Pier 1's profit beats Wall St view, shares climb

NEW YORK (Reuters) - Home decor retailer Pier 1 Imports Inc (PIR.N) posted a higher-than-expected quarterly profit on Thursday, sending its shares up nearly 9 percent.

Net income from continuing operations in the fourth quarter was $13.7 million, or 16 cents a share, compared with a net loss of $58.7 million, or 67 cents a share, a year earlier.

Total sales fell 8 percent to $436.7 million as Pier 1 closed 79 stores.

Analysts, on average, had expected the company to earn 8 cents a share, before special items, on revenue of $448.8 million, according to Reuters Estimates.

The company, which announced last week plans to sell its corporate headquarters in Fort Worth, Texas, also posted a 2.5 percent rise in comparable-store sales during the quarter.

Pier 1 is operating in a challenging sales environment with many consumers spending less due to declining home values, higher mortgage payments, and rising food and fuel costs.

The retailer -- which snapped its streak of 11 straight quarterly losses -- has cut losses through store closures, jobs cuts and less spending on marketing.

But despite some evidence of a turnaround, Morgan Keegan analyst Laura Champine said investors should sell on "any strength" in Pier 1's stock price due to the company's weak cash flow and earnings growth driven mostly through cost cuts.

Merchandise margins in the quarter rose to 48.1 percent of sales from 40.6 percent a year earlier. Selling, general and administrative (SG&A) expenses in the quarter fell to 26.2 percent of sales from 34.8 percent a year before.

The retailer said it trimmed $13.6 million in payroll expenses during the period, $9 million in marketing costs, and $11.9 million in other general administrative costs.

"The earnings beat relative to expectations was fueled by cost reductions within SG&A expense," Champine wrote in a research note. "The macro environment for home retailers remains extremely challenging, making further turnaround progress very difficult," added Champine, who has an underperform rating on Pier 1's shares.

Shares of Pier 1 were trading up about 8.6 percent at $7.48 a share in afternoon trading on the New York Stock Exchange.

(Reporting by Justin Grant in New York and Dhanya Skariachan in Bangalore)