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Pier 1 Imports, Inc. Reports Fourth Quarter And Full-Year Fiscal 2016 Financial Results

The following excerpt is from the company's SEC filing.

Provides Fiscal 2017 First Half and Full-Year Financial Guidance;

Declares Quarterly Cash Dividend

FORT WORTH, Texas--(BUSINESS WIRE)--April 13, 2016--Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the fourth quarter and fiscal year ended February 27, 2016.

Fiscal 2016 Highlights

Total sales increased 0.4% (1.4% on a constant currency basis);

Company comparable sales rose 0.7% (1.7% on a constant currency basis);

Achieved e-Commerce sales penetration of 16%;

Reduced inventory levels by approximately 15%;

Generated cash flow from operations of $164 million;

Returned nearly $100 million to shareholders through share repurchases and cash dividends;

Initiated real estate optimization plan; and

Launched Customer Data Excellence initiative.

Alex W. Smith, President and CEO, stated, “Although fiscal 2016 was a challenging year, we made solid progress toward stabilizing top line trends, cutting costs and reducing inventory levels. We also delivered another year of strong e-Commerce sales, which increased 45% on top of 193% growth last year.”

“We entered fiscal 2017 with much improved distribution center operations,” continued Mr. Smith. “The significant strides we made on the inventory front helped us put many of the issues in our distribution centers behind us; we’re now starting to see improved efficiency across the network, which will help us strengthen merchandise margin.”

“In fiscal 2017 we will emphasize more forcefully our newest products and our strongest categories. With an increased marketing spend and the extension of our rewards program we expect not only to continue to build frequency and retention, but additionally, to drive new customers to the brand. Known customers accounted for more than 70% of total sales in fiscal 2016, while repeat customers accounted for approximately 60%. We believe our enhanced capabilities will enable us to push these rates higher going forward.”

Mr. Smith concluded, “As we look ahead, we feel very good about our long-term positioning. The Pier 1 Imports brand is in excellent health, we have full omni-channel capabilities and we’re focused on improving our operational execution. Although revenue and earnings are expected to show only modest growth in fiscal 2017, we expect to achieve stronger performance in the second half of the year and accelerate growth in fiscal 2018 and beyond.”

Revised Presentation of Credit and Debit Card Fees

The Company has revised the presentation of the reporting of credit and debit card fees (“Credit Card Fees”) for all periods presented. The Company previously reported Credit Card Fees as a reduction to net sales and has revised its presentation to report Credit Card Fees as a component of selling, general and administrative (“SG&A”) expenses. This revised presentation results in an increase to both net sales and SG&A expenses; there is no impact to operating income, net income, the balance sheet or statement of cash flows. Tables reconciling the revised presentation are included in the “Revised Presentation of Credit and Debit Card Fees - Tables” section of this press release and on the “Investor Relations” page of the Company’s website, Pier1.com.

Fourth Quarter Fiscal 2016 Results of Operations

Net income for the fourth quarter ended February 27, 2016, was $18.7 million, or $0.23 per share, compared to $33.1 million, or $0.37 per share, in the fourth quarter ended February 28, 2015. In the fourth quarter of fiscal 2015, non-GAAP adjusted net income (excluding the after-tax effect of retirement related expenses for the Company’s former chief financial officer) was $35.1 million, or $0.39 per share. Total sales for the fourth quarter decreased 1.4% (a 0.5% decrease on a constant currency basis after adjusting for a 90 basis point impact attributable to the year-over-year decline in the value of the Canadian Dollar relative to the U.S. Dollar) to $542.3 million, compared to $550.0 million in the same period last year. Company comparable sales decreased 0.6% (a 0.3% increase on a constant currency basis). E-Commerce represented approximately 15% of total sales in the fourth quarter, as compared to approximately 13% of total sales in the fourth quarter of fiscal 2015.

Gross profit in the fourth quarter totaled $196.9 million, or 36.3% of total sales, compared to $220.8 million, or 40.2% of total sales, in the fourth quarter of fiscal 2015. Merchandise margin (the result of adding back delivery and fulfillment net costs and store occupancy costs to gross profit) in the fourth quarter totaled $284.8 million, or 52.5% of total sales, compared to $308.5 million, or 56.1% of total sales, in the fourth quarter of fiscal 2015. The year-over-year decline in merchandise margin is primarily attributable to promotional and clearance activity, as well as inventory-related inefficiencies within the Company’s distribution center network. For the three months ended February 27, 2016, contribution from operations (gross profit less compensation for operations and operational expenses) totaled $103.5 million, compared to $123.8 million during the same period last year.

Fiscal 2016 fourth quarter SG&A expenses were $150.3 million, or 27.7% of total sales, compared to $155.4 million, or 28.3% of total sales, in the year-ago period. The following table details the breakdown of SG&A expenses for the fourth quarter of fiscal 2016 as compared to the same period last year (in millions).

Three Months Ended

February 27, 2016

February 28, 2015

Expense

% of Sales

Compensation for operations

67.2

12.4

72.6

13.2

Operational expenses

26.2

4.8

24.4

4.4

Marketing

23.0

4.2

20.8

3.8

Other selling, general and administrative

33.9

6.2

37.6

6.8

Total selling, general and administrative

150.3

27.7

155.4

28.3

Operating income for the fourth quarter of fiscal 2016 was $33.6 million compared to $53.1 million in the fourth quarter of fiscal 2015. Fourth quarter EBITDA (earnings before interest, taxes, depreciation and amortization) for fiscal 2016 was $45.6 million, compared to $67.6 million in the fourth quarter of last year.

For the fiscal year ended February 27, 2016, the Company reported net income of $39.6 million, or $0.46 per share, compared to $75.2 million, or $0.82 per share, for the fiscal year ended February 28, 2015. In fiscal 2015, non-GAAP adjusted net income (excluding the after-tax effect of retirement-related expenses mentioned above) was $77.2 million, or $0.84 per share. Fiscal 2016 total sales increased 0.4% (a 1.4% increase on a constant currency basis after adjusting for a 100 basis point impact attributable to the year-over-year decline in the value of the Canadian Dollar relative to the U.S. Dollar) to $1.892 billion. Fiscal 2016 company comparable sales increased 0.7% (a 1.7% increase on a constant currency basis). For fiscal 2016, e-Commerce represented approximately 16% of total sales, compared to approximately 11% of total sales in fiscal 2015.

Fiscal 2016 gross profit totaled $705.0 million, or 37.3% of total sales, compared to $768.5 million, or 40.8% of total sales in fiscal 2015. Merchandise margin for the twelve months ended February 27, 2016, totaled $1.046 billion, or 55.3% of total sales, compared to $1.100 billion, or 58.4% of total sales, in fiscal 2015. The year-over-year decline in merchandise margin is primarily attributable to promotional and clearance activity, as well as inventory-related inefficiencies within the Company’s distribution center network.

For the twelve-month period ended February 27, 2016, contribution from operations totaled $354.3 million, compared to $412.5 million during the same period last year.

SG&A expenses for the twelve months ended February 27, 2016, were $578.8 million, or 30.6% of total sales, compared to $594.9 million, or 31.6% of total sales a year ago. The following...


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