CORRECTED: Pier 1 quarterly loss, ex-items, beats estimates
(Corrects Reuters Estimates view of loss before items to 24 cents per share from 20 cents in first bullet point and seventh paragraph)
SAN FRANCISCO (Reuters) - Pier 1 Imports Inc (PIR.N) posted a quarterly loss, excluding items, that was smaller than expected as the home furnishings retailer cut costs and reduced clearance sales.
Pier 1 has been cutting jobs, closing stores and negotiating with landlords to reduce rents as the recession curbs consumer appetite for its home decor and furniture.
The retailer said it expects to close roughly 50 stores this year and will keep its conservative approach to managing expenses and purchasing merchandise to weather the downturn.
"We feel confident that we can successfully run the business with less rather than more inventory. We are confident that we can sustain healthy merchandise margins. We know we can manage expenses down without harming the business, and most important of all, we can see our way to growing sales," said Chief Executive Alex Smith on a conference call.
The retailer reported net income of $29.3 million, or 32 cents a share, for its fiscal first quarter, ended May 30. That compared with a net loss of $32.8 million, or 37 cents a share, a year earlier.
Pier 1, whose rivals include Williams-Sonoma Inc (WSM.N) and Bed Bath & Beyond Inc (BBBY.O), said it recorded a gain of $48 million in the first quarter on the repurchase of debt.
Excluding the gain, it lost 24 cents a share, while analysts expected a loss of 36 cents a share, according to Reuters Estimates.
Merchandise margins were 54 percent of sales in the quarter compared with 51 percent a year earlier, while inventories declined $91 million from prior year levels.
It said improved margins were due to lower supply chain costs and the need for fewer profit-crunching clearance sales.
SALES DECLINES GETTING SMALLER
Pier 1 said net sales fell 9 percent to $281.1 million, hurt by fewer stores and a 7.5 percent drop in comparable-store sales, but came in above analysts' estimates of $276.2 million.
Smith said traffic in its stores is gradually improving, and he was encouraged by business in the first quarter. While sales remain tough in areas like Florida and the West Coast, he said that in those regions, the sales declines are getting smaller.
The company said it has reached agreements in principle to terminate leases on 22 stores, and it will close five additional stores where it did not reach rental termination or reduction deals. It estimates total charges of about $8 million in cash and noncash termination charges related to these closures, of which $5 million were incurred in the first quarter.
Pier 1 also said it reduced its long-term debt by $79 million, and had cash and cash equivalents of $136 million at the end of the first quarter. Continued...
