Pier 1 Imports, Inc. (PIR)
Q3 2010 Earnings Call
December 17, 2009 11:00 am ET
Nancy Benson – Director of Treasury and Investor Relations.
Alexander Smith – President, Chief Executive Officer
Charles Turner – Executive Vice President, Chief Financial Officer
Budd Bugatch – Raymond James
Brian Nagel – Oppenheimer
Bradley Thomas – Keybanc Capital Markets
Anthony Chukumba – FTN Equity Capital
John Barrett – Columbia Management
Previous Statements by PIR
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Good morning everyone. Thank you for joining us this morning. With me today are Kerry Turner, our Executive Vice President and Chief Financial Officer and Nancy Benson, our Director of Treasury and Investor Relations.
Today we’re going to share the news about our third quarter and give you some thoughts about the rest of the year. As always before we begin, I’ll ask Nancy to read you the Safe Harbor statements.
I would like to remind everyone that all of the information being communicated during this call along with all comments being made, should be considered in conjunction with today’s press release which if you do not have one, is available to you on the Investor Relations page of our website at www.pier1.com as are all of our SEC filings.
I also need to remind you that certain comments made during this call may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and can be identified by the use of words such as may, will, expect, anticipate, believe and other similar words and phrases.
Our actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside of our control. Please refer to our SEC filings including our annual report filed on Form 10-K for a complete discussion of the major risks and uncertainties that may affect our business.
The forward-looking statements made today are as of the date of this call and we do not undertake any obligation to update our forward-looking statements. For a full report on the results of the third quarter, I will now turn the call over to Kerry.
Earlier today, we reported net income of $39 million or $0.37 per share for the third quarter compared to a net loss of $37 million or $0.41 per share for the year ago period. Year to date, net income was $52 million or $0.55 per share compared to a net loss of $100 million or $1.12 a share last year.
Without any of the unusual transactions and expenses that were recorded during the third quarter net income would have been $2 million or $0.02 per share compared to a loss of $30 million last year or $0.34 per share. A reconciliation of this amount was provided in today’s press release.
Total sales for the third quarter increased to $327 million from $301 million in the year ago quarter. Comparable store sales for the quarter increased 13.7% which can be attributed to increases in traffic, conversion and average ticket.
Merchandise margins for the third quarter were up 410 basis points to 56.6% of sales compared to 52.5% of sales last year. The increase in merchandise margin is the direct result of strong input margins and reduced markdown activity.
For the first nine months merchandise margins increased 340 basis points to 54.4% of sales from 51% of sales last year. We expect margins to continue to improve significantly on a year over year basis through the remainder of the fiscal year and to be at least as good as the second quarter merchandise margin of 52%.
Store occupancy costs in the quarter were $65 million compared to $70 million last year. For the first nine months, store occupancy costs were $200 million compared to $214 million in the first nine months of last year. This improvement can be attributed to negotiated rent reductions as well as the reduced store cap.
For the third quarter gross profit dollars increased to $120 million or 36.6% of sales compared to $88 million or 29.2% of sales last year. For the nine months, gross profit increased to $286 million or 32% of sales compared to $262 million or 29.1% of sales last year.
During the third quarter SG&A expenses were $112 million or 34% of sales compared to $115 million or 38% of sales last year. SG&A expenses during the third quarter consisted primarily of $20 million in marketing, $74 million in payroll and $18 million in other SG&A costs.
Administrative payroll expense increased $7 million over last year as a result of the reversal of corporate bonus in last year’s third quarter and additional bonus reported in the third quarter of this year. Offsetting this increase in administrative payroll, was sales and store related expenses such as store payroll, supplies and general insurance costs which were closely monitored and actually declined by approximately $3 million.
During the quarter, SG&A expenses included special charges of $1 million resulting primarily from lease termination charges versus $7 million for the same period last year.
For the first nine months, SG&A expenses were $308 million compared to $332 million for the same period last year. Year to date SG&A expenses included $43 million for marketing, $208 million in payroll and $57 million in other SG&A costs. Year to date SG&A expenses included $11 million in special charges versus $14 million last year.