New York (TheStreet) -- Pier 1 Imports (PIR - Get Report) shares slid more than 7% in premarket trading Thursday after the home furnishings and decor company posted disappointing earnings that it attributed to lower-than-expected store traffic in the quarter.
Pier 1 reported net income dropped 32% in the fiscal second quarter to $17.8 million, or 17 cents a share. Adjusted net income totaled $20.7 million, or 19 cents a share. The Fort Worth, Texas-based company's second quarter ended on Aug. 31.
Wall Street was looking for Pier 1 to post earnings of 21 cents a share in the quarter.
Shares were falling 7.4% to $21.85 before the market opened.Sales improved in the quarter, up 7.6% to $395.6 million, even if they did come in shy of analysts' forecasts of $405 million. Comparable-store sales increased 3.5% during the second quarter, but were down from last year's comparable-store sales gain of 6.7%. "For each of the last 15 quarters we've prided ourselves on our ability to deliver consistent short-term results while building out our '1 Pier 1' omni-channel strategy," Alex W. Smith, Pier I Imports' president and CEO, said in an earnings statement. "During the second quarter, the efforts focused around our short- and long-term goals fell slightly out of balance. In particular, our marketing initiatives did not include appropriate messaging around clearance and promotional activity in our stores, or customer acquisition generally, which contributed to lower than expected store traffic. We should also have done a better job of flowing new product to the stores and reflecting those items in the floor set." As a percentage of sales, gross profit was 40.8% compared with 41.2% in the second quarter of fiscal 2013. Second-quarter selling, general and administrative expenses were $122.6 million, or 31% of sales, compared with $112 million, or 30.5% of sales, in the second quarter last year. The company has been focused on boosting its online sales. Pier 1 said in August the online business "achieved a new high water mark" of 5% of total sales, coinciding with the first anniversary of its e-commerce enabled Web site. Still, Pier 1 lowered its full-year guidance to a range of $1.23 to $1.29 a share, representing year-over-year growth of 5% to 10%, compared to prior guidance of $1.27 to $1.32 a share. "We've entered the third quarter with a very clean inventory position and a terrific assortment of fall product newly set in the stores. Customers are responding favorably to both regular and seasonal merchandise," Smith said. "We're confident in our plans for the holiday season, including a stepped up marketing campaign which will see our return to advertising on network TV. We believe the business is well-positioned for the second half of the year and expect to return to our historical levels of quarterly sales and profit growth." As of Aug. 31, the company's cash and cash equivalents totaled $124.9 million. Inventory totaled $444.7 million, an increase of 5.7% from a year earlier and in line with management's expectations, the retailer said. -- Written by Laurie Kulikowski in New York.