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Pier 1 Imports, Inc. Reports First Quarter Fiscal 2020 Financial Results

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Provides Update on Fiscal 2020 Action Plan

Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the first quarter ended June 1, 2019.

First Quarter Fiscal 2020 Financial Summary

  • Company comparable sales decreased 13.5% compared to the first quarter of fiscal 2019;
  • Net sales decreased 15.5% to $314.3 million compared to the first quarter of fiscal 2019;
  • Net loss of $81.7 million, or ($19.97) per share, reflecting the Company's recently effected 1-for-20 reverse stock split on June 20, 2019;
  • Inventory of $327.2 million, down approximately 1% year-over-year; and
  • Cash and cash equivalents of $30.5 million at quarter end, $50 million of borrowings under the Company's FILO tranche and $20 million of borrowings under its $350 million revolving credit facility.

Cheryl Bachelder, Interim CEO, stated, "Our teams are laser focused on the initiatives under our fiscal 2020 action plan, which is designed to reset our operating model and rebuild our business for the future. We believe Pier 1 has strong brand equity and a loyal customer who will return for the right style stories in our assortment. As we expected, our sales and margins remained under pressure in the first quarter and we anticipate this will continue through the second quarter. This reflects our decision to take aggressive clearance actions to move through lower-priced, lower-margin goods and ensure we provide our customers with a strong, on-brand style statement for fall.

"We have chosen to prioritize our comp sales recovery with the implementation of new merchandising and marketing initiatives supported by substantive cost cutting actions. Importantly, we remain on track to achieve the previously outlined benefits of $100-$110 million this year and now expect the substantial majority of those benefits to be realized through cost reductions. The expense savings we plan to realize in the second half of fiscal 2020 are expected to be absorbed by reduced gross margins rather than driving the full year net income and EBITDA recapture we previously outlined."

Ms. Bachelder concluded, "As we implement our fiscal 2020 action plan, we are incorporating our learnings and addressing business trends in real-time. We are committed to restoring the health and promise of the Pier 1 brand and believe our initiatives and liquidity will give us sufficient runway to achieve our fiscal 2020 goals."

First Quarter Fiscal 2020 Results of Operations

Net sales for the first quarter of fiscal 2020 decreased 15.5% to $314.3 million, compared to $371.9 million for first quarter of fiscal 2019. Company comparable sales decreased 13.5% compared to the year ago period. The decline in company comparable sales is a result of lower average customer spend, which is primarily attributable to changes in the Company's merchandise mix, as well as decreased store traffic. The Company operated 967 stores at the end of the first quarter, a decrease of 30 from the first quarter of fiscal 2019.

Gross profit for the first quarter of fiscal 2020 totaled $78.8 million, or 25.1% of net sales, compared to $120.1 million, or 32.3% of net sales, for the first quarter of fiscal 2019. The year-over-year decline in gross margin rate reflects lower merchandise margin, as well as 270 basis points of deleverage on occupancy costs. The year-over-year decline in merchandise margin rate is primarily attributable to increased promotional and clearance activity.

SG&A expenses for the first quarter of fiscal 2020 were $143.0 million, or 45.5% of net sales, compared to $138.6 million, or 37.3% of net sales, for the first quarter of fiscal 2019. The following table details the breakdown of SG&A expenses for the first quarter of fiscal 2020 as compared to the prior year period (in millions).

13 Weeks Ended
June 1, 2019 June 2, 2018
Expense % of Sales Expense % of Sales
 
Compensation for operations

$

56.2

17.9

%

$

56.6

15.2

%

Operational expenses

 

17.3

5.5

%

 

20.6

5.5

%

Marketing

 

21.0

6.7

%

 

26.5

7.1

%

Other selling, general and administrative

 

48.5

15.4

%

 

34.9

9.4

%

Total selling, general and administrative (1)

$

143.0

45.5

%

$

138.6

37.3

%

 

(1) The period ended June 1, 2019 includes transformation costs of approximately $19 million primarily related to professional fees.

Operating loss for the first quarter of fiscal 2020 was $76.6 million compared to operating loss of $31.3 million for the prior year period. Net loss for the first quarter of fiscal 2020 totaled $81.7 million, or ($19.97) per share, which includes transformation costs of approximately $19 million, primarily related to professional fees. This compares to net loss of $28.5 million, or ($7.11) per share a year ago. Per share figures for both the fiscal 2020 and fiscal 2019 periods have been adjusted to reflect the Company's recently effected 1-for-20 reverse stock split on June 20, 2019. EBITDA in the first quarter of fiscal 2020 was ($64.2) million, which includes the transformation costs referred to above, compared to EBITDA of ($18.7) million in the first quarter of fiscal 2019. A reconciliation of GAAP to non-GAAP measures is provided below.

Financial Position

As of June 1, 2019, inventories totaled $327.2 million compared to $329.7 million a year ago. At quarter end, the Company had $30.5 million of cash and cash equivalents, $190.5 million outstanding under its senior secured term loan, $50 million of borrowings under its FILO tranche and $20 million of borrowings under its $350 million revolving credit facility.

First Quarter Fiscal 2020 Financial Results Conference Call

The Company will hold a conference call to discuss first quarter fiscal 2020 financial results at 4:00 p.m. Central Time/5:00 p.m. Eastern Time on Wednesday, June 26, 2019. A live audio webcast will be accessible at the Company's website at https://investors.pier1.com. The call can also be accessed domestically at (866) 378-2926 and internationally at (409) 350-3152, conference ID 6299374. The conference call will be archived and can be accessed by visiting the Company's investor relations website at https://investors.pier1.com.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). This press release references EBITDA, a non-GAAP financial measure.

The Company believes that EBITDA allows management and investors to understand and compare results in a more consistent manner for the periods presented. EBITDA, as a non-GAAP financial measure, should be considered supplemental and not a substitute for the Company's results reported in accordance with GAAP for the periods presented.

EBITDA represents earnings before interest, taxes, depreciation and amortization. Management believes EBITDA is a meaningful indicator of the Company's performance, which 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. EBITDA 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 (loss) as a measure of operating performance. A reconciliation of net loss to EBITDA is shown below for the periods indicated (in millions).

13 Weeks Ended
June 1, 2019 June 2, 2018
$ Amount % of Sales $ Amount % of Sales
Net loss (GAAP)

$

(81.7

)

(26.0

)%

$

(28.5

)

(7.7

)%

 
Add back: Income tax provision (benefit)

 

0.1

 

0.0

%

 

(6.1

)

(1.6

)%

Interest expense, net

 

5.0

 

1.6

%

 

2.9

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