of its common stock for approximately $3.1 million.
Subsequent to the end of the first quarter, the Company has
repurchased an additional 420,000 shares of its common stock for
approximately $2.2 million. Of the Company’s $200 million share
repurchase program announced in April 2014, approximately $31.2
million remains available for repurchases.
Secured Credit Facility
Subsequent to the end of the first quarter, on June 2, 2017, the
Company amended its $350 million revolving credit agreement. The
amended and restated revolving credit agreement extends the
maturity of the revolving credit facility from June 18, 2018, to
June 2, 2022, and includes a $150 million accordion feature that
allows the Company to increase the facility to as much as $500
million under certain circumstances. As of June 2, 2017, the
Company had no borrowings under its revolving credit facility and
$42.2 million in outstanding stand-by letters of credit.
Real Estate Optimization Initiative
During the first quarter of fiscal 2018, the Company closed
three stores and opened one, ending the quarter with 1,016 Pier 1
Imports stores. The Company continues to expect to close
approximately 20 to 25 net stores in fiscal 2018.
Store Statistics
Store Count Three Months Ended
Start Openings Closures End Relocations (1) May 27, 2017
1,018 1 (3 ) 1,016 1 May 28, 2016 1,032 3 (8 ) 1,027 3
(1) Relocations are noted only in the period in which the
new store opens.
Fiscal 2018 Second Quarter and Full-Year Financial
Guidance
Jeffrey N. Boyer, Executive Vice President and Chief Financial
Officer, stated, “We delivered strong year-over-year merchandise
margin improvement and performed well against our cost initiatives
again in the first quarter. However, the Outdoor category
underperformed our expectations, resulting in some softness in
top-line performance. Although the Outdoor category is expected to
adversely impact sales and merchandise margin in the second
quarter, we are carefully managing inventory levels and anticipate
that our operating and growth initiatives will continue to gain
traction as we move through the year.”
The Company’s 2018 fiscal year includes 53 weeks of operating
results. The Company’s 53rd week is expected to contribute
approximately $26 million to net sales and approximately $0.02 to
earnings per share. Fiscal 2018 financial guidance is being
provided on a 53-week basis with the exception of company
comparable sales growth, which is being provided on a 52-week
basis. The Company provided the following financial guidance for
the fiscal 2018 second quarter and updated financial guidance for
the full year:
Guidance Metric
2nd Quarter Full Year
· Comparable sales growth (%) :
Flat to 2%
1% to 2%
· Net sales growth (%):
Approximately Flat
1.5% to 2.5%
· Merchandise margin (% of net sales): Approximately 57%
Approximately 58% · SG&A expenses: Approximately $132 million
to $137 million Approximately 31.5% of net sales · Marketing spend
(% of net sales): Approximately 6% · Depreciation: Approximately
$54 million · Corporate tax rate: Approximately 39% · (Loss)
Earnings per share: ($0.08) to ($0.04) $0.46 to $0.52 · Fully
diluted share count: Approximately 80.5 million shares · Capital
expenditures: Approximately $55 million
Declaration of Quarterly Cash Dividend
The Company announced that its Board of Directors declared a
$0.07 per share quarterly cash dividend on the Company’s
outstanding shares of common stock. The $0.07 quarterly cash
dividend will be paid on August 2, 2017, to shareholders of record
on July 19, 2017. As of June 27, 2017, approximately 84.6 million
shares of the Company’s common stock were outstanding.
First Quarter Fiscal 2018 Financial Results Conference
Call
The Company will host a conference call to discuss first quarter
fiscal 2018 financial results at 4:00 p.m. Central Time on
Wednesday, June 28, 2017. Investors will be able to connect to the
call through the Company’s website at pier1.com. The conference
call can be accessed by selecting “Investor Relations” on the
Company’s homepage and linking through to the “Events” page, or
dialing 1-866-378-2926, or if international, 1-409-350-3152. The
conference ID number is 35569654.
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 constant
currency, merchandise margin, contribution from operations and
EBITDA.
The Company believes that the non-GAAP financial measures
included in this press release allow management and investors to
understand and compare results in a more consistent manner for the
three-month periods ended May 27, 2017, and May 28, 2016. Non-GAAP
financial measures should be considered supplemental and not a
substitute for the Company’s results reported in accordance with
GAAP for the periods presented.
This press release references company comparable sales on a
constant currency basis, which is calculated by translating the
current and prior periods into comparable amounts using the same
foreign exchange rate. Management believes this non-GAAP financial
measure is useful when comparing sales results between periods when
foreign exchange rates are volatile.
Merchandise margin represents the result of adding back delivery
and fulfillment net costs and store occupancy costs to gross
profit. Contribution from operations represents gross profit less
compensation for operations (which includes store and customer
service payroll) and operational expenses. EBITDA represents
earnings before interest, taxes, depreciation and amortization.
Management believes merchandise margin, contribution from
operations and EBITDA are meaningful indicators of the Company’s
performance which provide useful information to investors regarding
its financial condition and results of operations. Management uses
merchandise margin, contribution from operations and 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. These non-GAAP
financial measures should not be considered in isolation or used as
an alternative to GAAP financial measures and do not purport to be
an alternative to net income or gross profit as a measure of
operating performance. A reconciliation of net loss to EBITDA to
contribution from operations to merchandise margin is shown below
for the periods indicated (in millions).
Three Months Ended May 27, 2017 May 28, 2016 $ Amount
% of Sales $ Amount % of Sales Merchandise
margin (non-GAAP) $ 240.2 58.6 % $ 232.5 55.6 % Less:
Delivery and fulfillment net costs 16.7 4.1 % 10.8 2.6 % Store
occupancy costs 71.9 17.5 % 72.7 17.4 %
Gross profit (GAAP) 151.6 37.0 % 149.0 35.6 % Less:
Compensation for operations 56.1 13.7 % 60.2 14.4 % Operational
expenses 20.6 5.0 % 20.1 4.8 %
Contribution from operations (non-GAAP) 74.9 18.3 % 68.7 16.4 %
Less: Other nonoperating income (0.2 ) (0.1 %) (0.5 ) (0.1
%) Marketing and other SG&A 63.5 15.5 %
62.4 14.9 % EBITDA (non-GAAP) 11.6 2.8 % 6.8 1.6 %
Less: Income tax benefit (1.8 ) (0.5 %) (4.1 ) (1.0 %)
Interest expense, net 2.7 0.7 % 2.8 0.7 % Depreciation 13.7
3.4 % 14.1 3.4 % Net loss (GAAP) $ (3.0
) (0.7 %) $ (6.0 ) (1.4 %)
Except for historical information contained herein, the
statements in this press release or otherwise made by our
management in connection with the subject matter of this press
release are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) and involve
risks and uncertainties and are subject to change based on various
important factors. This press release includes forward-looking
statements that are based on management’s current estimates or
expectations of future events or future results. These statements
are not historical in nature and can generally be identified by
such words as “believe,” “expect,” “estimate,” “anticipate,”
“plan,” “may,” “will,” “intend” and similar expressions.
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. These risks and
uncertainties include, but are not limited to: the effectiveness of
the Company’s marketing campaigns, merchandising and promotional
strategies and customer databases; consumer spending patterns;
inventory levels and values; the Company’s ability to implement
planned cost control measures; expected benefits from the real
estate optimization initiative, including cost savings and
increases in efficiency; risks related to U.S. import policy; and
changes in foreign currency values relative to the U.S. Dollar.
These and other factors that could cause results to differ
materially from those described in the forward-looking statements
contained in this press release can be found in the Company’s
Annual Report on Form 10-K and in other filings with the SEC. 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. Undue reliance should not be
placed on forward-looking statements, which are only current as of
the date they are made. The Company assumes no obligation to update
or revise its forward-looking statements.
About Pier 1 Imports
Pier 1 Imports is dedicated to offering customers exclusive,
one-of-a-kind products that reflect high quality at a great value.
Starting with a single store in 1962, Pier 1 Imports’ product is
now available in retail stores throughout the U.S. and Canada and
online at pier1.com. For more information about Pier 1 Imports or
to find the nearest store, please visit pier1.com.
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts) (unaudited) Three
Months Ended May 27, % of May 28, % of 2017 Sales 2016 Sales
Net sales $ 409,525 100.0% $ 418,370 100.0% Cost of sales
257,928 63.0% 269,403 64.4% Gross profit 151,597 37.0%
148,967 35.6% Selling, general and administrative expenses
140,195 34.2% 142,724 34.1% Depreciation 13,723 3.4% 14,051 3.4%
Operating loss (2,321) (0.6%) (7,808) (1.9%)
Nonoperating (income) and expenses: Interest, investment income and
other (570) (781) Interest expense 3,048 3,047 2,478 0.6% 2,266
0.5% Loss before income taxes (4,799) (1.2%) (10,074) (2.4%)
Income tax benefit (1,813) (0.5%) (4,054) (1.0%) Net loss $
(2,986) (0.7%) $ (6,020) (1.4%) Loss per share: Basic $
(0.04) $ (0.07) Diluted $ (0.04) $ (0.07) Dividends
declared per share: $ 0.07 $ 0.07 Average shares outstanding
during period: Basic 81,080 81,663 Diluted 81,080 81,663
Pier 1 Imports,
Inc.
CONSOLIDATED BALANCE SHEETS (in thousands except share
amounts) (unaudited) May 27, February 25, May 28,
2017 2017 2016 ASSETS
Current assets: Cash and cash equivalents, including
temporary investments of $152,978, $149,375 and $122,494,
respectively $ 161,625 $ 154,460 $ 128,031 Accounts receivable, net
24,723 22,945 25,631 Inventories 418,424 400,976 421,098 Prepaid
expenses and other current assets 31,464
31,607 34,995 Total current assets 636,236
609,988 609,755 Properties and equipment, net of accumulated
depreciation of $519,016, $505,555 and $497,064, respectively
181,390 191,476 199,331 Other noncurrent assets 42,467
41,618 36,738 $ 860,093 $
843,082 $ 845,824 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $
98,517 $ 68,981 $ 117,067 Gift cards and other deferred revenue
62,987 60,398 66,093 Accrued income taxes payable 25,635 26,058 -
Current portion of long-term debt 2,000 2,000 2,000 Other accrued
liabilities 129,330 133,866
103,228 Total current liabilities 318,469 291,303 288,388
Long-term debt 198,781 199,077 199,962 Other noncurrent
liabilities 62,085 60,674 87,517 Shareholders' equity:
Common stock, $0.001 par, 500,000,000 shares authorized,
125,232,000 issued 125 125 125 Paid-in capital 157,760 191,501
186,757 Retained earnings 728,268 737,165 717,825 Cumulative other
comprehensive loss (8,306 ) (7,414 ) (8,789 ) Less -- 40,208,000,
42,050,000 and 41,150,000 common shares in treasury, at cost,
respectively (597,089 ) (629,349 ) (625,961 )
Total shareholders' equity 280,758 292,028
269,957 $ 860,093 $ 843,082 $
845,824
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(unaudited) Three Months Ended May 27,
May 28, 2017 2016
Cash
flows from operating activities: Net loss $ (2,986 ) $ (6,020 )
Adjustments to reconcile to net cash provided by operating
activities: Depreciation 15,786 15,433 Stock-based compensation
expense 1,100 1,684 Deferred compensation, net 750 1,409 Deferred
income taxes (1,216 ) (2,496 ) Amortization of deferred gains (268
) (268 ) Other 650 2,245 Changes in cash from: Inventories (17,448
) (15,239 ) Prepaid expenses and other assets (1,142 ) (6,019 )
Accounts payable and other liabilities 34,129 49,118 Accrued income
taxes payable, net of payments (423 ) (6,324 ) Net
cash provided by operating activities 28,932
33,523
Cash flows from investing activities:
Capital expenditures (13,567 ) (10,044 ) Proceeds from disposition
of properties - 3 Proceeds from sale of restricted investments
1,164 991 Purchase of restricted investments (526 )
(402 ) Net cash used in investing activities (12,929 )
(9,452 )
Cash flows from financing activities:
Cash dividends (5,646 ) (5,692 ) Purchases of treasury stock (2,827
) (5,515 ) Stock purchase plan and other, net 135 446 Repayments of
long-term debt (500 ) (500 ) Net cash used in
financing activities (8,838 ) (11,261 ) Change
in cash and cash equivalents 7,165 12,810 Cash and cash
equivalents at beginning of period 154,460
115,221 Cash and cash equivalents at end of period $
161,625 $ 128,031
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version on businesswire.com: http://www.businesswire.com/news/home/20170628006338/en/
Pier 1 Imports, Inc.Bryan Hanley, 817-252-6083
Pier 1 Imports (NYSE:PIR)
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