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Pier 1 Strengthens Its Position
Pier 1 Imports (NYSE:PIR), specialty decorative home furnishings retailer, showed continued progress via its fourth quarter earnings. The company, which emerged from its retailing difficulties of a couple of years ago, adds to its firmer footing with each improved quarter.
TUTORIAL: Forex Guide
A Margin Story
One of the things that jumps out about Pier 1's results for the quarter is the strength of its margins. The company racked up a 260 basis point improvement in merchandise margins, to 58.4% of sales compared to 55.8% of sales in the same quarter last year.
The keys to this performance cited by the company were its lower markdowns, controlled input costs and well managed inventory levels. Gross profit improved to 42.8% of sales compared to 38.9% of sales in last year's same period.
An Improving Industry
Household decorative furnishings retailers are feeling better about their prospects. The sector's leader, Bed Bath & Beyond (Nasdaq:BBBY) recently posted a 30% increase in quarterly net earnings, as well as a strong full year's sales and earnings and, most importantly, guidance for continued earnings strength. Williams-Sonoma (NYSE:WSM), a retailer more on par with the Pier 1, turned in record earnings for its fiscal 2010.
Both Bed Bath & Beyond and Williams-Sonoma are well-run companies, but the upturn in the industry is not as robust with the larger players. Department stores such as Dillard Dept. Stores (NYSE:DDS) and JC Penney (NYSE:JCP) beat their comps in the recent March numbers, but uncertainty remains about the growth prospects of same store sales. While this includes more than home furnishings for the department stores, it suggests that the execution by the specialty stores in the space has been anything but easy.
Sales and Earnings Rise
Pier 1 reported $57.1 million net income or 48 cents per share for its fourth quarter compared to $34.5 million or 30 cents in the same quarter a year ago. Same store sales increased 8.9% for the quarter compared to 6.5% a year ago, with total revenue of $426.6 million this quarter compared to $396 million last year's same period. Traffic, conversion and average ticket all increased - a sweet combination for any retailer.
The full fiscal year results saw sales increase from $1.29 billion to $1.4 billion, with net income rising from $86.8 million to $100.1 million, though diluted earnings per share fell a penny from 86 cents to 85 cents.The company improved its cash position as it has $301.5 million cash and equivalents on hand compared to $187.9 million last year.
The company announced a three-year growth plan which includes the investment of $200 million for store expansion in both space and number, as well as an accelerated e-commerce program. The company also authorized an initial share repurchase program of up to $100 million.
Pier 1 Prospects
Pier 1 has executed its strategies well since the recession, and the company looks set to continue its earnings and sales growth. Although it's selling at a PE of 17.8, this is less than the industry average. A price pullback would make this stock worth an even closer look. (We look at three risk factors that best explain the bulk of equity performance. Check out Achieving Better Returns In Your Portfolio.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
TUTORIAL: Forex Guide
A Margin Story
One of the things that jumps out about Pier 1's results for the quarter is the strength of its margins. The company racked up a 260 basis point improvement in merchandise margins, to 58.4% of sales compared to 55.8% of sales in the same quarter last year.
The keys to this performance cited by the company were its lower markdowns, controlled input costs and well managed inventory levels. Gross profit improved to 42.8% of sales compared to 38.9% of sales in last year's same period.
An Improving Industry
Household decorative furnishings retailers are feeling better about their prospects. The sector's leader, Bed Bath & Beyond (Nasdaq:BBBY) recently posted a 30% increase in quarterly net earnings, as well as a strong full year's sales and earnings and, most importantly, guidance for continued earnings strength. Williams-Sonoma (NYSE:WSM), a retailer more on par with the Pier 1, turned in record earnings for its fiscal 2010.
Sales and Earnings Rise
Pier 1 reported $57.1 million net income or 48 cents per share for its fourth quarter compared to $34.5 million or 30 cents in the same quarter a year ago. Same store sales increased 8.9% for the quarter compared to 6.5% a year ago, with total revenue of $426.6 million this quarter compared to $396 million last year's same period. Traffic, conversion and average ticket all increased - a sweet combination for any retailer.
The full fiscal year results saw sales increase from $1.29 billion to $1.4 billion, with net income rising from $86.8 million to $100.1 million, though diluted earnings per share fell a penny from 86 cents to 85 cents.The company improved its cash position as it has $301.5 million cash and equivalents on hand compared to $187.9 million last year.
The company announced a three-year growth plan which includes the investment of $200 million for store expansion in both space and number, as well as an accelerated e-commerce program. The company also authorized an initial share repurchase program of up to $100 million.
Pier 1 Prospects
Pier 1 has executed its strategies well since the recession, and the company looks set to continue its earnings and sales growth. Although it's selling at a PE of 17.8, this is less than the industry average. A price pullback would make this stock worth an even closer look. (We look at three risk factors that best explain the bulk of equity performance. Check out Achieving Better Returns In Your Portfolio.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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