Pier 1 margins perk up; year off to strong start

The seller of goods ranging from wicker chairs to rugs and wine glasses said its new fiscal year had started well. Comparable-store sales rose 19.4 percent in March, lifted by an early Easter holiday and higher store traffic.

Like larger rivals Williams-Sonoma and Bed Bath & Beyond , Pier 1 is benefiting from renewed demand for home goods after a long consumer hiatus.

It has long been apparent that we can control costs and expand merchandise margin, Chief Executive Officer Alex Smith said in a statement. Now with a slightly more active economy, we are starting to see top-line improvements.

Pier 1 shares rose 2.2 percent at $7.42 in premarket trading.

Merchandise margins for the fourth quarter ended February 27 rose to 55.8 percent from 44.3 percent a year earlier.

The company is now sporting more pieces of decorative items like end tables and side tables rather than bulky couches and armoires. And unlike prior years when it offered fewer items in large numbers, Pier 1 is also giving shoppers more choices.

We view well above-plan March sales and margin as another indication that new merchandising at Pier 1 is resonating with customers, Oppenheimer analyst Brian Nagel said in a note to clients. Pier 1 represents the most compelling operating margin recovery story among small-cap hardlines.

Pier 1's fourth-quarter net income was $35 million, or 30 cents a share, compared with a year-earlier net loss of $29.4 million, or 33 cents a share.

Excluding items, the company earned 32 cents a share, in line with the analysts' average estimate, according to Thomson Reuters I/B/E/S.

Sales rose 1.7 percent to about $396 million.

(Reporting by Shradhha Sharma in Bangalore and Dhanya Skariachan in New York; Editing by Gopakumar Warrier and Lisa Von Ahn)