Pier 1 profit, sales down in Q4; looks to regain footing in 2016
Promotions, markdowns and supply chain issues took a toll on Pier in the fourth quarter as the retailer lower profits on declining sales. But the results were better than earlier projections and executives expressed confidence in the chain’s turnaround efforts.
Pier 1’s sales declined 1.4% to $542.3 million in the quarter ended Feb. 27; same store sales fell 0.6%. Net income was $18.7 million, down from $33.1 million in the year-ago period.
For the full year, net income fell to $39.6 million, or 46 cents per share, compared to $75.2 million, or 82 cents per share last year. (With the CFO after-tax retirement expenses, the previous year’s adjusted net income increases to $77.2 million.) Total sales rose 0.4% to $1.89 billion, and same-store sales were up 0.7%. For the full year, e-commerce sales accounted for about 16% of the total, compared to about 11% the previous year.
“Although fiscal 2016 was a challenging year, we made solid progress toward stabilizing top line trends, cutting costs and reducing inventory levels,” said Pier 1 President and CEO Alex Smith. “We also delivered another year of strong e-commerce sales, which increased 45% on top of 193% growth last year.”
During the fourth quarter, the company closed 24 stores and opened one store.
For the full year, the company closed 50 stores and opened 17 stores to end the year with 1,032 locations as part of its real estate optimization plan. The company expects to close about 20 stores this year.
“We entered fiscal 2017 with much improved distribution center operations. The significant strides we made on the inventory front helped us put many of the issues in our distribution centers behind us and we’re now starting to see improved efficiency across the network, which will help us strengthen merchandise margin,” Smith said. “In fiscal 2017 we will emphasize more forcefully our newest products and our strongest categories. With an increased marketing spend and the extension of our rewards program we expect not only to continue to build frequency and retention, but additionally, to drive new customers to the brand.”
Smith doesn’t expect immediate improvement however. The company is forecasting only modest growth in revenue and earnings this year. Performance is expected to be the strongest in the second half of the year with growth accelerating in 2017.
According to CFO Jeffrey Boyer, the company’s outlook assumes some top and bottom line pressure during the first half of the year with momentum gained in the back half of the year.
“Most notably, our profitability in the first half will be impacted by investments in marketing, including our return to television earlier this month, as well as higher clearance levels and the final tranche of legacy supply chain costs,” Boyer said.