Provides Update on Fiscal 2020 Action Plans
and Expense Reduction Initiatives
Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results
for the 13-week fourth quarter and 52-week full year ended March 2,
2019. Except where indicated, year-over-year comparisons reflect
the 14-week fourth quarter and 53-week full year of fiscal 2018
ended March 3, 2018.
Fourth Quarter Fiscal 2019 Financial Summary
- Company comparable sales decreased
13.7% compared to the 13-week period of fiscal 2018; the Company
estimates that the shift of certain holiday selling days, which
were not included in this year’s fiscal fourth quarter, negatively
impacted fourth quarter fiscal 2019 company comparable sales by
approximately 750 basis points.
- Net sales decreased 19.5% to $412.5
million compared to the fourth quarter of fiscal 2018;
- Net loss of $68.8 million, or ($0.85)
per share;
- Inventory of $347.6 million, flat to
fiscal 2018 year end; and
- Cash and cash equivalents of $54.9
million at year end, $50 million of borrowings under the Company’s
FILO tranche and an undrawn revolver facility.
“We are pleased to be sharing our fiscal 2020 action plan today,
which is designed to reset our operating model and rebuild our
business for the future,” said Cheryl Bachelder, Interim CEO. “As
anticipated, our fourth quarter sales and profitability were
disappointing and reflect the execution issues we identified
earlier in the year and have been working with urgency to correct.
Since December, we assembled a capable leadership team, brought
consulting expertise onboard, began a rapid diagnostic process and
selected priority initiatives designed to improve our operating
model and financial performance. Short term, we exited some legacy
inventory, revamped the focus of our spring/summer merchandise and
marketing, and implemented an organizational redesign in support of
our go-forward plan.”
Fourth Quarter Fiscal 2019 and Recent Business
Highlights
- Reduced legacy inventory that was not
uniquely Pier 1 merchandise and rebuilt the assortments for fall,
harvest and holiday;
- Established clearer merchandise focus
in stores and redesigned spring marketing messages with consistency
across all media channels;
- Engaged in a holistic review of the
business to re-engineer processes, build internal capabilities and
identify revenue growth and margin improvement opportunities;
and
- Implemented an organizational redesign
to align with the Company’s future strategy and enable reinvestment
around core competencies.
Fiscal 2020 Action Plans and Expense Reduction
Initiatives
Pier 1 is implementing an action plan designed to drive benefits
in fiscal 2020 of approximately $100-$110 million by resetting its
gross margin and cost structure. Approximately one-third of the
benefits are expected to be realized in gross margin, with the
remaining two-thirds coming from cost reduction. After reinvesting
in the business, the Company believes it will be positioned to
recapture approximately $30-$40 million of net income and $45-$55
million of EBITDA in fiscal year 2020. The Company expects to
capture efficiencies and drive improvement in the following areas:
1) Revenue and Margin; 2) Marketing and Promotional Effectiveness;
3) Sourcing and Supply Chain; 4) Cost Cutting; and 5) Store
Optimization.
As part of the $100-$110 million of benefits discussed above,
the Company has identified approximately $70-$80 million of
selling, general and administrative (“SG&A”) savings
opportunity for fiscal 2020, the majority of which is expected to
be realized in the second half of the year. This SG&A savings
opportunity for fiscal 2020 reflects an expected annual run-rate of
approximately $95-$105 million.
After closing 30 stores in fiscal 2019, the Company is
considering closing up to 45 locations in fiscal 2020 as leases
expire. Further, Pier 1 has conducted a review of its store
portfolio and will be seeking occupancy cost reductions. The store
closure number could increase to up to 15% of stores if the Company
is unable to achieve performance goals, sales targets, and
reductions in occupancy and other costs.
Ms. Bachelder added, “We are continuing to focus on
opportunities and initiatives to help drive incremental benefits in
the coming years, creating the runway to return our brand to
long-term health and sustainable financial performance. I am
pleased to see our teams executing against our new action plan with
urgency and believe our customer will return to a revitalized Pier
1 this fall.”
Fourth Quarter Fiscal 2019 Results of Operations
Net sales for the 13-week fourth quarter of fiscal 2019
decreased 19.5% to $412.5 million, compared to $512.2 million for
the 14-week fourth quarter of fiscal 2018. Company comparable sales
on a 13-week basis decreased 13.7% compared to the year ago period.
The Company estimates that the shift of certain holiday selling
days, which were not included in this year’s fiscal fourth quarter,
negatively impacted fourth quarter fiscal 2019 company comparable
sales by approximately 750 basis points. The decline in company
comparable sales is a result of lower average customer spend, which
is primarily attributable to changes in the Company’s merchandise
mix, as well as decreased store traffic. The Company operated 973
stores at the end of fiscal 2019, a decrease of 30 from fiscal 2018
year end.
Gross profit for the fourth quarter of fiscal 2019 totaled
$106.8 million, or 25.9% of net sales, compared to $189.7 million,
or 37.0% of net sales, for the 14-week fourth quarter of fiscal
2018. The year-over-year decline in gross margin rate reflects
lower merchandise margin, as well as 260 basis points of deleverage
on occupancy costs. The year-over-year decline in merchandise
margin rate is primarily attributable to lower input margins and
increased clearance activity.
SG&A expenses for the 13-week fourth quarter of fiscal 2019
were $158.7 million, or 38.5% of net sales, compared to $147.9
million, or 28.9% of net sales, for the 14-week fourth quarter of
fiscal 2018. The following table details the breakdown of SG&A
expenses for the fourth quarter of fiscal 2019 as compared to last
year (in millions).
13 Weeks Ended 14 Weeks Ended March 2,
2019 March 3, 2018 Expense % Sales Expense
% Sales Compensation for operations $ 65.1 15.8 % $
65.8 12.9 % Operational expenses 22.7 5.5 % 24.4 4.8 % Marketing
22.9 5.6 % 23.0 4.5 % Other selling, general and administrative
48.0 11.6 % 34.7 6.8 % Total selling, general and
administrative (1) $ 158.7 38.5 % $ 147.9 28.9 % (1)
The period ended March 2, 2019 includes
transformation costs of approximately $19 million primarily related
to professional fees and severance costs.
Operating loss for the fourth quarter of fiscal 2019 was $65.3
million compared to operating income of $28.2 million for the prior
year period. Net loss for the fourth quarter of fiscal 2019 totaled
$68.8 million, or ($0.85) per share, which includes transformation
costs of approximately $19 million primarily related to
professional fees and severance costs. This compares to net income
of $15.1 million, or $0.19 per share a year ago, and adjusted net
income (non-GAAP) of $16.6 million, or $0.21 per
share, which excludes $1.5 million, or $0.02 per
share related to the tax effect of regulatory costs relating to an
ongoing Consumer Product Safety Commission (“CPSC”)
inquiry. The Company estimates that the 14th week in fiscal 2018
contributed approximately $0.04 to earnings per share. EBITDA in
the fourth quarter of fiscal 2019 was ($51.9) million, which
includes the transformation costs referred to above, compared to
EBITDA of $41.5 million in the fourth quarter of fiscal 2018. A
reconciliation of GAAP to non-GAAP measures is provided below.
Full Year Fiscal 2019 Results of Operations
Net sales for the fiscal year ended March 2, 2019 were $1.6
billion, a decrease of 13.7% compared to $1.8 billion for the
53-week period of fiscal 2018. Company comparable sales for fiscal
2019 decreased 11.0% from the 52-week period of fiscal 2018.
Gross profit for fiscal 2019 totaled $450.9 million, or 29.0% of
net sales, compared to $658.1 million, or 36.6% of net sales, in
fiscal 2018.
SG&A expenses for the full year ended March 2, 2019 were
$587.5 million, or 37.8% of net sales, compared to $576.0 million,
or 32.0% of net sales, in fiscal 2018. The following table details
the breakdown of SG&A expenses for fiscal 2019 as compared to
last year (in millions).
52 Weeks Ended 53 Weeks Ended March 2,
2019 March 3, 2018 Expense % Sales Expense
% Sales Compensation for operations $ 241.7 15.6 % $
239.9 13.3 % Operational expenses 82.9 5.3 % 88.8 4.9 % Marketing
118.4 7.6 % 105.6 5.9 % Other selling, general and administrative
144.4 9.3 % 141.6 7.9 % Total selling, general and
administrative (1) $ 587.5 37.8 % $ 576.0 32.0 % (1)
The fiscal year ended March 2, 2019
includes transformation costs of approximately $19 million
primarily related to professional fees and severance costs. The
fiscal year ended March 3, 2018 includes legal and regulatory costs
and investments in brand consulting totaling approximately $12
million.
For the full year fiscal 2019, operating loss was $188.1 million
compared to operating income of $28.6 million a year ago. Net loss
for fiscal 2019 totaled $198.8 million, or ($2.46) per share, which
includes transformation costs of approximately $19 million
primarily related to professional fees and severance costs. This
compares to net income of $11.6 million, or $0.14 per share, and
adjusted net income (non-GAAP) of $16.8 million,
or $0.21 per share, for fiscal 2018. Adjusted net income
in fiscal 2018 excludes $6.6 million ($5.2 million,
or $0.07 per share, net of tax) of expense for legal and
regulatory costs related to a California wage-and-hour matter
and an ongoing CPSC inquiry. As referenced above, the Company
estimates that the 53rd week in fiscal 2018 contributed
approximately $0.04 to earnings per share. EBITDA for fiscal 2019
was ($136.7) million, which includes the transformation costs
referred to above, compared to EBITDA of $82.7 million, and
adjusted EBITDA of $89.3 million, which excludes the legal and
regulatory costs referred to above, in fiscal 2018. A
reconciliation of GAAP to non-GAAP measures is provided below.
Financial Position
As of March 2, 2019, inventories totaled $347.6 million compared
to $347.4 million a year ago. At year-end, the Company had $54.9
million of cash and cash equivalents, $191 million outstanding
under its senior secured term loan, $50 million of borrowings under
its FILO tranche and an undrawn revolving credit facility. The
Company has reduced its planned capital expenditures for fiscal
2020 from $40 million to approximately $30 million.
Fourth Quarter Fiscal 2019 Financial Results Conference
Call
The Company will hold a conference call to discuss fourth
quarter and full year fiscal 2019 financial results and fiscal 2020
action plans at 4:00 p.m. Central Time/5:00 p.m. Eastern Time on
Wednesday, April 17, 2019. A live audio webcast will be accessible
at the Company’s website at https://investors.pier1.com. The call
can also be accessed domestically at (866) 378-2926 and
internationally at (409) 350-3152, conference ID 3193662.
Financial Disclosure Advisory
The Company reports its financial results in accordance with
U.S. generally accepted accounting principles (“GAAP”). This press
release references non-GAAP financial measures including adjusted
net income (loss), adjusted earnings (loss) per share, EBITDA and
adjusted EBITDA.
The Company believes that the non-GAAP financial measures used
in this press release allow management and investors to understand
and compare results in a more consistent manner for the periods
presented. Non-GAAP financial measures should be considered
supplemental and not a substitute for the Company’s results
reported in accordance with GAAP for the periods presented.
EBITDA represents earnings before interest, taxes, depreciation
and amortization. Management believes EBITDA is a meaningful
indicator of the Company’s performance, which provides useful
information to investors regarding its financial condition and
results of operations. Management uses EBITDA, together with
financial measures prepared in accordance with GAAP, to assess the
Company’s operating performance, to enhance its understanding of
core operating performance and to compare the Company’s operating
performance to other retailers. EBITDA should not be considered in
isolation or used as an alternative to GAAP financial measures and
does not purport to be an alternative to net income (loss) as a
measure of operating performance. A reconciliation of net income
(loss) to EBITDA is shown below for the periods indicated (in
millions).
13 Weeks
Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended March 2, 2019
March 3, 2018 March 2, 2019 March 3, 2018 $ Amount %
of Sales $ Amount % of Sales $ Amount
% of Sales $ Amount % of Sales Net income
(loss) (GAAP) $ (68.8 ) (16.7 )% $ 15.1 2.9 % $ (198.8 ) (12.8 )% $
11.6 0.6 % Add back: Income tax provision
(benefit) (0.2 ) 0.0 % 10.5 2.0 % (2.5 ) (0.2 )% 6.3 0.4 % Interest
expense, net 3.7 0.9 % 2.4 0.5 % 13.2 0.8 % 11.2 0.6 % Depreciation
13.4 3.2 % 13.6 2.7 % 51.5 3.3 %
53.6 3.0 % EBITDA (non-GAAP) $ (51.9 ) (12.6 )% $ 41.5 8.1 %
$ (136.7 ) (8.8 )% $ 82.7 4.6 %
This press release also references adjusted net income (loss),
adjusted earnings (loss) per share and adjusted EBITDA, each of
which excludes legal and regulatory costs relating to a California
wage-and-hour matter and an ongoing CPSC inquiry incurred during
fiscal 2018. Management believes these non-GAAP financial measures
are useful in comparing the Company’s year-over-year operating
performance and should be considered supplemental and not a
substitute for the Company’s net income (loss) or earnings (loss)
per share reported in accordance with GAAP for the periods
presented. A reconciliation of net income (loss), earnings (loss)
per share and EBITDA to adjusted net income (loss), adjusted
earnings (loss) per share and adjusted EBITDA, respectively, is
shown below for the periods indicated (in millions).
13 Weeks
Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks
Ended March 2, 2019 March 3, 2018 March 2,
2019 March 3, 2018 Net income (loss) (GAAP) $
(68.8 ) $ 15.1 $ (198.8 ) $ 11.6 Add back: Legal and regulatory
matters, net of tax (1) — 1.5 —
5.2 Adjusted net income (loss) (non-GAAP) $ (68.8 ) $ 16.6 $
(198.8 ) $ 16.8 Earnings (loss) per share (GAAP) $ (0.85 ) $
0.19 $ (2.46 ) $ 0.14 Add back: Legal and regulatory matters, net
of tax (1) — 0.02 — 0.07
Adjusted earnings (loss) per share (non-GAAP) $ (0.85 ) $ 0.21 $
(2.46 ) $ 0.21 EBITDA (non-GAAP) $ (51.9 ) $ 41.5 $ (136.7 )
$ 82.7 Add back: Legal and regulatory matters (1) —
— — 6.6 Adjusted EBITDA (non-GAAP) $
(51.9 ) $ 41.5 $ (136.7 ) $ 89.3
(1) For the 53 weeks ended March 3, 2018,
legal and regulatory costs related to a California wage-and-hour
matter and an ongoing Consumer Product Safety Commission (“CPSC”)
inquiry totaled $6.6 million, or $5.2 million ($0.07 per share)
after adjusting for the tax impact. For the 14 weeks ended March 3,
2018, adjusted net income excludes $1.5 million, or $0.02 per
share, related to the tax effect of the CPSC inquiry.
Except for historical information contained herein, the
statements in this press release or otherwise made by our
management in connection with the subject matter of this press
release are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) and involve
risks and uncertainties and are subject to change based on various
important factors. This press release includes forward-looking
statements that are based on management’s current estimates or
expectations of future events or future results. These statements
are not historical in nature and can generally be identified by
such words as “believe,” “expect,” “estimate,” “anticipate,”
“plan,” “may,” “will,” “intend” and similar expressions.
Management’s expectations and assumptions regarding future results
are subject to risks, uncertainties and other factors that could
cause actual results to differ materially from the anticipated
results or other expectations expressed in the forward-looking
statements included in this press release. These risks and
uncertainties include, but are not limited to: the impact of the
organizational redesign of the Company’s corporate workforce; the
impact of initiatives implemented in connection with the Company’s
multi-year “New Day” strategic plan, particularly with respect to
changes in the initiatives supporting the New Day plan and actions
intended to return the Company to profitable growth; the impact of
initiatives connected with the appointment of the Company's interim
chief executive officer; fiscal 2020 action plans and expense
reduction initiatives; the results of the evaluation of strategic
alternatives and the terms, value and timing of any transaction
resulting from that process, or the failure of any such transaction
to occur; the effectiveness of the Company’s marketing campaigns,
merchandising and promotional strategies and customer databases;
consumer spending patterns; inventory levels and values; the
Company's ability to increase cash flows to support its operating
activities; the effectiveness of the Company's relationships with,
and operations of, its key suppliers; the Company’s ability to
implement planned cost control measures and reductions in capital
expenditures; risks related to U.S. import policy, particularly
with regard to the impact of tariffs on goods imported
from China and strategies undertaken to mitigate such
impact; changes in foreign currency values relative to the U.S.
dollar; the Company's ability to identify a successor chief
executive officer and chief financial officer and retain its senior
management team; and the Company's ability to comply with the
continued listing criteria of the NYSE, and risks arising from
the potential suspension of trading of the Company's common stock
on that exchange. These and other factors that could cause results
to differ materially from those described in the forward-looking
statements contained in this press release can be found in the
Company’s Annual Report on Form 10-K, its Quarterly Report on Form
10-Q for the quarterly period ended December 1, 2018 and
in other filings with the SEC. Refer to the Company’s most
recent SEC filings for any updates concerning these and
other risks and uncertainties that may affect the Company’s
operations and performance. Undue reliance should not be placed on
forward-looking statements, which are only current as of the date
they are made. The Company assumes no obligation to update or
revise its forward-looking statements, except as may be required by
applicable law.
About Pier 1
Founded with a single store in 1962, Pier 1 is a leading
omnichannel retailer of unique home décor and accessories. The
company’s products are available through more than 970 Pier 1
stores in the U.S. and Canada and online
at pier1.com. For more information or to find the nearest
store, please visit pier1.com.
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except
per share amounts) (unaudited)
13 Weeks Ended 14 Weeks Ended March 2, % of
March 3, % of 2019 Sales 2018 Sales Net sales $ 412,506
100.0 % $ 512,229 100.0 % Cost of sales 305,740
74.1 % 322,516 63.0 % Gross profit
106,766 25.9 % 189,713 37.0 % Selling, general and
administrative expenses 158,718 38.5 % 147,909 28.9 % Depreciation
13,383 3.2 % 13,630 2.7 %
Operating income (loss) (65,335 ) (15.8 %) 28,174 5.4 %
Nonoperating (income) and expenses: Interest, investment income and
other (933 ) (723 ) Interest expense 4,624
3,371 3,691 0.9 % 2,648
0.5 % Income (loss) before income taxes (69,026 )
(16.7 %) 25,526 4.9 % Income tax provision (benefit) (225 )
0.0 % 10,472 2.0 % Net income (loss) $ (68,801
) (16.7 %) $ 15,054 2.9 % Earnings (loss) per share:
Basic $ (0.85 ) $ 0.19 Diluted $ (0.85 ) $ 0.19
Dividends declared per share: $ - $ 0.07
Average shares outstanding during period: Basic
81,305 79,835 Diluted
81,305 79,854
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except
per share amounts) (unaudited)
52 Weeks Ended 53 Weeks Ended March 2, % of
March 3, % of 2019 Sales 2018 Sales Net sales $ 1,552,938
100.0 % $ 1,798,522 100.0 % Cost of sales 1,102,035
71.0 % 1,140,372 63.4 % Gross profit
450,903 29.0 % 658,150 36.6 % Selling, general and
administrative expenses 587,459 37.8 % 575,953 32.0 % Depreciation
51,529 3.3 % 53,603 3.0 %
Operating income (loss) (188,085 ) (12.1 %) 28,594 1.6 %
Nonoperating (income) and expenses: Interest, investment income and
other (2,000 ) (1,665 ) Interest expense 15,294
12,362 13,294 0.9 %
10,697 0.6 % Income (loss) before income taxes
(201,379 ) (13.0 %) 17,897 1.0 % Income tax provision (benefit)
(2,546 ) (0.2 %) 6,271 0.4 % Net income
(loss) $ (198,833 ) (12.8 %) $ 11,626 0.6 % Earnings
(loss) per share: Basic $ (2.46 ) $ 0.14 Diluted $
(2.46 ) $ 0.14 Dividends declared per share: $ -
$ 0.28 Average shares outstanding during
period: Basic 80,708 80,223
Diluted 80,708 80,254
Pier 1 Imports,
Inc.
CONSOLIDATED BALANCE SHEETS (in
thousands except share amounts) (unaudited) March 2,
March 3, 2019 2018 ASSETS Current assets:
Cash and cash equivalents, including
temporary investments of $49,532 and $115,456, respectively
$ 54,878 $ 135,379 Accounts receivable, net of allowance for
doubtful accounts of $251 and $236, respectively 21,189 22,149
Inventories 347,584 347,440 Prepaid expenses and other current
assets 49,876 48,794 Total current
assets 473,527 553,762 Properties and equipment, net 149,356
178,767 Other noncurrent assets 33,407 39,790
$ 656,290 $ 772,319 LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $
121,969 $ 71,279 Gift cards and other deferred revenue 37,655
55,281 Accrued income taxes payable 302 2,301 Current portion of
long-term debt 2,000 2,000 Other accrued liabilities 107,539
106,268 Total current liabilities 269,465
237,129 Long-term debt 245,624 197,906 Other noncurrent
liabilities 51,672 59,714 Shareholders' equity:
Common stock, $0.001 par, 500,000,000
shares authorized, 125,232,000 issued
125 125 Paid-in capital 138,350 168,424 Retained earnings 534,419
726,232 Cumulative other comprehensive loss (7,861 ) (7,477 )
Less -- 39,618,000 and 41,974,000 common
shares in treasury, at cost, respectively
(575,504 ) (609,734 ) Total shareholders' equity
89,529 277,570 $ 656,290 $
772,319
Pier 1 Imports,
Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) 52
Weeks Ended 53 Weeks Ended March 2, March 3, 2019 2018
Cash flows from operating activities: Net income (loss) $
(198,833 ) $ 11,626
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation
59,523 61,430 Stock-based compensation expense 2,756 3,809 Deferred
compensation, net 4,169 2,414 Deferred income taxes (3,071 ) 6,012
Other 3,615 2,111 Changes in cash from: Inventories (540 ) 53,536
Prepaid expenses and other assets 3,348 (17,546 ) Accounts payable
and other liabilities 32,249 (33,829 ) Accrued income taxes
payable, net of payments (2,014 ) (23,757 ) Net cash
provided by (used in) operating activities (98,798 )
65,806
Cash flows from investing
activities:
Capital expenditures (36,444 ) (53,249 ) Proceeds from disposition
of properties 2,058 160 Proceeds from sale of restricted
investments 12,063 27,562 Purchase of restricted investments
(6,927 ) (26,082 ) Net cash used in investing activities
(29,250 ) (51,609 )
Cash flows from
financing activities: Cash dividends - (22,294 ) Purchases of
treasury stock - (10,000 ) Stock purchase plan and other, net 1,400
2,307 Repayments of long-term debt (2,000 ) (2,000 ) Debt issuance
costs (1,170 ) (1,291 ) Borrowings under revolving line of credit -
8,000 Repayments of borrowings under revolving line of credit -
(8,000 ) Borrowings under FILO/ABL Term Loan 50,000
- Net cash provided by (used in) financing activities
48,230 (33,278 ) Effect of exchange
rate changes on cash (683 ) - Change in cash and cash
equivalents (80,501 ) (19,081 ) Cash and cash equivalents at
beginning of period 135,379 154,460
Cash and cash equivalents at end of period $ 54,878 $
135,379
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190417005898/en/
Investor Relations Contact:Christine GreanyThe Blueshirt
Group(858) 523-1732christine@blueshirtgroup.com
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