Pier 1 Imports, Inc. Reports 2014 First Quarter Results

Pier 1 Imports, Inc. Reports 2014 First Quarter Results

Raises Full Year Fiscal 2014 EPS Guidance

FORT WORTH, Texas--(BUSINESS WIRE)-- Pier 1 Imports, Inc. (NYS: PIR) today reported financial results for the first quarter ended June 1, 2013.


First Quarter Financial Highlights

  • Total sales increased 9.3%

  • Comparable store sales rose 5.9%

  • Gross profit as a percentage of sales up 80 basis points to 42.4%

  • Operating margin expanded 80 basis points to 8.4%

  • Net income increased 14% to $20.3 million; Earnings per share growth of 19% to $0.19

"Our results for the period, our 15th consecutive quarter of significant sales and profit growth, reflect a solid quarter of execution," stated Alex W. Smith, President and Chief Executive Officer. "The continued improvement of our gross profit speaks to the success of our merchandising strategies, both in-store and online, and reflects strong full-price selling during the period. We also leveraged expenses, enabling us to deliver operating margins of 8.4% and earnings per share growth of 19%."

Mr. Smith continued, "We're pleased with the ongoing progress we are making towards building out our multi-channel functionality and executing our '1 Pier 1' vision. The rollout of our new point-of-sale system is on track for completion later this summer; we will then begin the integration of our stores and e-Commerce businesses, laying the foundation to provide a seamless and significantly enhanced shopping experience for our customers."

First Quarter Fiscal 2014 Results

For the first quarter ended June 1, 2013, the Company reported net income of $20.3 million, or $0.19 per share, compared to last year's first quarter net income of $17.8 million, or $0.16 per share. Total sales for the first quarter were $394.9 million, a 9.3% increase versus $361.1 million in the year-ago quarter. Comparable store sales increased 5.9% during the first quarter compared to last year's comparable store sales gain of 7.2%. Comparable store sales results for the quarter were primarily attributable to increases in store traffic and higher average ticket.

Gross profit for the quarter improved to $167.6 million, or 42.4% of sales, from $150.3 million, or 41.6% of sales in the first quarter of last year. Gross profit primarily benefitted from the leveraging of store occupancy costs.

First quarter selling, general and administrative expenses were $125.5 million, or 31.8% of sales, compared to $116.3 million, or 32.2% of sales, in the first quarter of last year.

Operating income for the first quarter increased 21.2% to $33.2 million, or 8.4% of sales, compared to $27.4 million, or 7.6% of sales, last year.

Balance Sheet and Share Repurchase Program

As of June 1, 2013, the Company remained in strong financial condition with $241.9 million of cash and cash equivalents. Inventory totaled $383.3 million, an increase of 14.9% compared to $333.5 million a year ago, which was in line with management's expectations. Capital expenditures totaled $14.1 million for the quarter and were primarily used for new store openings, existing store improvements, and infrastructure and technology development, including the rollout of the Company's new point-of-sale system and enhancements to its e-Commerce platform.

During the first quarter, the Company repurchased 727,400 shares of its common stock at an average cost of $23.36 per share and a total cost of approximately $17.0 million. Subsequent to the end of the first quarter, the Company repurchased an additional 238,900 shares of its common stock at an average cost of $23.89 per share and a total cost of approximately $5.7 million. To date the Company has repurchased 966,300 shares of common stock under its current $100.0 million share repurchase program at an average cost of $23.49 per share and a total cost of approximately $22.7 million and $77.3 million remains available for repurchase under the plan. As of June 20, 2013, approximately 106.9 million shares of the Company's common stock were outstanding.

Secured Credit Facility

The Company reported today that it has amended, renewed and extended its secured, asset-based revolving credit facility. The facility was amended to extend the maturity date from April 2016 to June 2018 and increase the size of the facility from $300 million to $350 million. The amended facility includes a $100 million accordion feature, which if the Company chose to utilize, would enable it to increase the line to as much as $450 million under certain circumstances. The facility is secured by Pier 1 Imports' merchandise inventory and credit card receivables. The Company expects to continue funding its working capital requirements with cash flow from operations but may use the facility for general corporate purposes.

Fiscal 2014 Financial Guidance

The Company provided the following updated financial guidance for fiscal year 2014 on a comparable 52-week basis:

  • Comparable store sales growth in the mid single-digit range

  • EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) growth in the range of 15% to 18%

  • Depreciation and amortization of approximately $38 million compared to $31 million in FY13

  • Effective annual income tax rate of approximately 38% compared to 35.6% in FY13

  • Earnings per share in the range of $1.27 to $1.32, representing year-over-year growth of 9% to 13%, compared to prior guidance of $1.26 to $1.31

  • Capital expenditures of approximately $75 million

  • Approximately 30 store openings and 14 closing/relocations for a net increase of 16 stores

First Quarter Results Conference Call and Annual Meeting of Shareholders Information

The Company will host a live conference call to discuss fiscal 2014 first quarter financial results at 10:00 a.m. Central Time today, June 20, 2013. 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 to 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 76404842.

A replay will be available after 12:00 p.m. Central Time for a 24-hour period and the replay can be accessed by dialing 1-855-859-2056, or if international, 1-404-537-3406 using conference ID number 76404842.

Pier 1 Imports, Inc. will host its annual meeting of shareholders on Tuesday, July 2, 2013 at 10:00 a.m. Central Time. The meeting will be held on the Mezzanine Level, Conference Center Room C, Pier 1 Imports, Inc. Headquarters, 100 Pier 1 Place, Fort Worth, Texas 76102.

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 13-weeks ended June 1, 2013 and May 26, 2012 (in millions).

13-Weeks Ended

June 1, 2013

May 26, 2012

Net Income

$

20.3

$

17.8

Add Back: Income Tax Provision

12.5

10.2

Interest Expense (Income), net

0.6

0.7

Depreciation and Amortization

8.9

6.5

EBITDA

$

42.3

$

35.2

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. 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 imported decorative home furnishings and gifts. Information about the Company is available on www.pier1.com.

Pier 1 Imports, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)

Three Months Ended

June 1,

% of

May 26,

% of

2013

Sales

2012

Sales

Net sales

$

394,853

100.0

%

$

361,119

100.0

%

Cost of sales

227,256

57.6

%

210,844

58.4

%

Gross Profit

167,597

42.4

%

150,275

41.6

%

Selling, general and administrative expenses

125,470

31.8

%

116,330

32.2

%

Depreciation and amortization

8,912

2.2

%

6,532

1.8

%

Operating income

33,215

8.4

%

27,413

7.6

%

Nonoperating (income) and expenses:

Interest, investment income and other

(352

)

(1,428

)

Interest expense

749

814

397

0.1

%

(614

)

-0.2

%

Income before income taxes

32,818

8.3

%

28,027

7.8

%

Income tax provision

12,471

3.1

%

10,202

2.9

%

Net income

$

20,347

5.2

%

$

17,825

4.9

%

Earnings per share:

Basic

$

0.19

$

0.16

Diluted

$

0.19

$

0.16

Dividends declared per share:

$

0.05

$

0.04

Average shares outstanding during period:

Basic

105,989

108,597

Diluted

107,790

110,564

Pier 1 Imports, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)

June 1,

March 2,

May 26,

2013

2013

2012

ASSETS

Current assets:

Cash and cash equivalents, including temporary investments

of $202,316, $191,568 and $178,679, respectively

$

241,898

$

231,556

$

217,898

Accounts receivable, net

20,418

22,309

21,554

Inventories

383,321

356,053

333,523

Prepaid expenses and other current assets

50,453

49,016

31,838

Total current assets

696,090

658,934

604,813

Properties, net

154,026

150,615

108,414

Other noncurrent assets

45,830

47,666

70,785

$

895,946

$

857,215

$

784,012

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

108,977

$

58,701

$

80,223

Gift cards and other deferred revenue

53,206

51,740

50,859

Accrued income taxes payable

17,963

25,249

9,260

Other accrued liabilities

97,353

112,437

96,841

Total current liabilities

277,499

248,127

237,183

Long-term debt

9,500

9,500

9,500

Other noncurrent liabilities

64,870

62,457

75,091

Shareholders' equity:

Common stock, $0.001 par, 500,000,000 shares authorized,

125,232,000 issued

125

125

125

Paid-in capital

223,666

233,518

225,911

Retained earnings

589,280

574,206

476,228

Cumulative other comprehensive loss

(4,813

)

(4,828

)

(5,066

)

Less 18,174,000, 18,906,000 and 17,491,000

common shares in treasury, at cost, respectively

(264,181

)

(265,890

)

(234,960

)

544,077

537,131

462,238

$

895,946

$

857,215

$

784,012

Pier 1 Imports, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended

June 1,

May 26,

2013

2012

Cash flow from operating activities:

Net income

$

20,347

$

17,825

Adjustments to reconcile to net cash provided by (used in)

operating activities:

Depreciation and amortization

10,679

8,722

Stock-based compensation expense

4,054

2,916

Deferred compensation

2,237

2,675

Amortization of deferred gains

(729

)

(4,652

)

Other

629

(564

)

Changes in cash from:

Inventories

(27,268

)

(11,041

)

Proprietary credit card receivables

(888

)

(2,892

)

Prepaid expenses and other assets

(19

)

(12,217

)

Accounts payable and accrued expenses

37,282

1,811

Accrued income taxes payable, net of payments

(7,286

)

(7,499

)

Net cash provided by (used in) operating activities

39,038

(4,916

)

Cash flow from investing activities:

Capital expenditures

(14,070

)

(12,224

)

Proceeds from disposition of properties