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Pier 1 Imports, Inc. Reports 2013 Fourth Quarter and Fiscal Year Financial Results

  Pier 1 Imports, Inc. Reports 2013 Fourth Quarter and Fiscal Year Financial
  Results

                 *Achieves Full Year Operating Margin of 11.7%
  *Provides Fiscal 2014 Financial Outlook

Business Wire

FORT WORTH, Texas -- April 11, 2013

Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the
fourth quarter and fiscal year ended March 2, 2013.

Fiscal 2013 Financial Highlights

  *Comparable store sales increase of 7.5%; three-year cumulative comparable
    store sales increase of 27.9%
  *Gross profit as a percentage of sales up 110 basis points to 43.6%
  *Operating income increased 29%; operating margin expanded 160 basis points
    to 11.7%
  *Earnings per share of $1.20 (GAAP and non-GAAP) on a 53-week basis versus
    $1.48 (GAAP) and $0.94 (non-GAAP) per share last year on a 52-week basis;
    53^rd week contributed approximately $0.03 to earnings per share in fiscal
    2013
  *Repurchased $100 million, or approximately 5.3%, of common stock
    outstanding; paid $18 million in quarterly cash dividends

Fiscal 2013 Operating Highlights

  *Launched e-Commerce enabled website in July 2012
  *Executed initial pilot of new point-of-sale system; completion of rollout
    expected by summer 2013
  *Established successful partnership with Alliance Data for the Pier 1
    Rewards Credit Card; launched new loyalty program
  *Enhanced existing store portfolio and opened 22 new locations
  *Upgraded information technology and systems

“Fiscal 2013 was another outstanding year for Pier 1 Imports,” said Alex W.
Smith, President and Chief Executive Officer. “We delivered our 14^th
consecutive quarter of significant sales and profit growth, re-introduced our
dividend and repurchased $100 million of Pier 1 Imports stock, returning
substantial value to our shareholders. At the same time, we launched our
e-Commerce enabled website, established a platform to support our
multi-channel strategy and commenced a pilot of our new POS system.”

“We believe we can continue to grow our business significantly,” continued Mr.
Smith. “We have laid the foundation to take the Company to a new level of
growth and we’re focused on executing the strategies to get there. First and
foremost, we’re operating our store portfolio and new e-Commerce site as
mutually supportive, integrated and inter-dependent businesses. We’re
broadening our existing assortments and adding new product categories –
supporting these initiatives with enhanced planning and allocations, logistics
and systems. This summer, we expect to complete the implementation of our new
POS system, which will be transformational for the Company, enabling us to
offer our Pier 1 Imports customer a seamless, multi-channel shopping
experience and dramatically enhancing our capability to expand the business in
the coming years.”

Fiscal Year Results

For the fiscal year ended March 2, 2013, net income for the 53-week period was
$129.4 million, or $1.20 per share. The Company estimates that the 53^rd week
contributed $29 million to net sales and approximately $0.03 to earnings per
share. For the fiscal year ended February 25, 2012, the Company reported net
income for the 52-week period of $168.9 million, or $1.48 per share, which
included the tax benefit resulting from the reversal of the Company’s
valuation allowance. Non-GAAP adjusted earnings per share, before the
non-recurring tax benefits of $61.5 million, were $0.94 for fiscal year 2012.
For the fiscal year ended March 2, 2013, total sales for the 53-week period
increased 11.2% to $1.705 billion from $1.534 billion last fiscal year.
Comparable store sales for fiscal 2013 on a 52-week basis increased 7.5%
versus an increase of 9.5% last fiscal year.

In fiscal 2013, merchandise margins at the store level were slightly higher
versus the prior year. Merchandise margins, including the direct-to-consumer
business, were 59.8%, which is flat compared to fiscal 2012. Store occupancy
costs were $276.5 million, or 16.2% of sales, compared to $265.9 million, or
17.3% of sales, last year. Gross profit was $743.1 million compared to $651.2
million last year and increased to 43.6% of sales from 42.5% last year, an
improvement of 110 basis points.

Selling, general and administrative expenses for fiscal year 2013 were $513.1
million, or 30.1% of sales, compared to $475.2 million, or 31.0% of sales, in
fiscal year 2012. The 90 basis point improvement was primarily due to the
leveraging of store payroll, administrative payroll and other relatively fixed
costs.

Operating income for the year increased 29% to $199.0 million, or 11.7% of
sales, compared to $154.8 million, or 10.1% of sales, last year.

Fourth Quarter Results

For the fourth quarter ended March 2, 2013, the Company reported net income of
$61.7 million, or $0.58 per share. Non-GAAP adjusted net income, which
utilizes a 35.6% annual effective tax rate for fiscal 2013 (as described below
under Financial Disclosure Advisory), was $64.2 million, or $0.60 per share.
For the fourth quarter ended February 25, 2012, the Company reported net
income of $115.2 million, or $1.04 per share, which included the tax benefit
resulting from a change in the Company’s valuation allowance. Non-GAAP
adjusted earnings per share, before non-recurring tax benefits of $61.5
million were $0.48 for the fourth quarter of fiscal 2012. Total sales for the
14-week fourth quarter of fiscal 2013 improved 15.7% to $551.6 million
compared to $476.8 million in the 13-week fourth quarter of last year.
Comparable store sales on a 13-week basis increased 7.9% versus an increase of
10.3% in the 13-week quarter of last year. Strong comparable store sales
results for the quarter were primarily attributable to increases in store
traffic and higher average ticket.

Fourth quarter merchandise margins at the store level were relatively flat
compared to the same period last year. Merchandise margins, including the
direct-to-consumer business, were 59.0% for the fourth quarter of this year.
Store occupancy costs were $70.5 million, or 12.8% of sales, compared to $66.6
million, or 14.0% of sales, last year. Gross profit for the quarter was $255.0
million, or 46.2% of sales, a 70 basis point improvement from $217.1 million,
or 45.5% of sales in the fourth quarter of last year.

Fourth quarter selling, general and administrative expenses were $145.5
million, or 26.4% of sales, compared to $132.7 million, or 27.8% of sales, in
the same period of fiscal 2012. The 140 basis point improvement was primarily
due to the leveraging of store payroll, administrative payroll and other
relatively fixed costs.

Operating income for the fourth quarter increased 28% to $100.4 million, or
18.2% of sales, compared to last year’s fourth quarter operating income of
$78.3 million, or 16.4% of sales.

Balance Sheet and Share Repurchase Program

As of March 2, 2013, the Company remained in strong financial condition with
$231.6 million of cash and cash equivalents. Inventory totaled $356.1 million,
an increase of 10.4% compared to $322.5 million a year ago. Capital
expenditures totaled $80.4 million for the year and were primarily used for
new store openings, existing store improvements, and infrastructure and
technology development, including the Company’s new e-Commerce platform and
the initial rollout of its new point-of-sale system.

During the fourth quarter, the Company did not repurchase shares under its
current $100 million share repurchase program and the entire amount currently
remains available for repurchase. As of April 11, 2013, approximately 107.0
million shares of the Company’s common stock were outstanding.

Fiscal 2014 Financial Guidance

The Company has provided the following guidance for fiscal 2014 on a
comparable 52-week basis:

  *Comparable store sales growth in the mid single-digit range
  *EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
    growth in the range of 14% to 18%
  *Depreciation and amortization of approximately $38 million compared to $31
    million in FY13
  *Effective annual income tax rate of approximately 38% compared to 35.6% in
    FY13
  *Earnings per share in the range of $1.26 to $1.31, representing
    year-over-year growth of 8% to 12%
  *Capital expenditures of approximately $75 million
  *Approximately 30 store openings and 14 closings/relocations for a net
    increase of 16 stores

“We are pleased to have delivered another year of exceptional financial
performance,” stated Cary H. Turner, Senior Executive Vice President and Chief
Financial Officer. “We are confident that our proven operating model and
disciplined approach to investing will continue to drive meaningful long-term
growth in sales and earnings. Now that our transformation to a multi-channel
retailer is well underway, the business is at an important inflection point.
This year, we will be making prudent investments, including additional
headcount, to support our growth. In fiscal 2014, we expect to achieve a
mid-single digit comp store sales gain, improve gross profit and modestly
leverage expenses to drive a double-digit increase in EBITDA. We also expect
to deliver a strong increase of 8% to 12% in earnings per share, which
reflects higher depreciation versus fiscal 2013 and the normalization of our
tax rate this year. Additionally, we plan to continue returning value to our
shareholders through share repurchases and cash dividends. Looking at fiscal
2015 and beyond, as we begin to scale our e-Commerce business and other
strategic initiatives more dramatically, we anticipate that EBITDA and
earnings per share will grow at similar rates, with expected increases in the
mid-teens.”

Mr. Smith concluded, “As we look at the competitive landscape, the unique
positioning of the Pier 1 Imports experience and the talent and ambition we
have throughout our organization, we see a tremendous amount of runway to
readily achieve the targets under our Three-Year Plan. Equally important, we
are preparing for our next leg of growth by enhancing our organizational
capabilities and continuing to make an appropriate level of investment in the
business. We look forward to discussing our growth plans at our upcoming
Investor Day on May 7th.”

Fourth Quarter and Fiscal Year Results Conference Call

The Company will host a conference call to discuss fiscal 2013 fourth quarter
and fiscal year financial results at 10:00 a.m. Central Time today. Investors
will be able to connect to the call through the Company’s website at
www.pier1.com. The conference call can be accessed by linking through to the
“Investor Relations” page to the “Events” page, or you can listen to the
conference call by dialing 1-800-498-7872, or if international,
1-706-643-0435. The conference ID number is 19369600.

A replay will be available after 12:00 p.m. Central Time for a 24-hour period
and the replay can be accessed by dialing 1-855-859-2056, or if international,
1-404-537-3406 using conference ID number 19369600.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally
accepted accounting principles (GAAP). This press release references non-GAAP
financial measures, including EBITDA, adjusted net income and adjusted
earnings per share.

EBITDA represents earnings before interest, taxes, depreciation and
amortization. Management believes EBITDA is a meaningful indicator of the
Company’s performance that 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. This non-GAAP financial measure 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 as a measure of operating
performance.

The Company believes that the non-GAAP financial measures included in this
press release allow management and investors to understand and compare
earnings per share results in a more consistent manner for the 14-week fourth
quarter and 53-week fiscal year ended March 2, 2013 and the 13-week fourth
quarter and 52-week fiscal year ended February 25, 2012. Adjusted net income
and adjusted earnings per share should be considered supplemental and not a
substitute for the Company’s net income and earnings per share results that
will be recorded in accordance with GAAP for the periods presented. A
reconciliation of GAAP to non-GAAP net income and earnings per share is shown
below for the 14-week fourth quarter ended March 2, 2013.

                                            
                                              14-Weeks Ended
                                              March 2, 2013
                                              ($ in millions, except per share
                                              amounts)
                                              
Net Income (GAAP)                             $61.7
Add back: Income Tax Provision (GAAP)         37.9
Adjusted Income Before Income Taxes           99.6
Less: Adjusted Income Tax Provision at        35.4
35.6% Annual Effective Tax Rate
Adjusted Net Income (non-GAAP)                $64.2
                                              
Diluted Earnings per Share (GAAP)             $0.58
Difference of Income Tax Provision at 35.6%   0.02
Annual Effective Tax Rate
Adjusted Diluted Earnings per Share           $0.60
(non-GAAP)
                                              

A reconciliation of net income to EBITDA is shown below for the 53-week fiscal
year ended March 2, 2013.

                               
                                 53-Weeks Ended
                                 March 2, 2013
                                 ($ in millions)
                                 
Net Income                       $129.4
Add Back: Income Tax Provision   71.6
Interest Expense (Income), net   -
Depreciation and Amortization    31.0
EBITDA                           $232.0
                                 

Management’s expectations and assumptions regarding future results are subject
to risks, uncertainties and other factors that could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements included in this press release. Any
forward-looking projections or statements should be considered in conjunction
with the cautionary statements and risks contained in the Company’s Annual
Report on Form 10-K. Refer to the Company’s most recent SEC filings for any
updates concerning these and other risks and uncertainties that may affect the
Company’s operations and performance. The Company assumes no obligation to
update or revise its forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied will not
be realized.

Pier 1 Imports, Inc. is the original global importer of imported decorative
home furnishings and gifts. Information about the Company is available on
www.pier1.com.

                                                                 
                                                                       
Pier 1 Imports, Inc.
                                                                       
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                                                                       
                                14-Weeks Ended          13-Weeks Ended
                                March 2,      % of      February 25,   % of
                                2013          Sales     2012           Sales
                                                                       
Net sales                       $ 551,625     100.0 %   $  476,757     100.0 %
                                                                       
Cost of sales                    296,648    53.8  %     259,674    54.5  %
                                                                       
Gross Profit                      254,977     46.2  %      217,083     45.5  %
                                                                       
Selling, general and              145,489     26.4  %      132,746     27.8  %
administrative expenses
Depreciation and amortization    9,053      1.6   %     6,070      1.3   %
                                                                       
Operating income                  100,435     18.2  %      78,267      16.4  %
                                                                       
Nonoperating (income) and
expenses:
Interest, investment income       (590    )                (3,994  )
and other
Interest expense                 1,372                 808        
                                 782        0.1   %     (3,186  )   -0.7  %
                                                                       
Income before income taxes        99,653      18.1  %      81,453      17.1  %
Income tax provision             37,949     6.9   %     (33,760 )   -7.1  %
(benefit)
                                                                       
Net income                      $ 61,704     11.2  %   $  115,213    24.2  %
                                                                       
Earnings per share:
Basic                           $ 0.59                 $  1.06    
                                                                       
Diluted                         $ 0.58                 $  1.04    
                                                                       
Dividends declared per share:   $ 0.05                 $  0.00    
                                                                       
Average shares outstanding
during period:
Basic                            105,168                108,835 
                                                                       
Diluted                          107,066                110,709 
                                                                       

                                                                 
                                                                       
Pier 1 Imports, Inc.
                                                                       
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                                                                       
                             53-Weeks Ended            52-Weeks Ended
                             March 2,        % of      February 25,    % of
                             2013            Sales     2012            Sales
                                                                       
Net sales                    $ 1,704,885     100.0 %   $ 1,533,611     100.0 %
                                                                       
Cost of sales                 961,826      56.4  %    882,449      57.5  %
                                                                       
Gross Profit                   743,059       43.6  %     651,162       42.5  %
                                                                       
Selling, general and           513,085       30.1  %     475,162       31.0  %
administrative expenses
Depreciation and              30,988       1.8   %    21,240       1.4   %
amortization
                                                                       
Operating income               198,986       11.7  %     154,760       10.1  %
                                                                       
Nonoperating (income) and
expenses:
Interest, investment           (2,757    )               (12,434   )
income and other
Interest expense              743                    3,087        
                              (2,014    )   -0.1  %    (9,347    )   -0.6  %
                                                                       
Income before income taxes     201,000       11.8  %     164,107       10.7  %
Income tax provision          71,556       4.2   %    (4,831    )   -0.3  %
(benefit)
                                                                       
Net income                   $ 129,444      7.6   %   $ 168,938      11.0  %
                                                                       
Earnings per share:
Basic                        $ 1.22                   $ 1.50      
                                                                       
Diluted                      $ 1.20                   $ 1.48      
                                                                       
Dividends declared per       $ 0.17                   $ 0.00      
share:
                                                                       
Average shares outstanding
during period:
Basic                         106,222                 112,534   
                                                                       
Diluted                       108,259                 114,390   
                                                                       

                                                               
                                                                  
Pier 1 Imports, Inc.
                                                                  
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
                                                                  
                                                                  
                                                   March 2,       February 25,
                                                   2013           2012
ASSETS
                                                                  
Current assets:
Cash and cash equivalents, including temporary
investments
of $191,568 and $248,624, respectively             $ 231,556      $ 287,868
Accounts receivable, net                             22,309         16,282
Inventories                                          356,053        322,482
Prepaid expenses and other current assets           49,016       23,682   
Total current assets                                 658,934        650,314
                                                                  
Properties, net                                      150,615        103,640
Other noncurrent assets                             47,666       69,409   
                                                   $ 857,215     $ 823,363  
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                  
Current liabilities:
Accounts payable                                   $ 58,701       $ 63,827
Gift cards and other deferred revenue                51,740         53,123
Accrued income taxes payable                         25,249         16,759
Other accrued liabilities                           112,437      111,679  
Total current liabilities                            248,127        245,388
                                                                  
Long-term debt                                       9,500          9,500
Other noncurrent liabilities                         62,457         74,832
                                                                  
Shareholders' equity:
Common stock, $0.001 par, 500,000,000 shares
authorized,
125,232,000 issued                                   125            125
Paid-in capital                                      233,518        231,919
Retained earnings                                    574,206        462,751
Cumulative other comprehensive loss                  (4,828   )     (4,473   )
Less -- 18,906,000 and 15,512,000 common
shares in treasury, at cost, respectively           (265,890 )    (196,679 )
                                                    537,131      493,643  
                                                   $ 857,215     $ 823,363  
                                                                             

                                                            
                                                                
Pier 1 Imports, Inc.
                                                                
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                
                                               53-Weeks Ended   52-Weeks Ended
                                               March 2,         February 25,
                                               2013             2012
                                                                
Cash flow from operating activities:
    Net income                                 $  129,444       $  168,938
    Adjustments to reconcile to net cash
    (used in) provided by
    operating activities:
    Depreciation and amortization                 38,431           30,949
    Stock-based compensation expense              12,337           6,199
    Deferred compensation                         6,192            5,612
    Deferred income taxes                         19,928           (41,915   )
    Amortization of credit card deferred          (2,986    )      (22,706   )
    revenue
    Amortization of deferred gains                (3,931    )      (13,938   )
    Change in reserve for uncertain tax           (6,252    )      629
    positions
    Other                                         (2,087    )      3,888
    Changes in cash from:
    Inventories                                   (33,571   )      (10,712   )
    Proprietary credit card receivables           (2,019    )      171
    Prepaid expenses and other assets             (31,620   )      (8,245    )
    Accounts payable and accrued expenses         (5,516    )      6,824
    Accrued income taxes payable, net of         5,699          16,527    
    payments
    Net cash provided by operating               124,049        142,221   
    activities
                                                                
Cash flow from investing activities:
    Capital expenditures                          (80,363   )      (62,316   )
    Proceeds from disposition of                  217              1,350
    properties
    Proceeds from sale of restricted              1,290            471
    investments
    Purchase of restricted investments           (3,567    )     (1,575    )
    Net cash used in investing activities        (82,423   )     (62,070   )
                                                                
Cash flow from financing activities:
    Cash dividends                                (17,989   )      -
    Purchases of treasury stock                   (100,000  )      (100,000  )
    Proceeds from stock options exercised,
    stock purchase plan and other, net            20,051           9,343
    Debt issuance costs                          -              (3,097    )
    Net cash used in financing activities        (97,938   )     (93,754   )
                                                                
Change in cash and cash equivalents               (56,312   )      (13,603   )
                                                                
Cash and cash equivalents at beginning of        287,868        301,471   
period
Cash and cash equivalents at end of period     $  231,556      $  287,868   

Contact:

Pier 1 Imports, Inc.
Cary Turner, 817-252-8400
 
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