Pier 1 Reports 2Q Loss

September 13, 2006  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on September 2006 Pier 1 has reported a net loss of $73 million for the second quarter ended Aug. 26.

Excluding unusual charges and the effect of the adoption of a new accounting system the loss would have been $29.3 million for the quarter, compared to a loss of $6.4 million during the second quarter last year.

Sales for the quarter dropped 12.5 percent to $370.7 million, compared to sales of $423.7 million in the year-ago quarter. Same-store sales fell 14.8 percent.

For the first six months of fiscal 2007, Pier 1’s net loss from continuing operations was $95.8 million. Year-to-date sales dropped 8.3 percent to $746.8 million from $814 million during the same period last year. Same-store sales for the six months dropped 10.9 percent.

Reported results in the second quarter included a non-cash charge of $24.6 million to establish a valuation allowance against the retailer’s net deferred income tax assets that arose in prior years.

Unusual charges reported during the second quarter included the following: A pre-tax charge of $4.6 million attributable to a labor litigation settlement and related costs; a non-cash charge of $3.1 million for store-level asset impairment charges; a $2.7 million for relocation and integration of the Pier 1 Kids’ headquarters and warehouse into Pier 1 facilities; and a non-cash charge of $2.7 million for stock-based compensation expense in compliance with SFAS 123R.

“Although we are well underway with our turn-around strategy, we are disappointed to report a significant loss for the second quarter,” said Marvin Girouard, chairman and chief executive officer. “We did have a number of one-time charges which impacted the quarter. Additionally, sales were soft in June and July, improved slightly in August, but our fixed costs were too much to overcome.”

Girouard said he expects the retailer to improve over the next few months as Pier 1 moves into its fall and holiday selling seasons.

“We have dramatically changed our stores and our merchandise assortments to present new, eclectic and differentiated collections that offer better quality products, compelling visual presentations and a superior shopping experience in an effort to attract new customers,” he said.

“With 100 days remaining until Christmas, we are focused on the all-important holiday season,” Girouard said. “We have planned increases in store-level inventory for decorative accessories, gifts and tabletop collections, although total inventory is being carefully monitored and is currently 15 percent below last year. We have an aggressive marketing program scheduled for the third and fourth quarters of this year and new visual presentations planned for stores that will feature a broad assortment of value-priced items.”