Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results
for the third quarter ended November 30, 2019 and provided a
business update.
Third Quarter Fiscal 2020 Financial Summary
- Company comparable sales decreased 11.4% compared to the third
quarter of fiscal 2019; the Company estimates that the shift of
certain holiday selling days, which were included in last year’s
fiscal third quarter, negatively impacted third quarter fiscal 2020
company comparable sales by approximately 650 basis points. The
impact of this timing shift is expected to reverse in the fourth
quarter of fiscal 2020;
- Net sales decreased 13.3% to $358.4 million compared to the
third quarter of fiscal 2019;
- Net loss of $59.0 million, or ($14.15) per share;
- Impairment charges totaling $14.1 million which consisted of
$9.2 million for lease right-of-use assets and $4.9 million for
fixed assets;
- Inventory of $328.9 million, down approximately 15.3%
year-over-year; and
- Cash and cash equivalents of $11.1 million at quarter end,
$189.5 million outstanding under its senior secured term loan,
$50.0 million of borrowings under the Company’s FILO tranche, $96
million of borrowings under its $350 million revolving credit
facility and $46.5 million in letters of credit outstanding under
the Revolving Credit Facility, with $158.5 million remaining
available for cash borrowings, all as of November 30, 2019.
Robert Riesbeck, Pier 1’s Chief Executive Officer and Chief
Financial Officer, said, “Fiscal third quarter sales and margins
remained under pressure as we completed our efforts to clear out
non-go-forward merchandise. Looking ahead, we believe that we will
deliver improved financial results over time as we realize the
benefits of our business transformation and cost-reduction
initiatives. To further advance our progress, we are announcing
additional actions today that will enable us to move forward with
an appropriately sized store footprint and operating structure as
an omni-channel retailer, and better position Pier 1 to meet our
customers where they shop.”
Business Update
In order to better align its
business with the current operating environment, Pier 1 intends to
reduce its store footprint by up to 450 locations. To reflect the
revised store footprint, the Company also plans to close certain
distribution centers and reduce its corporate expenses. This
includes a reduction in corporate headcount.
In order to maintain the same
high standards customers have come to expect and ensure a seamless
experience for customers at these locations, the Company is
utilizing the services of a third-party liquidator to help manage
the store closings.
On January 6, 2020, the
Company received consent from its lenders under the Revolving
Credit Facility to permit the reduction to the store footprint and
related actions.
Mr. Riesbeck added, “Although
decisions that impact our associates are never easy, reducing the
number of our brick-and-mortar locations is a necessary business
decision. We thank our team of hard-working associates for their
commitment to Pier 1 and to serving our customers.”
Third Quarter Fiscal 2020 Results of Operations
Net sales for the third quarter of fiscal 2020 decreased 13.3%
to $358.4 million, compared to $413.2 million for the third quarter
of fiscal 2019. Company comparable sales decreased 11.4% compared
to the year ago period, primarily as a result of lower traffic. In
addition, the Company estimates that the shift of certain holiday
selling days, which were included in last year’s fiscal third
quarter, negatively impacted third quarter fiscal 2020 company
comparable sales by approximately 650 basis points. The impact of
this timing shift is expected to reverse in the fourth quarter of
fiscal 2020. The Company operated 942 stores at the end of the
third quarter, a decrease of 45 from the third quarter of fiscal
2019.
Gross profit for the third quarter of fiscal 2020 totaled $110.3
million, or 30.8% of net sales, compared to $130.5 million, or
31.6% of net sales, for the third quarter of fiscal 2019. The
year-over-year decline in gross margin rate primarily reflects
increased promotional and clearance activity, as well as 190 basis
points deleverage in store occupancy costs due to lower sales.
SG&A expenses for the third quarter of fiscal 2020 were
$151.4 million, or 42.2% of net sales, compared to $147.0 million,
or 35.6% of net sales, for the third quarter of fiscal 2019. The
following table details the breakdown of SG&A expenses for the
third quarter of fiscal 2020 as compared to the prior year period
(in millions).
13 Weeks Ended November 30, 2019 December 1, 2018
Expense
% of Sales
Expense
% of Sales
Compensation for operations
$
54.7
15.3
%
$
61.0
14.8
%
Operational expenses
14.7
4.1
%
19.8
4.8
%
Marketing
25.2
7.0
%
35.4
8.6
%
Other selling, general and administrative
42.7
11.9
%
30.8
7.5
%
Impairment
14.1
3.9
%
-
0.0
%
Total selling, general and administrative
$
151.4
42.2
%
$
147.0
35.6
%
Operating loss for the third quarter of fiscal 2020 was $53.3
million compared to operating loss of $28.9 million for the prior
year period. Net loss for the third quarter of fiscal 2020 totaled
$59.0 million, or ($14.15) per share, which includes transformation
costs of approximately $10 million, primarily related to
professional fees, and a non-cash charge of $14.1 million related
to store impairment. This compares to net loss of $50.4 million, or
($12.49) per share a year ago. Per share figures have been adjusted
to reflect the Company’s 1-for-20 reverse stock split effected on
June 20, 2019. EBITDA in the third quarter of fiscal 2020 was
($41.0) million, which includes the transformation costs and
impairment charge referred to above, compared to EBITDA of ($16.9)
million in the third quarter of fiscal 2019. A reconciliation of
this non-GAAP measure to GAAP is provided below.
Year-to-Date Results of Operations
Net sales for the 39 weeks ended November 30, 2019 were $977.3
million, a decrease of 14.3% compared to $1.140 billion for the
same period of fiscal 2019. Company comparable sales for the
year-to-date period decreased 12.5% from the prior year, reflecting
lower average customer spend, which is primarily attributable to
changes in the Company’s merchandise mix, as well as decreased
store traffic.
Gross profit for the year-to-date period of fiscal 2020 totaled
$239.9 million, or 24.5% of net sales, compared to $344.1 million,
or 30.2% of net sales, for the same period a year ago.
SG&A expenses for the 39 weeks ended November 30, 2019 were
$426.3 million, or 43.6% of net sales, compared to $428.7 million,
or 37.6% of net sales, for the period ended December 1, 2018. The
following table details the breakdown of SG&A expenses for
fiscal 2020 as compared to last year (in millions).
39 Weeks Ended November 30, 2019 December 1, 2018 Expense % of
Sales Expense % of Sales Compensation for operations
$
167.1
17.1
%
$
176.6
15.5
%
Operational expenses
51.4
5.3
%
60.2
5.3
%
Marketing
64.1
6.6
%
95.5
8.4
%
Other selling, general and administrative
125.0
12.8
%
96.4
8.5
%
Impairment
18.7
1.9
%
-
0.0
%
Total selling, general and administrative
$
426.3
43.6
%
$
428.7
37.6
%
For the 39-week period ended November 30, 2019, operating loss
was $222.9 million compared to operating loss of $122.8 million in
the same period a year ago. Net loss for the 39 weeks ended
November 30, 2019 totaled $241.2 million, or ($58.36) per share,
which includes transformation costs of approximately $36 million,
primarily related to professional fees, and a non-cash charge of
$18.7 million related to store impairment. This compares to net
loss of $130.0 million, or ($32.31) per share, in the year ago
period. Per share figures have been adjusted to reflect the
Company’s 1-for-20 reverse stock split effected on June 20, 2019.
EBITDA for the 39-week period was ($186.1) million in fiscal 2020,
which includes the transformation costs and impairment charge
referred to above, compared to EBITDA of ($84.8) million in the
same period of fiscal 2019. A reconciliation of this non-GAAP
measure to GAAP is provided below.
Balance Sheet and Financial Position
As of November 30, 2019,
inventories totaled $328.9 million compared to $388.3 million a
year ago. At quarter end, the Company had $11.1 million in cash and
cash equivalents, $189.5 million outstanding under its senior
secured term loan, $50.0 million of borrowings under its FILO
tranche, $96.0 million of borrowings under its $350 million
revolving credit facility and $46.5 million in letters of credit
outstanding under the Revolving Credit Facility, with $158.5
million remaining available for cash borrowings, all as of November
30, 2019.
Financial Disclosure Advisory
The Company reports its financial results in accordance with
U.S. generally accepted accounting principles (“GAAP”). This press
release references EBITDA, a non-GAAP financial measure.
The Company believes that EBITDA allows management and investors
to understand and compare results in a more consistent manner for
the periods presented. EBITDA, as a non-GAAP financial measure,
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 loss to
EBITDA is shown below for the periods indicated (in millions).
13 Weeks Ended 39 Weeks Ended November 30, 2019 December 1, 2018
November 30, 2019 December 1, 2018 $ Amount % of Sales $ Amount %
of Sales $ Amount % of Sales $ Amount % of Sales Net loss (GAAP)
$
(59.0
)
(16.4
)%
$
(50.4
)
(12.2
)%
$
(241.2
)
(24.7
)%
$
(130.0
)
(11.4
)%
Add back: Income tax provision (benefit)
0.3
0.1
%
17.9
4.3
%
3.0
0.3
%
(2.3
)
(0.2
)%
Interest expense, net
5.5
1.5
%
3.3
0.8
%
15.6
1.6
%
9.5
0.8
%
Depreciation
12.2
3.4
%
12.4
3.0
%
36.6
3.7
%
38.1
3.4
%
EBITDA (non-GAAP)
$
(41.0
)
(11.4
)%
$
(16.9
)
(4.1
)%
$
(186.1
)
(19.0
)%
$
(84.8
)
(7.4
)%
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: actions intended to
return the Company to profitable growth; fiscal 2020 action plans
and expense reduction initiatives intended to reset the Company’s
gross margin and cost structure, including the potential closure of
up to 450 stores; the Company’s ability to increase cash flows to
support its operating activities and to fund its obligations and
working capital needs through the next 12 months; 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 Company’s ability to
finalize or fully execute actions that would be probable of
mitigating the existence of “substantial doubt” regarding the
Company’s ability to continue as a going concern within the next
year; the Company’s ability to obtain necessary consents, waivers
and amendments and to avoid defaults under its senior secured
credit facilities, including defaults that would result from the
Company’s auditors qualifying their opinion on the Company’s fiscal
2020 financial statements expected to be filed with the SEC; the
effectiveness of the Company’s marketing campaigns, merchandising
and promotional strategies and customer databases; consumer
spending patterns; inventory levels and values; the effectiveness
of the Company’s relationships with, and operations of, its key
suppliers; risks related to changes in U.S. policy related to
imported merchandise, 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 retain its senior
management team; continued volatility in the price of the Company’s
common stock; and the Company’s ability to execute its business
plan to return to compliance with the continued listing criteria of
the New York Stock Exchange (“NYSE”), as accepted by the NYSE, its
ability to continue to comply with the applicable NYSE listing
standards within the available cure period, and risks arising from
the potential suspension of trading of the Company’s common stock
on the NYSE. 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 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 Imports, Inc.
Founded with a single store in 1962, Pier 1 Imports is a leading
omni-channel retailer of unique home décor and accessories. The
Company’s products are available through 936 Pier 1 stores in the
U.S. 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 November 30, % of
December 1, % of
2019
Sales
2018
Sales
Net sales
$
358,416
100.0
%
$
413,232
100.0
%
Cost of sales
248,146
69.2
%
282,740
68.4
%
Gross profit
110,270
30.8
%
130,492
31.6
%
Selling, general and administrative expenses
151,405
42.2
%
147,012
35.6
%
Depreciation
12,176
3.4
%
12,423
3.0
%
Operating loss
(53,311
)
(14.8
%)
(28,943
)
(7.0
%)
Nonoperating (income) and expenses: Interest, investment
income and other
(191
)
96
Interest expense
5,586
3,526
5,395
1.5
%
3,622
0.9
%
Loss before income taxes
(58,706
)
(16.3
%)
(32,565
)
(7.9
%)
Income tax provision
250
0.1
%
17,876
4.3
%
Net loss
$
(58,956
)
(16.4
%)
$
(50,441
)
(12.2
%)
Loss per share: Basic
$
(14.15
)
$
(12.49
)
Diluted
$
(14.15
)
$
(12.49
)
Average shares outstanding during period: Basic
4,168
4,039
Diluted
4,168
4,039
Pier 1 Imports, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except
per share amounts) (unaudited) 39 Weeks Ended November 30, %
of December 1, % of
2019
Sales
2018
Sales
Net sales
$
977,330
100.0
%
$
1,140,432
100.0
%
Cost of sales
737,402
75.5
%
796,295
69.8
%
Gross profit
239,928
24.5
%
344,137
30.2
%
Selling, general and administrative expenses
426,259
43.6
%
428,741
37.6
%
Depreciation
36,600
3.7
%
38,146
3.4
%
Operating loss
(222,931
)
(22.8
%)
(122,750
)
(10.8
%)
Nonoperating (income) and expenses: Interest, investment
income and other
(549
)
(1,067
)
Interest expense
15,883
10,670
15,334
1.6
%
9,603
0.8
%
Loss before income taxes
(238,265
)
(24.4
%)
(132,353
)
(11.6
%)
Income tax provision (benefit)
2,955
0.3
%
(2,321
)
(0.2
%)
Net loss
$
(241,220
)
(24.7
%)
$
(130,032
)
(11.4
%)
Loss per share: Basic
$
(58.36
)
$
(32.31
)
Diluted
$
(58.36
)
$
(32.31
)
Average shares outstanding during period: Basic
4,133
4,025
Diluted
4,133
4,025
Pier 1 Imports, Inc.
CONSOLIDATED BALANCE SHEETS (in thousands except share
amounts) (unaudited) November 30, March 2, December
1,
2019
2019
2018
ASSETS Current assets: Cash and cash equivalents, including
temporary investments of $2,727, $49,532 and $63,330, respectively
$
11,077
$
54,878
$
71,109
Accounts receivable, net
36,489
21,189
36,283
Inventories
328,916
347,584
388,275
Prepaid expenses and other current assets
50,103
49,876
56,656
Total current assets
426,585
473,527
552,323
Properties and equipment, net of accumulated depreciation of
$586,592, $556,426 and $551,065, respectively
106,260
149,356
159,705
Operating lease right-of-use assets
588,573
-
-
Other noncurrent assets
28,821
33,407
33,264
$
1,150,239
$
656,290
$
745,292
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities: Accounts payable
$
144,972
$
121,969
$
172,744
Gift cards and other deferred revenue
36,709
37,655
44,028
Borrowings under revolving line of credit
96,000
-
-
Accrued income taxes payable
24
302
-
Current portion of long-term debt
2,875
2,000
2,000
Current portion of operating lease liabilities
146,931
-
-
Other accrued liabilities
106,268
107,539
118,236
Total current liabilities
533,779
269,465
337,008
Long-term debt
258,254
245,624
197,011
Long-term operating lease liabilities
487,872
-
-
Other noncurrent liabilities
18,032
51,672
54,087
Shareholders' equity (deficit): Common stock, $0.001 par,
25,000,000 shares authorized, 6,262,000 issued
6
6
6
Paid-in capital
141,875
138,469
149,044
Retained earnings
294,742
534,419
603,220
Cumulative other comprehensive loss
(7,812
)
(7,861
)
(8,219
)
Less -- 1,986,000, 1,981,000 and 2,019,000 common shares in
treasury, at cost, respectively
(576,509
)
(575,504
)
(586,865
)
Total shareholders' equity (deficit)
(147,698
)
89,529
157,186
$
1,150,239
$
656,290
$
745,292
Pier 1
Imports, Inc.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(unaudited)
39 Weeks Ended November 30, December 1,
2019
2018
Cash flows from operating activities:
Net loss
$
(241,220
)
$
(130,032
)
Adjustments to reconcile to net
cash used in
operating activities:
Depreciation
42,097
44,121
Non-cash operating lease
expense
2,665
-
Right-of-use asset impairment
10,629
-
Fixed asset impairment
8,103
-
Stock-based compensation
expense
1,847
2,266
Deferred compensation, net
380
2,065
Deferred income taxes
2,337
(1,361
)
Other
5,192
1,486
Changes in cash from:
Inventories
18,681
(41,257
)
Prepaid expenses and other
assets
(15,342
)
(18,210
)
Accounts payable and other
liabilities
19,051
104,888
Accrued income taxes payable, net
of payments
(277
)
(2,313
)
Net cash used in operating
activities
(145,857
)
(38,347
)
Cash flows from investing
activities:
Capital expenditures
(10,060
)
(31,466
)
Proceeds from disposition of
properties
627
1,732
Proceeds from sale of restricted
investments
2,985
11,236
Purchase of restricted
investments
(804
)
(6,605
)
Net cash used in investing
activities
(7,252
)
(25,103
)
Cash flows from financing
activities:
Stock purchase plan and other,
net
554
1,104
Repayments of long-term debt
(1,500
)
(1,500
)
Borrowings under revolving line
of credit
251,000
-
Repayments of borrowings under
revolving line of credit
(155,000
)
-
Borrowings under company owned
life insurance
14,246
-
Net cash provided by (used in)
financing activities
109,300
(396
)
Effect of exchange rate changes on cash
8
(424
)
Change in cash and cash equivalents
(43,801
)
(64,270
)
Cash and cash equivalents at beginning of period
54,878
135,379
Cash and cash equivalents at end of period
$
11,077
$
71,109
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200106005964/en/
Pier 1 Contact: Jennifer Engstrand Reeder
mediarelations@pier1.com
Media Contact: Joele Frank, Wilkinson Brimmer Katcher
Leigh Parrish / Andrea Rose 212-355-4449
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