Pier 1 Imports, Inc. (PIR)

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Pier 1 Imports (PIR)

Q2 2013 Earnings Call

September 13, 2012 11:00 am ET

Executives

Kelley Buchhorn

Alexander W. Smith - Chief Executive Officer, President, Director and Member of Executive Committee

Charles H. Turner - Chief Financial Officer, Senior Executive Vice President and Treasurer

Analysts

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

Thomas J. McConville - Raymond James & Associates, Inc., Research Division

Simeon Gutman - Crédit Suisse AG, Research Division

Vincent J. Sinisi - BofA Merrill Lynch, Research Division

Alan M. Rifkin - Barclays Capital, Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Pier 1 Imports Second Quarter Fiscal 2013 Earnings Call. At the request of Pier 1 Imports, today's conference call is being recorded. [Operator Instructions]

I would now like to introduce Kelley Buchhorn, Director of Investor Relations for Pier 1 Imports.

Kelley Buchhorn

Thank you, and good morning, everyone. Prior to market open today, we issued a press release, which included the detailed financial results for the second quarter ended August 25, 2012. In just a few moments, we will hear comments from Alex and Cary about the financial results and the company's growth initiative, 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 27A of the Securities Act of 1933 and 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 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. 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 company will also discuss non-GAAP financial measures on this conference call. Pursuant to the requirements of Regulation G and Item 10E of Regulation SK, the company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings press release that was issued earlier this morning. If you do not have a copy of today's press release, you may obtain one, along with copies of the prior press releases and all SEC filings, by linking through to the Investor Relations page of our website, pier1.com.

Now I'd like to turn the call over to Alex Smith, our President and Chief Executive Officer. Alex?

Alexander W. Smith

Thanks, Kelley. Good morning, everyone, and thanks for joining us today. Also on the call with us today is Cary Turner, of course, our Senior Executive Vice President and Chief Financial Officer. And in a few moments, Cary will provide a detailed review of our second quarter financial results and updated earnings guidance for the year.

We're very pleased with our strong second quarter financial performance, which marks our 12th consecutive quarter of significant comp store sales gains and profitability increases. During the period, we delivered a comp store sales increase of 6.7%, achieved operating margins of 8.8% and grew non-GAAP earnings per share by 36%. Our talented and hardworking associates with their exceptional drive and their focus on creating an increasingly prosperous Pier 1 Imports have delivered consistent top and bottom line growth, expanded our market share and allowed us to return value to our shareholders through stock purchases and cash dividends.

In the second quarter of fiscal 2013, total sales increased 8.3%. Throughout the period, business trends grew increasingly strong as customers responded favorably to all our product categories, including outdoor and summer. By early August, our stores had transitioned to the new season, and we are set with our fabulous fall Halloween and Harvest merchandise. Early reads on these assortments have been positive. Merchandise margins remained strong, reaching 60.1% in the second quarter. We continue to carefully and thoughtfully analyze the right balance of regular promotion and clearance pricing in order to maximize merchandise margin dollars while offering our customers newness, exclusive quality merchandise and a strong value proposition.

During the quarter, we had fewer clearance markdowns compared to last year, which afforded us the opportunity to deliver more promotional pricing to our customers, whom, we all know, in this current environment, are still looking for a good deal. Our approach delivered both an improved margin rate and more merchandise margin dollars.

Let's now spend some time on what may be the single most important project in the history of our company and certainly the largest and most complex. It is, of course, our new e-Commerce-enabled, fully redesigned website, pier1.com. We are very proud of the new site, which successfully launched just over 6 weeks ago, on time and on budget. The transformation is significant and truly remarkable. We view this successful launch as a major milestone, which positions the business to grow into a true multichannel organization.

We laid out a plan 2 years ago to design and develop a best-in-class website that would be fully reflective of our brand, our stores and who we are. Our plan called for the launch of our new website in the summer of 2012. So that's what we did. And here we are, up and running after 24 months of hard work and dedication by associates throughout the organization, as well as the commitment of our external business partners.

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