Exhibit 99.1
Pier 1 Imports, Inc. Reports Fiscal 2012 Third Quarter Financial Results
Third Quarter Operating Income Improves 50%
FORT WORTH, Texas--(BUSINESS WIRE)--December 15, 2011--Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the third quarter ended November 26, 2011.
Third Quarter Highlights
- Comparable store sales increase of 7.0% versus last year’s increase of 10.2%; three-year cumulative comparable store sales increase of 30.9%
- Merchandise margins of 60.5% of sales versus 58.9% last year
- Gross profit of 43.2% of sales compared to 40.7% last year
- Operating income increased 50.2% and is 8.6% of sales compared to 6.2% of sales last year
- Earnings per share of $0.21 (fully taxed) versus $0.18 per share last year (minimally taxed)
Execution of Three-Year Growth Plan
Alex W. Smith, President and Chief Executive Officer, commented, “We are very pleased with the results of our third quarter. Our strong product assortments, the right balance of regular and promotional pricing and a great store experience are driving robust sales and merchandise margin growth. December sales so far are strong and we expect this trend to continue for the final ten days leading up to Christmas. Our growth plan is on track as we execute our business model with increasing finesse. Operating margins and sales per retail square foot continue to grow. Pier 1 To-Go, which allows customers to order online and pick-up and pay in-store, is positively impacting top line sales and our new e-commerce enabled site will launch next summer. We look forward to discussing our third quarter results in more detail and providing updates to the balance of the year and our three-year growth plan initiatives later this morning on our conference call.”
Third Quarter Results
For the third quarter ended November 26, 2011, the Company reported net income of $23.0 million, or $0.21 per share, which included an income tax provision of $12.4 million. Net income for the third quarter last year was $21.0 million, or $0.18 per share, which included an income tax provision of $0.5 million due to the Company’s federal net operating loss tax carry-forward position. Income before income taxes was $35.4 million for the third quarter compared to income before income taxes of $21.5 million for the same period last year. Total sales for the third quarter were $382.7 million, an 8.2% increase from $353.8 million in the year-ago quarter. Comparable store sales increased 7.0% during the third quarter compared to last year’s comparable store sales increase of 10.2% for the same period. The sales increase for the quarter was primarily the result of increases in store traffic and average ticket.
Merchandise margins for the quarter were 60.5% of sales compared to 58.9% of sales in the same period last year. The 160 basis point improvement in merchandise margins continues to be positively impacted by strong input margins, the right balance between regular and promotional pricing and well-managed inventory levels. Store occupancy costs were $66.2 million for the quarter, or 17.3% of sales, compared to $64.4 million, or 18.2% of sales, last year. Gross profit for the quarter improved to $165.5 million, or 43.2% of sales, from $144.1 million, or 40.7% of sales in the third quarter of last year.
Third quarter selling, general and administrative expenses totaled $127.5 million, or 33.3% of sales, compared to $117.5 million, or 33.2% of sales, in the year-ago quarter. For the quarter, SG&A expenses consisted of $26.4 million in marketing, $84.2 million in payroll, and $16.9 million in other G&A costs.
The following table details the breakdown of fixed and variable costs included in selling, general, and administrative expenses for the third quarter as compared to the same period last year.
Three months ended | ||||||||||||||||||||
November 26, 2011 | November 27, 2010 | |||||||||||||||||||
Expense | % Sales | Expense | % Sales | Increase | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Store payroll | $ | 58.5 | 15.3 | % | $ | 56.9 | 16.1 | % | $ | 1.6 | ||||||||||
Marketing | 26.4 | 6.9 | % | 23.6 | 6.7 | % | 2.8 | |||||||||||||
Store supplies, services and other | 6.6 | 1.7 | % | 6.0 | 1.7 | % | 0.6 | |||||||||||||
Variable costs | 91.5 | 23.9 | % | 86.5 | 24.5 | % | 5.0 | |||||||||||||
Administrative payroll | 25.7 | 6.7 | % | 21.5 | 6.1 | % | 4.2 | |||||||||||||
Other relatively fixed expenses | 10.3 | 2.7 | % | 9.5 | 2.6 | % | 0.8 | |||||||||||||
Relatively fixed costs | 36.0 | 9.4 | % | 31.0 | 8.7 | % | 5.0 | |||||||||||||
$ | 127.5 | 33.3 | % | $ | 117.5 | 33.2 | % | $ | 10.0 | |||||||||||
Operating income for the third quarter increased 50.2% to $32.9 million, or 8.6% of sales, compared to last year’s operating income of $21.9 million, or 6.2% of sales, reported for the same period. The overall improvement in operating income is primarily attributable to increases in sales and merchandise margins.
Year-to-Date Results
For the year-to-date period ended November 26, 2011, the Company reported net income of $53.7 million, or $0.47 per share, which included an income tax provision of $28.9 million. Net income for the same period last year was $43.1 million, or $0.37 per share, which included an income tax provision of $0.9 million due to the Company’s federal net operating loss tax carry-forward position. Income before income taxes was $82.7 million for the first nine months compared to income before income taxes of $43.9 million for the same period last year. Total sales for the first nine months increased 9.0% to $1.057 billion from $969.9 million in the year-ago period. Comparable store sales for the first nine months increased 9.2% compared to last year’s comparable store sales increase of 11.8% in the year-ago period.
Merchandise margins for the first nine months were 59.9% of sales compared to 58.6% of sales in the same period last year. Store occupancy costs were $199.3 million, or 18.9% of sales, compared to $195.9 million, or 20.2% of sales, last year. As a percentage of sales, gross profit for the first nine months was 41.1% compared to 38.4% last year.
Year-to-date selling, general and administrative expenses were $342.4 million, or 32.4% of sales, compared to $312.9 million, or 32.3% of sales, in the year-ago period. SG&A expenses consisted of $56.4 million in marketing, $236.2 million in payroll, and $49.8 million in other G&A costs.
The following table details the breakdown of fixed and variable costs included in selling, general, and administrative expenses for the first nine months of the year as compared to the same period last year.
Nine months ended | |||||||||||||||||||||
November 26, 2011 | November 27, 2010 | Increase | |||||||||||||||||||
Expense | % Sales | Expense | % Sales | (Decrease) | |||||||||||||||||
($ in millions) | |||||||||||||||||||||
Store payroll | $ | 170.2 | 16.1 | % | $ | 159.9 | 16.5 | % | $ | 10.3 | |||||||||||
Marketing | 56.4 | 5.3 | % | 47.3 | 4.9 | % | 9.1 | ||||||||||||||
Store supplies, services and other | 17.9 | 1.7 | % | 18.4 | 1.9 | % | (0.5 | ) | |||||||||||||
Variable costs | 244.5 | 23.1 | % | 225.6 | 23.3 | % | 18.9 | ||||||||||||||
Administrative payroll | 66.0 | 6.3 | % | 58.7 | 6.1 | % | 7.3 | ||||||||||||||
Other relatively fixed expenses | 31.9 | 3.0 | % | 28.6 | 2.9 | % | 3.3 | ||||||||||||||
Relatively fixed costs | 97.9 | 9.3 | % | 87.3 | 9.0 | % | 10.6 | ||||||||||||||
$ | 342.4 | 32.4 | % | $ | 312.9 | 32.3 | % | $ | 29.5 | ||||||||||||
Operating income for the first nine months of the year increased 68.7% to $76.5 million, or 7.2% of sales, compared to last year’s operating income of $45.3 million, or 4.7% of sales, for the same period. The overall improvement in operating income is primarily attributable to increases in sales and merchandise margins.
Balance Sheet, Share Repurchase Program and Income Taxes
At the end of the third quarter, inventory was in line with management’s expectations and totaled $367.9 million, up 8.7% over last year’s third quarter-end balance of $338.4 million. The increase in inventory was primarily due to slightly larger purchases of seasonal merchandise to support higher sales and early receipt of spring merchandise in order to transition and set the stores earlier for spring. By the end of the fiscal year, inventory is expected to be slightly above last year-end’s levels. Management continues to strategically manage its inventory purchases and monitor its inventory levels to keep them in line with consumer demand.
Cash and cash equivalents at the end of the third quarter were $179.3 million, a decrease from last year’s balance of $209.8 million for the same period. Capital expenditures for the first nine months totaled $40.4 million and consisted primarily of investments in new stores, existing store improvements, and infrastructure and technology development as described in the three-year growth plan.
During the third quarter, the Company did not repurchase shares under the newly authorized $100 million share repurchase program and $100.0 million currently remains available for repurchase. As of December 15, 2011, approximately 109.7 million shares of the Company’s common stock were outstanding.
Given the improved performance and expectations for the remainder of the fiscal year, the Company believes it is probable that during the fourth quarter it will be able to conclude that the realization of all deferred tax assets is more likely than not. Accordingly, it is likely that the Company will reverse its valuation allowance and record a non-cash tax benefit of approximately $60 million, or an estimated $0.54 per share, during the fourth quarter of the current fiscal year.
Third Quarter Conference Call and December Sales Release
The Company will host a conference call concerning fiscal 2012 third quarter 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 calling 1-800-498-7872, or if international, 1-706-643-0435. The conference ID number is 25501934.
A replay will be available after 12:00 p.m. Central Time for a 24-hour period and the replay can be accessed by calling 1-855-859-2056, or if international, 1-404-537-3406 using the conference ID number 25501934.
The Company will announce fiscal 2012 December sales on January 5, 2012.
Financial Disclosure Advisory
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) | ||||||||||||||||||
Three Months Ended | ||||||||||||||||||
November 26, | % of | November 27, | % of | |||||||||||||||
2011 | Sales | 2010 | Sales | |||||||||||||||
Net sales | $ | 382,699 | 100.0 | % | $ | 353,759 | 100.0 | % | ||||||||||
Cost of sales (including buying and store occupancy costs) | 217,209 | 56.8 | % | 209,690 | 59.3 | % | ||||||||||||
Gross Profit | 165,490 | 43.2 | % | 144,069 | 40.7 | % | ||||||||||||
Selling, general and administrative expenses | 127,514 | 33.3 | % | 117,524 | 33.2 | % | ||||||||||||
Depreciation and amortization | 5,104 | 1.3 | % | 4,666 | 1.3 | % | ||||||||||||
Operating income | 32,872 | 8.6 | % | 21,879 | 6.2 | % | ||||||||||||
Nonoperating (income) and expenses: | ||||||||||||||||||
Interest and investment income and other | (3,238 | ) | (1,045 | ) | ||||||||||||||
Interest expense | 739 | 1,424 | ||||||||||||||||
(2,499 | ) | -0.6 | % | 379 | 0.1 | % | ||||||||||||
Income before income taxes | 35,371 | 9.2 | % | 21,500 | 6.1 | % | ||||||||||||
Income tax provision | 12,383 | 3.2 | % | 496 | 0.2 | % | ||||||||||||
Net income | $ | 22,988 | 6.0 | % | $ | 21,004 | 5.9 | % | ||||||||||
Earnings per share: | ||||||||||||||||||
Basic | $ | 0.21 | $ | 0.18 | ||||||||||||||
Diluted | $ | 0.21 | $ | 0.18 | ||||||||||||||
Average shares outstanding during period: | ||||||||||||||||||
Basic | 108,713 | 116,479 | ||||||||||||||||
Diluted | 110,306 | 117,680 | ||||||||||||||||
Pier 1 Imports, Inc. | ||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(in thousands except per share amounts) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Nine Months Ended | ||||||||||||||||||
November 26, | % of | November 27, | % of | |||||||||||||||
2011 | Sales | 2010 | Sales | |||||||||||||||
Net sales | $ | 1,056,854 | 100.0 | % | $ | 969,887 | 100.0 | % | ||||||||||
Cost of sales (including buying and store occupancy costs) | 622,775 | 58.9 | % | 596,970 | 61.6 | % | ||||||||||||
Gross Profit | 434,079 | 41.1 | % | 372,917 | 38.4 | % | ||||||||||||
Selling, general and administrative expenses | 342,416 | 32.4 | % | 312,917 | 32.3 | % | ||||||||||||
Depreciation and amortization | 15,171 | 1.5 | % | 14,653 | 1.4 | % | ||||||||||||
Operating income | 76,492 | 7.2 | % | 45,347 | 4.7 | % | ||||||||||||
Nonoperating (income) and expenses: | ||||||||||||||||||
Interest and investment income and other | (8,441 | ) | (3,113 | ) | ||||||||||||||
Interest expense | 2,279 | 4,516 | ||||||||||||||||
(6,162 | ) | -0.6 | % | 1,403 | 0.2 | % | ||||||||||||
Income before income taxes | 82,654 | 7.8 | % | 43,944 | 4.5 | % | ||||||||||||
Income tax provision | 28,929 | 2.7 | % | 886 | 0.1 | % | ||||||||||||
Net income | $ | 53,725 | 5.1 | % | $ | 43,058 | 4.4 | % | ||||||||||
Earnings per share: | ||||||||||||||||||
Basic | $ | 0.47 | $ | 0.37 | ||||||||||||||
Diluted | $ | 0.47 | $ | 0.37 | ||||||||||||||
Average shares outstanding during period: | ||||||||||||||||||
Basic | 113,767 | 116,363 | ||||||||||||||||
Diluted | 115,490 | 117,202 | ||||||||||||||||
Pier 1 Imports, Inc. | ||||||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||||
(in thousands except share amounts) | ||||||||||||||
(unaudited) | ||||||||||||||
November 26, | February 26, | November 27, | ||||||||||||
2011 | 2011 | 2010 | ||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents, including temporary investments | ||||||||||||||
of $136,765, $261,274 and $164,066, respectively | $ | 179,296 | $ | 301,471 | $ | 209,781 | ||||||||
Accounts receivable, net | 26,561 | 14,814 | 24,313 | |||||||||||
Inventories | 367,876 | 311,770 | 338,437 | |||||||||||
Income tax receivable | 134 | 1,043 | 972 | |||||||||||
Prepaid expenses and other current assets | 21,525 | 22,871 | 20,694 | |||||||||||
Total current assets | 595,392 | 651,969 | 594,197 | |||||||||||
Properties, net | 87,029 | 64,773 | 59,171 | |||||||||||
Other noncurrent assets | 30,405 | 26,835 | 31,008 | |||||||||||
$ | 712,826 | $ | 743,577 | $ | 684,376 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 68,437 | $ | 57,421 | $ | 61,445 | ||||||||
Current portion long-term debt | - | - | 16,542 | |||||||||||
Gift cards and other deferred revenue | 58,369 | 71,963 | 44,672 | |||||||||||
Accrued income taxes payable | 11,731 | 232 | 2,313 | |||||||||||
Other accrued liabilities | 115,342 | 106,739 | 116,931 | |||||||||||
Total current liabilities | 253,879 | 236,355 | 241,903 | |||||||||||
Long-term debt | 9,500 | 9,500 | 9,500 | |||||||||||
Other noncurrent liabilities | 70,666 | 84,870 | 79,425 | |||||||||||
Shareholders' equity: | ||||||||||||||
Common stock, $0.001 par, 500,000,000 shares authorized, | ||||||||||||||
125,232,000 issued | 125 | 125 | 125 | |||||||||||
Paid-in capital | 230,524 | 243,051 | 244,134 | |||||||||||
Retained earnings | 347,538 | 293,813 | 236,746 | |||||||||||
Cumulative other comprehensive loss | (2,174 | ) | (784 | ) | (262 | ) | ||||||||
Less -- 15,574,000, 7,748,000 and 7,967,000 | ||||||||||||||
common shares in treasury, at cost, respectively | (197,232 | ) | (123,353 | ) | (127,195 | ) | ||||||||
378,781 | 412,852 | 353,548 | ||||||||||||
$ | 712,826 | $ | 743,577 | $ | 684,376 | |||||||||
Pier 1 Imports, Inc. | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(in thousands) | |||||||||
(unaudited) | |||||||||
Nine Months Ended | |||||||||
November 26, | November 27, | ||||||||
2011 | 2010 | ||||||||
Cash flow from operating activities: | |||||||||
Net income | $ | 53,725 | $ | 43,058 | |||||
Adjustments to reconcile to net cash (used in) provided by operating activities: | |||||||||
Depreciation and amortization | 23,078 | 24,178 | |||||||
Loss (gain) on disposal of fixed assets | 388 | (1,687 | ) | ||||||
Stock-based compensation expense | 4,780 | 3,668 | |||||||
Deferred compensation | 4,342 | 3,127 | |||||||
Lease termination expense | 783 | 680 | |||||||
Amortization of credit card deferred revenue | (15,625 | ) | - | ||||||
Amortization of deferred gains | (9,794 | ) | (5,683 | ) | |||||
Other | (1,118 | ) | 2,662 | ||||||
Changes in cash from: | |||||||||
Inventories | (56,106 | ) | (24,941 | ) | |||||
Accounts receivable, prepaid expenses and other assets | (17,586 | ) | (10,460 | ) | |||||
Income tax receivable | 909 | (411 | ) | ||||||
Accounts payable and accrued expenses | 12,668 | 4,118 | |||||||
Accrued income taxes payable | 11,499 | (2,654 | ) | ||||||
Net cash provided by operating activities | 11,943 | 35,655 | |||||||
Cash flow from investing activities: | |||||||||
Capital expenditures | (40,359 | ) | (19,659 | ) | |||||
Proceeds from disposition of properties | 1,341 | 10,619 | |||||||
Proceeds from sale of restricted investments | 423 | 3,818 | |||||||
Purchase of restricted investments | (1,240 | ) | (3,815 | ) | |||||
Collection of notes receivable | - | 1,500 | |||||||
Net cash used in investing activities | (39,835 | ) | (7,537 | ) | |||||
Cash flow from financing activities: | |||||||||
Purchases of treasury stock | (100,000 | ) | - | ||||||
Proceeds from stock options exercised, stock purchase plan and other, net | 8,814 | 3,251 | |||||||
Repayment of long-term debt | - | (9,500 | ) | ||||||
Debt issuance costs | (3,097 | ) | - | ||||||
Net cash used in financing activities | (94,283 | ) | (6,249 | ) | |||||
Change in cash and cash equivalents | (122,175 | ) | 21,869 | ||||||
Cash and cash equivalents at beginning of period | 301,471 | 187,912 | |||||||
Cash and cash equivalents at end of period | $ | 179,296 | $ | 209,781 |
CONTACT:
Pier 1 Imports, Inc.
Cary Turner, 817-252-8400