Pier 1 Net Falls 32 Percent in Q2

Pier 1FORT WORTH, Texas-A long run of quarterly profit gains came to an end for Pier 1 Imports, which reported a second-quarter drop of 32 percent in net income to $17.8 million.

The home specialty retailer posted 7.6 percent gain in sales, to $395.6 million, in the quarter which ended on Aug. 31. Same-store sales rose 3.5 percent. Even with these increases, however, Alex Smith, Pier 1 president and CEO, said the retailer didn’t do its job properly with the merchandise it had on offer.

“During the second quarter, the efforts focused around our short- and long-term goals fell slightly out of balance,” Smith said. “In particular, our marketing initiatives did not include appropriate messaging around clearance and promotional activity in our stores, or customer acquisition generally, which contributed to lower-than-expected store traffic. We should also have done a better job of flowing new product to the stores and reflecting those items in the floor set.”

Smith said Pier 1 did score a success with online sales during the quarter, making “great progress” with its 1 Pier 1 strategy. “We are enjoying increases in traffic to pier1.com and conversion rates are steadily moving upward,” he said. “Indeed, in August, our online business achieved a new high-water mark of 5 percent of total sales, a great way to celebrate the first anniversary of our new e-commerce-enabled website.”

However, other key metrics shaved the Pier 1 bottom line. Gross margin fell 40 basis points to 40.8 percent. Selling, general and administrative expenses rose 9.5 percent in dollars and 50 basis points as a percentage of sales, to 31 percent.

Along with announcing the second-quarter results, Pier 1 said its projections for the fiscal year as a whole called for total sales growth in the high single-digit range, along with an increase in same-store sales in the mid-single-digit range.