Pier I Q2 misses forecasts; details omnichannel growth, initiatives

Fort Worth, Texas -- Pier I on Wednesday reported income and sales that missed Wall Street forecasts. The retailer also detailed its online growth and omnichannel investments.



Pier I posted net income of $9.2 million for the second quarter ended August 30, 2014, down $17.8 million from the year ago period, amid continued investments in omnichannel growth and increased fulfillment costs.



“While total brand traffic, conversion and average ticket all increased in the second quarter, we were challenged by soft store traffic and, more significantly, by declines in our merchandise margins,” said Alex W. Smith, president and CEO. “Consequently, results for the second quarter came in below our expectations.”



The company said the pace of growth of its e-commerce sales remains high, with sales penetration nearing 10% in the second quarter.



“With the acceleration of investments in our ‘1 Pier 1’ omnichannel strategy, we expect this momentum to continue,” Smith said. “These incremental investments are impacting our near-term financial performance as anticipated, as we rapidly evolve into our new business model.”



Pier I said its online sales channel in under three years time has gone from a stand-still to a $200 million-plus run-rate business. E-Commerce represented approximately 1% of total sales in fiscal 2013, 4% in fiscal year 2014, 9% in the first quarter of fiscal 2015 and 9.7% in the second quarter of fiscal 2015.



“A little over a year from now we envision online sales exceeding $400 million,” Smith said. “And, even if store traffic remains subdued, our omnichannel strategy will allow us to continue driving top line growth.”



Approximately one-quarter of Pier 1 Imports’ e-commerce sales are being placed from in-store PCs.



“Additionally, our stores are increasingly serving as a fulfillment point, with approximately one-third of all orders placed through Pier1.com being picked up in a Pier 1 Imports store,” Smith said.



As part of the retailer’s efforts to further strengthen customer experience, tablets will be rolled out to 600 stores by the end of October 2014.



Pier I opened its second e-Commerce fulfillment center two years ahead of plan in August 2014. It is planning to transform all six of its distribution centers into combined distribution/fulfillment centers, which is expected to be completed in the second quarter of fiscal 2016. The transformation will improve general inventory efficiency, reduce shipping costs and provide the capacity to support increased e-commerce sales.



Pier I expects total capital expenditures to be approximately $80 million in fiscal 2015. Investments in technology and e-commerce will include mobile optimization of Pier1.com, rollout of additional PCs and new tablets in store, and a new fulfillment center.



Investments in stores include strategic relocations, new merchandise fixtures, remodels and refurbishments and lighting upgrades and other leasehold improvements.



Total sales for the second quarter were $418.6 million, up 5.8% from $395.6 million last year. Same-store sales increased 4.5% during quarter, which the chain attributed to increases in brand traffic, conversion and average ticket.



Pier I said is preparing for the all-important holiday season by bolstering marketing and promotional strategies to drive both store and website traffic, conversion and average ticket.



“Our initiatives include additional circulation of our mailers and catalogs, new TV spots that feature fresh creative, new digital programs and a more aspirational brand message,” Smith said.