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Pier 1 Imports Q3 results in line with guidance

23
Dec '08

The Company reported a net loss of $36.9 million, or $0.41 per share, for the third quarter, versus $10.0 million, or $0.11 per share, for the same period last year. EBITDA before special charges was negative $20 million, in line with the previous guidance of negative $16 - $20 million.

Alex W. Smith, the Company's President and Chief Executive Officer, said, "In this environment, those external to our Company will naturally focus on raw numbers, which from a sales and income perspective are extremely disappointing, but not a surprise. That said, we know our merchandise offering and in-store experience are significantly better than last year. I am very pleased with what our team has delivered, and in any normal environment, we would have been rewarded at the cash register.

"Despite the recession, we continue to see outstanding levels of conversion rate and units per transaction, albeit at a lower average ticket than originally planned. Our Christmas marketing campaign has resonated well, and as a consequence, traffic declines are smaller in December than in October and November.

"We are fortunate that we have ample liquidity to weather this storm, but we need to be cautious in the short term. Until we see signs of an upturn, we will buy carefully, manage our inventories aggressively and make our everyday fair price proposition more compelling through increased use of promotional activity, but without impairing our brand position. We will do this hand in hand with our ongoing mission to improve our product and enhance the in-store experience. Additionally, we will continue to aggressively seek out ways to reduce our cost base.

"We had planned to complete the first phase of our turnaround and to return Pier 1 Imports to profitability in fiscal 2010, and until August, we were well on our way. This recession has obviously slowed our speed and increased our timeline, and some of our tactics may change, but our overall strategy remains the same. We remain very optimistic about the future prospects for the brand."

Sales and Merchandise Margins
Total sales for the third fiscal quarter declined to $301 million from $374 million in the year-ago quarter. Comparable store sales for the quarter declined 17.8%, which is in line with the previous guidance. Total sales for the first nine months of fiscal 2009 were $931 million, versus $1,075 million for the same period last year. Comparable store sales for the first nine months declined 8.9%.

Merchandise margins for the quarter were 52.5%, and were in line with the Company's November guidance. Merchandise margins were 53.0% in the same period last year. Merchandise margins during the quarter were impacted by increased markdown activity as compared to last year, as the Company focused on managing inventory levels given the lower than anticipated sales. Store occupancy costs were $70 million compared to $72 million last year.

For the first nine months of fiscal 2009, merchandise margins were 51.0%, versus 48.6% last year. Store occupancy costs were $214 million year to date versus $222 million last year.

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