Tuesday, home improvement retailer Pier 1 Imports Inc. (PIR) posted a loss for the fourth quarter, as total sales dropped sharply, reflecting a reduction in store count and a decline in comparable store sales, amid weak economic environment.
The ongoing volatility in the global economy coerced customers to scale back their expenses and trade down for necessities. Massive job cuts coupled with the scrimp-and-save trend intimidated the retailers to sing the blues. With the mortgage crisis, fewer people are changing homes, which mean difficult times for those selling home improvement items.
The Fort Worth, Texas-based company's fourth-quarter net loss totaled $29 million or $0.33 per share, compared to a profit of $14 million or $0.16 per share in the prior-year quarter.
Quarterly sales fell to $389 million from the previous year's $437 million.
On average, analysts polled by Thomson Reuters expected the company to report a loss of $0.32 per share for the quarter on revenues of $269.23 million. Analysts' estimates typically exclude special items.
The company noted that the downtrend in the top line is due to the current devastation in the global economy, a store count reduction, and a decline in comparable store sales of 9.7%.
Further, the weakening of the Canadian dollar relative to the U.S. dollar during the fourth quarter contributed about 150 basis points to the decline in comparable store sales during the fiscal quarter.
Merchandise margins for the latest quarter were 44.3% compared to 48.1% in the previous year, due to more aggressive clearance of merchandise compared to last year. Store occupancy costs of $71 million were flat compared to last year.
Fourth quarter selling, general and administrative expenses amounted to $122 million, consisting primarily of $17 million in marketing, $74 million in payroll, and $31 million in other G&A costs. Selling, general and administrative expenses included about $9 million in special charges resulting from store level asset impairment, store closing costs, and severance charges.
Full Year Results
For the fiscal year, the company incurred a net loss of $129 million or $1.45 per share, compared to a loss of $96 million or $1.09 per share last year.
Annual sales for the year ended February 28, 2009, dropped to $1.32 billion from $1.51 billion in the previous year, hurt by the declines in the overall economic environment, a net store count reduction of 25 stores and a comparable store sales decline of 9.2%.
Alex Smith, President and Chief Executive Officer of Pier 1 Imports, said, Fiscal 2009 was not the year we anticipated that it would be, but despite all the challenges faced as a result of the economic environment, we were able to end the year with clean inventory levels and a strong cash position.
In an effort to improve efficiency in the supply chain, the company adjusted the timing and levels of inventory purchases during fiscal 2009. As a result, inventory at the end of fiscal 2009 was $316 million compared to $412 million last year, coupled with management's conservative view on the first half of fiscal 2010.
Cash and cash equivalents at the end of the year were $156 million. Further, the company expects to continue its conventional approach to merchandise purchases, expense planning, and capital expenditures in the near-term.
Future In Focus
Looking forward to fiscal 2010, the company said March comparable stores sales were in line with its internal budget and declined 9.7%, while merchandise margins were ahead of plan as they returned to about 52%.
Smith added, We will continue to focus our efforts on making further enhancements to our already much improved merchandise assortments and in-store experience. We remain steadfast in our belief that we can and will return this Company to profitability and beyond.
The company, which offers furniture, wicker, decorative home furnishings and epicurean products, embarked the fiscal year with 1,092 Pier 1 Imports stores in North America. Owing to the ongoing confabs with its landlords to achieve rental reductions across its store portfolio, Pier 1 said it has now reached agreements to terminate the leases on 20 stores and intends to close 2 additional stores for which termination or rental reduction agreements have not been reached.
In addition, the company expects total charges of about $6 million in cash and non-cash termination charges related to the store closures, of which $4 million would be incurred in the first quarter of fiscal 2010.
Pier 1 further stated that the cash portion of these charges would be partially offset by the liquidation of inventory in the closing stores. The company currently estimates about $6 million in rental savings for fiscal 2010 and still expects to close no more than 80 locations in fiscal 2010.
Home goods retailer Bed Bath & Beyond Inc. (BBBY) is set to publish fourth-quarter results on April 7, after markets close. While announcing third quarter results, the company said it expects earnings to range between $0.40 and $0.46 per share for the fourth quarter and $1.50 - $1.56 per share for the full year. Wall Street analysts have a consensus earnings estimate of $0.44 per share for the quarter, and $1.53 per share for the full year.
Earlier, the company had projected fiscal year earnings per share to decline in a low double-digit percentage to mid teens percentage from the $2.10 per share reported in the previous year. The new guidance implies earnings per share to decline by 25% to nearly 29%, worse than the originally expected drop.
Recently, Cost Plus, Inc. (CPWM) posted a wider loss in the fourth quarter on a slew of charges, including impairment on store closures, asset impairment and those related to write-downs. Results for the quarter were also impacted by lower revenues, reflecting a dramatic decline in consumer spending. Same store sales declined 6.1%.
Cost Plus expects first-quarter sales to range between $179 million and $184 million, while the Street expects sales of $191.36 million.
Peer Williams-Sonoma Inc. (WSM) witnessed a 90% drop in fourth quarter profit, as comparable store sales declined 22.3% year-on-year. The company also expects a loss of $0.20 - $0.23 per share for the first quarter and sees same-store sales decline of up to 25%.
Pier 1 shares, which have been trading between $0.10 and $8.25 in the past 52 weeks, closed Monday's trading session at $0.64.
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