Pier 1 Q3 Profit Jumps on Strong Margins, Comp Sales Increase
December 15, 2016,
FORT WORTH, Texas-Pier 1 Imports bucked a drop in sales to produce a dramatic 24.3 percent increase in third quarter net income, which totaled $13.6 million.
Along with releasing its quarterly results, Pier 1 announced that its board named Terry London, the company’s chairman, as interim CEO. London will take the post when current President and CEO Alex Smith departs Dec. 31.
The bottom-line result marked a comeback from the specialty retailer’s second quarter, when it posted a $4.1 million net loss. The return to the black was due primarily to an increase of 278 basis points in gross margin, to 41.3 percent, along with a gain of 400 basis points in merchandise margin (gross margin plus the net costs of back delivery, fulfillment and store occupancy).
“We are making progress on our strategies to deliver shareholder value through our merchandising, marketing, supply chain and real estate initiatives,” Smith said. “Our seasonal assortments are resonating with customers and we’re seeing strength across nearly all our product categories.”
London will serve as CEO while Pier 1 works with executive search specialist Korn Ferry to find a successor to Smith. He has been a director of Pier 1 since 2003 and served as non-executive chairman since 2012. He was chairman of London Broadcasting Co., parent of media and entertainment companies which he founded in 2007, until last year. Prior to that, he was president and CEO of Gaylord Entertainment Co.
“Terry has a keen understanding of the unique culture and customer-first mindset at Pier 1 Imports,” Smith said. “Equally important, he is aware of the long-term potential that exists for our brand and committed to pursuing the multitude of opportunities that exist with our omnichannel platform now firmly in place.”
Pier 1 is projecting fourth quarter net sales to decline by 1 to 3 percent, along with same-store sales ranging from down 1 percent to up 1 percent. For the full fiscal year, net sales are expected to show a decrease of 2 to 4 percent, with same-store sales ranging from down 2 percent to flat.