Finanzas: Pier 1 Imports Reports Second Quarter Fiscal 2017 Financial Results

 

Pier 1 Imports, Inc. (PIR) reported financial results for the second quarter ended August 27, 2016.

Alex W. Smith, President and CEO, stated, “Our top-line results reflect soft store traffic levels throughout the second quarter, most notably in July. To drive our business, we have many initiatives currently underway which include: our return to television advertising; merchandise refreshes, including the arrival of new and fall seasonal goods; new floor sets; gift registry introduction; full implementation of our multi-tender loyalty program; and an effective and balanced promotional plan.”

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Mr. Smith continued, “As we moved through August and into September, we have seen improvement in our sales and merchandise margin trends; however, we remain cautious regarding our sales outlook given that it’s early in the quarter and our biggest selling season is still ahead of us.”

“We believe our Pier 1 Imports stores and website are well positioned moving into the holidays and will demonstrate the unique Pier 1 Imports selling proposition. I know that our wonderful Pier 1 Imports associates will continue to focus on delighting our customers at every turn, highlighting our assortments and our brand.”

Mr. Smith concluded, “With our omni-channel model in place, we are confident in the programs we have underway to help drive sales, improve our supply chain efficiency, optimize our real estate portfolio and further reduce costs, which we believe will lead to greater value creation for our shareholders.”

Second Quarter Fiscal 2017 Results of Operations

Net sales for the second quarter of fiscal 2017 decreased 6.7% to $405.8 million, compared to $435.0 million in the same period last year. Company comparable sales for the quarter decreased 4.3%.

E-Commerce represented approximately 20% of net sales in the second quarter, as compared to approximately 17% of net sales in the second quarter of fiscal 2016. Taking into account e-Commerce orders placed in or picked-up in-store, approximately 90% of the Company’s second quarter fiscal 2017 net sales directly touched a store.

Gross profit for the second quarter of fiscal 2017 totaled $145.0 million, or 35.7% of net sales, compared to $154.6 million, or 35.5% of net sales, in the second quarter of fiscal 2016. Second quarter merchandise margin (the result of adding back delivery and fulfillment net costs and store occupancy costs to gross profit) totaled $229.8 million, or 56.6% of net sales, compared to $239.8 million, or 55.1% of net sales, in the second quarter of fiscal 2016. The year-over-year improvement in merchandise margin as a percentage of net sales is primarily attributable to a more balanced promotional strategy and improved operational execution within the Company’s distribution centers. For the three months ended August 27, 2016, contribution from operations (gross profit less compensation for operations and operational expenses) totaled $61.5 million, compared to $68.5 million during the same period last year.

Second quarter fiscal 2017 selling, general and administrative (“SG&A”) expenses were $135.8 million, or 33.5% of net sales, compared to $133.4 million, or 30.7% of net sales, in the year-ago period. Cost reductions across the organization were offset by planned investments in marketing, including television advertising. The following table details the breakdown of SG&A expenses for the second quarter of fiscal 2017 as compared to the same period last year (in millions).

Second quarter fiscal 2017 operating loss was $4.3 million compared to operating income of $8.4 million in the same period last year. Net loss for the second quarter ended August 27, 2016, was $4.1 million, or ($0.05) per share, compared to net income of $3.2 million, or $0.04 per share, in the year-ago period. Second quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was $9.5 million, compared to $20.9 million in the second quarter of fiscal 2016.

Year-to-Date Results of Operations

Net sales for the six months ended August 27, 2016, were $824.2 million, a decrease of 5.5% from the same period last year. Company comparable sales for the six months ended August 27, 2016, decreased 3.4%. For the same period, e-Commerce represented approximately 20% of net sales, compared to approximately 17% for the six months ended August 29, 2015.

Gross profit for the six months ended August 27, 2016, totaled $294.0 million, or 35.7% of net sales, compared to $324.1 million, or 37.2% of net sales for the six months ended August 29, 2015. Merchandise margin for the six months ended August 27, 2016, totaled $462.3 million, or 56.1% of net sales, compared to $492.7 million, or 56.5% of net sales for the same period last year. For the six-month period ended August 27, 2016, contribution from operations totaled $130.2 million, compared to $153.3 million during the same period last year.

SG&A expenses for the six months ended August 27, 2016, were $278.5 million, or 33.8% of net sales, compared to $277.0 million, or 31.8% of net sales during the same period a year ago. The following table details the breakdown of SG&A expenses for the six months ended August 27, 2016, as compared to the same period last year (in millions).

Operating loss for the six months ended August 27, 2016 was $12.1 million, compared to operating income of $21.9 million for the six months ended August 29, 2015. EBITDA for the six months ended August 27, 2016, totaled $16.2 million, compared to $47.0 million in the year ago period.

Balance Sheet Highlights and Share Repurchase Program

As of August 27, 2016, the Company had $38.3 million of cash and cash equivalents, $196.0 million outstanding under its senior secured term loan and $20.0 million of working capital borrowings outstanding under its $350 million secured revolving credit facility. Inventories at the end of the second quarter of fiscal 2017 decreased approximately 10% to $481.3 million, compared to $533.6 million at the end of the second quarter last year.

During the second quarter ended August 27, 2016, the Company repurchased 805,000 shares of its common stock at a cost of approximately $4.5 million. The majority of these repurchases were completed in June and previously reported in the Company’s first quarter fiscal 2017 press release dated June 29, 2016. Of the Company’s $200 million share repurchase program announced in April 2014, $36.6 million remains available for repurchases.

Real Estate Optimization Initiative

During the second quarter of fiscal 2017, the Company closed six stores and opened two. The Company expects to close approximately 15 to 20 stores in fiscal 2017.

Fiscal 2017 Second Half and Full-Year Financial Guidance

Jeffrey N. Boyer, EVP and Chief Financial Officer, stated, “Our results on the whole continue to be impacted by soft store traffic and a competitive promotional environment. As such, we are adjusting our full-year guidance – primarily to reflect changes in our expectations for top line performance. We continue to expect to see improvement within our merchandise margin as a percentage of net sales in the second half of the year, and are closely managing expenses throughout the organization. Importantly, our teams are resolutely focused on executing our holiday plans.”

The Company provided the following updated financial guidance for full-year fiscal 2017. The Company’s adjusted earnings per share guidance excludes approximately $10 million of estimated costs related to the planned departure of the Company’s Chief Executive Officer:

Company comparable sales contraction, which includes e-Commerce, of approximately (4%) to (2%);
Net sales contraction of approximately (6%) to (4%);
Merchandise margin, as a percentage of sales, of approximately 56% to 57%;
SG&A expenses of approximately $580 million to $585 million, which includes approximately $10 million of estimated costs related to the planned departure of the Company’s Chief Executive Officer;
Depreciation of approximately $56 million;
Earnings per share (GAAP) in the range of $0.16 to $0.24, utilizing a fully diluted share count of approximately 81 million shares;
Adjusted earnings per share (non-GAAP) in the range of $0.24 to $0.32, utilizing a fully diluted share count of approximately 81 million shares; and
Capital expenditures of approximately $45 million.

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Fuente: Seeking Alpha


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