Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results
for the third quarter ended November 29, 2014.
Third Quarter Fiscal 2015 Highlights
- Total sales up 4.1% versus last year’s
increase of 9.6%
- Company comparable sales growth of 2.5%
(3% on a constant currency basis)
- E-Commerce sales represented 12% of
total sales
- Gross profit of 42.3% of sales
- Net income of $17.9 million; EBITDA of
$44.3 million
- Fully diluted earnings per share of
$0.20
“Our ambitious omni-channel transformation continues to progress
well,” said Alex W. Smith, President and Chief Executive Officer.
E-Commerce sales have grown three-fold over last year, reaching 12%
of total sales in the third quarter. Notably, over 60% of our
e-Commerce transactions touched the stores during the period.
Importantly, this quarter saw a return to a more balanced mix of
full and promotional pricing. We are confident that the value
proposition created by our exclusive and unique product remains
strong, and our refined promotional strategy -- which benefited
this period -- will contribute to gradual improvement in our gross
margin rate over the coming quarters. We have in our stores and
online business two mutually supportive and interdependent vehicles
to drive long-term, profitable growth.”
“We remain focused on consistent cash generation and a balanced
capital allocation strategy, which is enabling us to return capital
to shareholders by way of share repurchases and an ongoing
dividend, while also investing decisively in our ‘1 Pier 1’
vision.”
Mr. Smith concluded, “We had a solid start to our fourth
quarter, marked by a successful five-day event surrounding
Thanksgiving. We’re pleased about how well the business is
positioned this season, with an inspiring merchandise assortment
and multiple ways to shop Pier 1 Imports.”
Third Quarter Fiscal 2015 Results
For the third quarter ended November 29, 2014, the Company
reported net income of $17.9 million, or $0.20 per share, compared
to last year’s third quarter net income of $26.8 million, or $0.26
per share. Total sales for the third quarter were $484.5 million, a
4.1% increase versus $465.5 million in the year-ago quarter.
Company comparable sales increased 2.5% (3% on a constant currency
basis after adjusting for a 50 basis point impact attributable to
the year-over-year devaluation of the Canadian Dollar) and reflect
increases in brand traffic, conversion and average ticket.
Gross profit for the third quarter of fiscal 2015 was $204.9
million compared to $202.2 million for the same period last year.
As a percentage of sales, gross profit was 42.3%, compared to 43.4%
in the third quarter of fiscal 2014. The decline of 110 basis
points was in line with management’s expectations and principally
reflects a higher mix of e-Commerce sales, including fulfillment
costs, partially offset by leverage of store occupancy costs.
Third quarter selling, general and administrative expenses were
$160.8 million, or 33.2% of sales, compared to $149.2 million, or
32.1% of sales in the third quarter of last year. The planned,
year-over-year increases in both dollars and as a percent of sales
are attributable to incremental marketing expense and additional
headcount and related costs in support of ‘1 Pier 1’.
Third quarter EBITDA (earnings before interest, taxes,
depreciation and amortization) was $44.3 million compared to $53.4
million in the third quarter of last year. Operating income for the
third quarter was $31.8 million compared to $43.1 million in the
third quarter of fiscal 2014.
Net interest expense for the third quarter was $2.8 million,
compared to $0.1 million of interest income during the same period
last year. The increase is primarily attributable to the Company’s
$200 million term loan, which closed in the first quarter of fiscal
2015.
Balance Sheet and Share Repurchase Program
As of November 29, 2014, the Company remained in strong
financial condition with $33.0 million of cash and cash equivalents
and $12.0 million of cash borrowings under its $350 million
asset-based revolving credit facility. Inventory totaled $535.5
million, an increase of 25% compared to $429.1 million in the year
ago period, which reflects a combination of factors – primarily a
year-over-year increase in merchandise in-transit due to earlier
deliveries in advance of the Chinese New Year, merchandise related
to the planned increase in online-only and Express Request
assortments, and additional inventory to support higher sales.
Capital expenditures totaled $18.9 million for the quarter and were
relatively evenly divided between store, distribution, and
information technology investments.
The Company repurchased 1,781,900 shares of its common stock
during the third quarter at an average cost of $13.06 per share and
a total cost of approximately $23.3 million. Subsequent to the end
of the third quarter, the Company has repurchased an additional
371,400 shares of common stock at a cost of $5.1 million. To date,
the Company has repurchased 5,136,500 shares of common stock under
its April 2014 $200 million share repurchase program at a total
cost of approximately $76.8 million and $123.2 million remains
available for future repurchases under the program.
Declaration of Quarterly Cash Dividend
The Company announced that its Board of Directors declared a
$0.06 per share quarterly cash dividend on the Company’s
outstanding shares of common stock. The $0.06 per share quarterly
cash dividend will be paid on February 4, 2015 to shareholders of
record on January 21, 2015. As of December 17, 2014, approximately
90.0 million shares of the Company’s common stock were
outstanding.
Fiscal 2015 Financial Guidance
The Company reiterated its financial guidance for fiscal year
2015:
- Company comparable sales growth, which
includes e-Commerce, in the mid- to high-single digits;
- Gross profit, as a percentage of sales,
of 40.5% to 41.5%;
- Selling, general and administrative
expenses relatively flat, as a percentage of sales, compared to
fiscal 2014;
- EBITDA, as a percentage of sales, of
approximately 11%;
- Net interest expense of approximately
$10 million; and
- Earnings per diluted share in the range
of $0.95 to $1.05.
Third Quarter Conference Call Information and December Sales
Release
The Company will host a live conference call to discuss fiscal
2015 third quarter financial results at 3:30 p.m. Central Time
today, December 18, 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 88750368.
A replay will be available today after 6:30 p.m. Central Time
for a 24-hour period and can be accessed by dialing 1-855-859-2056,
or if international, 1-404-537-3406, using conference ID number
88750368.
The Company will announce fiscal 2015 December sales on January
8, 2015.
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 Nine Months Ended
November 29, 2014 November 30, 2013 November 29, 2014 November 30,
2013 Net Income (GAAP) $17.9 $26.8 $42.1 $64.9
Add Back:
Income Tax Provision
11.1 16.4 25.7
39.8
Interest Expense (Income), net 3.0 0.3 6.9
1.3
Depreciation and Amortization 12.3 9.9 34.0
28.5
EBITDA (non-GAAP)
$44.3
$53.4 $108.8 $134.5
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 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 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.
(Financials Attached)
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except
per share amounts) (unaudited) Three Months Ended November
29, % of November 30, % of 2014 Sales 2013
Sales Net sales $ 484,501 100.0 % $ 465,462 100.0 %
Cost of sales 279,588 57.7 % 263,232
56.6 % Gross Profit 204,913 42.3 % 202,230 43.4 %
Selling, general and administrative expenses 160,820 33.2 %
149,217 32.1 % Depreciation and amortization 12,323
2.5 % 9,919 2.0 % Operating income 31,770 6.6
% 43,094 9.3 % Nonoperating (income) and expenses: Interest,
investment income and other (254 ) (592 ) Interest expense
3,054 528 2,800
0.6 % (64 ) 0.0 % Income before income taxes 28,970
6.0 % 43,158 9.3 % Income tax provision 11,110 2.3 %
16,400 3.6 % Net income $ 17,860 3.7 %
$ 26,758 5.7 % Earnings per share: Basic $ 0.20
$ 0.26 Diluted $ 0.20 $ 0.26
Dividends declared per share: $ 0.06 $ 0.05
Average shares outstanding during period: Basic
89,741 103,319 Diluted 90,635
104,716
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except
per share amounts) (unaudited) Nine Months Ended November
29, % of November 30, % of 2014 Sales 2013 Sales Net sales $
1,322,182 100.0% $ 1,255,957 100.0% Cost of sales 786,918
59.5% 724,830 57.7% Gross Profit 535,264 40.5% 531,127 42.3%
Selling, general and administrative expenses 427,103 32.3%
397,296 31.6% Depreciation and amortization 34,032 2.6% 28,461 2.3%
Operating income 74,129 5.6% 105,370 8.4%
Nonoperating (income) and expenses: Interest, investment income and
other (891) (1,216) Interest expense 7,216 1,846
6,325 0.5% 630 0.1% Income before income taxes 67,804 5.1%
104,740 8.3% Income tax provision 25,731 1.9% 39,801 3.1%
Net income $ 42,073 3.2% $ 64,939 5.2% Earnings per share:
Basic $ 0.46 $ 0.62 Diluted $ 0.45 $ 0.61 Dividends
declared per share: $ 0.18 $ 0.15 Average shares outstanding
during period: Basic 91,967 105,018 Diluted 93,030 106,942
Pier 1 Imports,
Inc.
CONSOLIDATED BALANCE SHEETS (in thousands except share
amounts) (unaudited) November 29, March 1, November
30, 2014 2014 2013 ASSETS
Current assets:
Cash and cash equivalents, including
temporary investments of $26,737, $121,446 and $120,222,
respectively
$ 33,044 $ 126,695 $ 128,205 Accounts receivable, net 45,002 24,614
36,557 Inventories 535,532 377,650 429,069 Prepaid expenses and
other current assets 53,183 47,547
51,625 Total current assets 666,761 576,506 645,456
Properties, net of accumulated
depreciation of $448,357, $424,246 and $418,167, respectively
208,722 183,352 176,816 Other noncurrent assets 45,900
43,765 50,043 $ 921,383 $
803,623 $ 872,315 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Notes payable $
12,000 $ - $ - Accounts payable 119,336 84,238 105,143 Gift cards
and other deferred revenue 61,284 57,428 55,490 Accrued income
taxes payable 6,242 14,025 18,020 Current portion of long-term debt
2,000 - - Other accrued liabilities 121,143
110,278 114,455 Total current liabilities
322,005 265,969 293,108 Long-term debt 205,173 9,500 9,500
Other noncurrent liabilities 77,106 78,722 70,717
Shareholders' equity:
Common stock, $0.001 par, 500,000,000
shares authorized, 125,232,000 issued
125 125 125 Paid-in capital 219,828 235,637 231,316 Retained
earnings 685,769 660,040 623,512 Cumulative other comprehensive
loss (6,107 ) (6,114 ) (4,883 )
Less -- 34,833,000, 26,517,000 and
21,956,000 common shares in treasury, at cost, respectively
(582,516 ) (440,256 ) (351,080 )
317,099 449,432 498,990 $
921,383 $ 803,623 $ 872,315
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended November 29, November 30,
2014 2013
Cash flows from operating
activities: Net income $ 42,073 $ 64,939
Adjustments to reconcile to net cash (used
in) provided by operating activities:
Depreciation and amortization 39,458 33,598 Stock-based
compensation expense 5,870 10,267 Deferred compensation 4,416 5,372
Deferred income taxes 2,370 1,774 Amortization of deferred gains
(2,681 ) (2,286 ) Other (2,819 ) (1,496 ) Changes in cash from:
Inventories (157,882 ) (73,016 ) Proprietary credit card
receivables (6,934 ) (7,441 ) Prepaid expenses and other assets
(24,845 ) (14,829 ) Accounts payable and accrued expenses 60,084
51,671 Accrued income taxes payable, net of payments (5,319
) (7,391 ) Net cash (used in) provided by operating
activities (46,209 ) 61,162
Cash
flows from investing activities: Capital expenditures (61,531 )
(60,590 ) Proceeds from disposition of properties 37 11,055
Proceeds from sale of restricted investments 1,232 507 Purchase of
restricted investments (2,314 ) (2,566 ) Net cash
used in investing activities (62,576 ) (51,594 )
Cash flows from financing activities: Cash dividends
(16,344 ) (15,633 ) Purchases of treasury stock (178,289 ) (114,025
) Stock options exercised, stock purchase plan and other, net 3,888
17,888 Issuance of long-term debt, net of discount 198,000 -
Repayments of long-term debt (500 ) - Debt issuance costs (3,621 )
(1,149 ) Borrowing of notes payable 60,000 - Repayments of notes
payable (48,000 ) - Net cash provided by (used
in) financing activities 15,134 (112,919 )
Change in cash and cash equivalents (93,651 ) (103,351 )
Cash and cash equivalents at beginning of period
126,695 231,556 Cash and cash
equivalents at end of period $ 33,044 $ 128,205
Pier 1 Imports, Inc.Cary Turner, 817-252-8400
Pier 1 Imports (NYSE:PIR)
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