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Pier 1 Imports (PIR)
Q3 2012 Earnings Call
December 15, 2011 11:00 am ET
Alexander W. Smith - Chief Executive Officer, President, Director and Member of Executive Committee
Charles H. Turner - Chief Financial Officer, Executive Vice President of Finance and Treasurer
Kelley Buchhorn -
Budd Bugatch - Raymond James & Associates, Inc., Research Division
Anthony C. Chukumba - BB&T Capital Markets, Research Division
Jason Campbell - KeyBanc Capital Markets Inc., Research Division
Mark Rupe - Longbow Research LLC
David Berman - Berman Capital Management LP
Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division
Vincent J. Sinisi - BofA Merrill Lynch, Research Division
Simeon Gutman - Crédit Suisse AG, Research Division
Brian W. Nagel - Oppenheimer & Co. Inc., Research Division
Previous Statements by PIR
» Pier 1 Imports' CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Pier 1 Imports' CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Pier 1 Imports' CEO Discusses Q4 2011 Results - Earnings Call Transcript
Alexander W. Smith
Thank you, Carmen. Good morning, everybody, and thanks for joining us today. Cary Turner, our Executive Vice President and Chief Financial Officer is with me today, as is Kelley Buchhorn, our Director of Investor Relations.
And as always, before we begin, I will ask Kelley to read you the Safe Harbor Statement. Kelley?
Thank you, Alex, and good morning, everyone. Prior to market open today, we issued a press release which included the detailed financial results for the third quarter ended November 26, 2011. In just a few moments, we will hear comments from Alex and Cary about those results, followed by a 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 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 conditions may differ materially from those expressed in any such forward-looking statements as a result of the many factors that may be outside of our control. Please refer to our SEC filings, including our Annual Report 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.
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 Cary, who will provide the highlights and an overview of our third quarter financial results. Cary?
Charles H. Turner
Thank you, Kelley. As reported on December 1 and in this morning's press release, comp store sales increased 7% for the third quarter versus last year's comp store sales increase of 10.2% for the same period. Total sales increased 8.2% for the quarter over the same period last year. The third quarter sales growth was driven by increases in store traffic and average ticket, and sales across all merchandise categories were strong.
Pier 1 To-Go sales contributed approximately 1% to the comp store sales increase during the quarter. On a trailing 12-month basis at the end of the quarter, sales per retail square foot were $178, getting closer to our 3-year goal of $200.00 per retail square foot and up from $163 per retail square foot at the end of the third quarter year. Merchandise margins increased 160 basis points as a percentage of sales to 60.5% of sales compared to 58.9% of sales in the third quarter last year. Merchandise margins continued to be positively impacted by strong input margins, the right balance of regular and promotional pricing and well-managed inventory levels.
Store occupancy costs for the third quarter declined 90 basis points as a percent of sales from last year and were $66 million or 17.3% of sales. Last year's store occupancy costs were $64 million or 18.2% of sales for the same period.
Gross profit for the quarter improved 250 basis points to 43.2% of sales compared to 40.7% of sales last year. SG&A expenses for the quarter were $128 million or 33.3% of sales compared to last year's SG&A expenses of $118 million or 33.2% of sales for the period.
As we discussed on our last call, we continued to make investments in marketing expenses and it is the one expense we do not expect to leverage. Even with the incremental marketing investment, variable expenses for the quarter were well leveraged and decreased 60 basis points as a percentage of sales over last year. The increase in fixed expenses primarily resulted from approximately $2 million to $3 million of expenses related to the planned hiring of incremental headcount in support of e-commerce and other growth initiatives for our business, and also additional expense for performance-related pay and other items. We remain prudent and careful as we can to analyze and incur incremental headcount as we go forward.
Operating income for the third quarter improved 50% to $33 million or 8.6% of sales compared to last year's third quarter operating income of $22 million or 6.2% of sales. The improvement in operating income resulted primarily from increases in sales and merchandise margins.