LOS ANGELES - Home furnishings retailer Pier 1 Imports Inc said sales at established stores rose 9.9 percent in September and said merchandise margins continue to improve, sending its shares up 12 percent.
Pier 1 stock -- which fell to 10 cents a share in March -- rose to $4.94 in extended trade from its close of $4.41 on the New York Stock Exchange.
To put that seven-month share gain in perspective, a person who invested $10,000 in Pier 1 when shares were at 10 cents would now have an investment worth nearly half a million dollars.
Fort Worth, Texas-based Pier 1, which sells goods ranging from teak patio furniture and Papasan chairs to dinner plates and wine glasses, competes with retailers such as Crate and Barrel, Williams-Sonoma Inc's Pottery Barn, Cost Plus Inc and Bed Bath & Beyond Inc.
Such retailers have seen sales slump with the housing-led recession.
After slashing jobs, closing stores, renegotiating rents and tightly managing inventories, Pier 1 is starting to see its business turn.
Some of the improvement is due to easier comparisons. For example, September's 9.9 percent rise in same-store sales compares with a decline of 11.7 percent the year earlier.
The company significantly reduced markdown and clearance activity, which is helping merchandise margins improve for the current third-quarter ending Nov. 28.
Inventory levels should peak at the end of the quarter at around $350 million, the company said in a statement.
Although it is still early in the quarter, we have seen nothing to indicate that recent sales and traffic trends will not continue, Alex Smith, Pier 1's president and chief executive officer, said in a statement.
As we head into November and December, we feel confident about our inventory level and our ability to manage it with significantly less markdowns than last year, Smith said.
The executive added the company's fall and holiday marketing campaigns should help drive more traffic to stores.
Should Pier 1 shares continue to recover, company management expects to exercise its right to terminate the conversion rights of the holders of its 9 percent convertible notes issued during the second quarter, the retailer said. (Reporting by Lisa Baertlein; editing Bernard Orr and Andre Grenon)