Home furnishings and accessories retailer Pier 1 Imports (PIR 7.25) reported its fiscal fourth quarter and year-end results after Wednesday's close. Those results underscored the difficulty the retailer is having in producing stronger sales growth. At the same time, they also revealed the success the company is having with its e-commerce business and its efforts to drive improved profitability.
The fourth quarter report was a follow-up to preliminary guidance offered in early March. Accordingly, the sales and earnings results didn't contain any big surprises.
Net sales decreased 2.6% to $528.4 million, comparable sales increased 0.2%, and e-commerce sales increased 28% to $103.1 million, accounting for 19.5% of net sales versus approximately 15% of net sales in the same period a year ago. Adjusted earnings per share for the period were $0.34, which was at the high end of the increased guidance range shared in early March.
For fiscal 2017, net sales fell 3.4% to $1.828 billion, comparable sales decreased 1.0%, and e-commerce represented roughly 20% of net sales versus approximately 16% in fiscal 2016. Adjusted earnings per share were $0.44.
Looking at fiscal 2018, which is a 53-week period, Pier 1 Imports is projecting earnings to be $0.46 to $0.52 per share, with the 53rd week adding approximately $0.02 per share.
Management said the company gained momentum in the second half of the year with its turnaround initiatives. Seeing that shares of PIR are trading 3.7% lower in pre-market action, it would appear that not everyone is convinced about the turnaround initiatives.
That could have to do in large part with first quarter guidance that calls for net sales growth to be only flat to up 1% and for the company to post a loss of ($0.07) to ($0.03) per share, which is worse than analysts' average expectation. Comparable sales growth is anticipated to be up 1% to 2%, which is what Pier 1 Imports is also forecasting for fiscal 2018.
To its credit, Pier 1 Imports achieved a nice expansion in its fourth quarter merchandise margin, which was 56.7% of net sales versus 52.5% in the year-ago period. That improvement was attributed to decreased clearance, a more effective promotional strategy, and an improvement in the company's supply chain. Pier 1 Imports expects its merchandise margin for the first quarter and fiscal 2018 to be approximately 58%.
Pier 1 ended fiscal 2017 with inventories down 1%.
What takes place in fiscal 2018 will be under the guidance of new CEO, Alasdair James, who will join the company on May 1.
There is ample scope for improvement still in the stock of Pier 1, which is down 15% year-to-date and down more than 60% from the highs it saw 2013. Concerns about a border adjustment tax have been a major drag this year since Pier 1 imports close to 90% of its merchandise. The added factor of increased competition in the industry is just one more important element with which it has to contend.
Pier 1 looks to be working hard at achieving turnaround success that could translate into a much improved stock price. Still, it remains an uphill battle, which investors remain unsure the company can win in quick fashion.