Pier 1 Imports, Inc. (PIR)

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Industry: Consumer Services
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Pier 1 Imports, Inc. (PIR)

F4Q10 Earnings Call

April 8, 2010 11:00 am ET

Executives

Nancy Benson – Director of Treasury and Investor Relations.

Alexander Smith – President, Chief Executive Officer

Charles Turner – Executive Vice President, Chief Financial Officer

Analysts

Budd Bugatch – Raymond James

Brian Nagel – Oppenheimer

Irfan Senesi [ph] – Bank of America

David Berman – Berman Capital

Bradley Thomas – Keybanc Capital Markets

Anthony Chukumba – BB&T Capital Markets

Presentation

Operator

This is Pier 1 Imports quarterly conference call. (Operator Instructions) I would now like to introduce Mrs. Nancy Benson, Assistant Treasurer and Director of Investor Relations for Pier 1 Imports. Ms. Benson you may begin.

Nancy Benson

Good morning everyone. Thank you for joining us this morning. Earlier today we issued a press release which included the detailed financial results for the fourth quarter and fiscal year ended February 27, 2010. In just a few moments we will hear comments from our President and Chief Executive Officer, Alex Smith, and Executive Vice President and Chief Financial Officer, Cary Turner about those results followed by a brief question and answer period.

Before we begin I 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 and Exchange Act of 1935 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. The press release issued earlier today also includes a reconciliation of any non-GAAP measures that are being discussed today. If you do not have a copy of today’s press release you may obtain one along with copies of prior press releases and all SEC filings by linking through to the Investor Relations page of our website Pier1.com.

I would now like to turn the call over to Alex.

Alexander Smith

Thank you Nancy and thank you everyone for joining us this morning. Amazingly to me it was three years ago that I spoke to you on my first earnings call. It seems like yesterday. At that time I talked about how we were going to return out company to profitability. I didn’t know then what the economy was going to throw at us. So the recession has obviously extended our turnaround timeline. It has cost us a year but we stayed with our strategy, took advantage where we could and focused not only on the execution of our business priorities but on building the culture we all want for ourselves here at Pier 1 Imports.

Consequently we arrive here today stronger, leaner, more effective and more determined to take market share than ever before. Now Kerry is going to talk about our fourth quarter and year-end results. You will hear how our business has dramatically improved and will grasp just how much potential lies ahead of us. Kerry?

Charles Turner

Thank you Alex. Earlier today for the fourth quarter we reported net income of $35 million or $0.30 per share, a $64 million improvement over the net loss of $29 million or $0.33 per share reported for the same period last year.

Results for the fourth quarter of fiscal 2010 included special charges of $1 million which I will discuss later. Excluding these charges the company’s net income on a non-GAAP basis for the quarter would have been $36 million or $0.31 per share. Despite having started the quarter with 49 fewer stores than the year-ago quarter total sales for the fourth fiscal quarter increased to $396 million from $389 million. The increase in total sales during the quarter was primarily due to a comparable store sales gain during the period of 6.5%.


Comparable store sales increased as a result of traffic improvements in December and higher average ticket, average unit retail and conversion rates for the quarter. Merchandise margins for the quarter were $221 million or 55.8% of sales, a 1,150 basis point improvement over $173 million or 44.3% reported for the same period last year. A fourth quarter merchandise margin rate at this level has not been achieved since fiscal 1999.

Store occupancy costs at $67 million declined from $71 million last year due to the reduced store count and rental rate reductions achieved in existing stores. Gross profit for the quarter calculated by deducting store occupancy costs from merchandise margin dollars improved to $154 million or 38.9% of sales from $102 million or 26.2% of sales in the fourth quarter last year.

Fourth quarter selling, general and administrative expenses were well controlled and declined to $113 million, a $9 million decrease when compared to $122 million reported for the year-ago quarter. During the period, SG&A consisted primarily of $18 million in marketing costs, $77 million in payroll and $17 million in other G&A costs. Also, these expenses included approximately $1 million in special charges resulting from store closings and severance charges.

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