Pier 1 Imports' CEO Discusses Q4 2012 Results - Earnings Call Transcript

Pier 1 Imports (PIR)

Q4 2012 Earnings Call

April 05, 2012 11:00 am ET

Executives

Kelley Buchhorn -

Alexander W. Smith - Chief Executive Officer, President, Director and Member of Executive Committee

Charles H. Turner - Chief Financial Officer, Executive Vice President of Finance and Treasurer

Analysts

Budd Bugatch - Raymond James & Associates, Inc., Research Division

Brian W. Nagel - Oppenheimer & Co. Inc., Research Division

Alan M. Rifkin - Barclays Capital, Research Division

Matthew R. Nemer - Wells Fargo Securities, LLC, Research Division

Simeon Gutman - Crédit Suisse AG, Research Division

Anthony C. Chukumba - BB&T Capital Markets, Research Division

Presentation

Operator

Good morning, ladies and gentlemen. This is the Pier 1 Imports Fourth Quarter and Fiscal Year End Conference Call. At the request of Pier 1 Imports, today's conference call is being recorded. [Operator Instructions] I would now like to introduce Kelley Buchhorn, Director of Investor Relations for Pier 1 Imports.

Kelley Buchhorn

Thank you, Deborah, and good morning, everyone. Prior to market open today, we issued 3 press releases. One included the financial and operating results for the fourth quarter and fiscal year ended February 25, 2012, one included details of the company's new 3-year growth plan and one included details of the company's board-approved quarterly cash dividend. In just a few moments, we will hear comments from Alex and Cary about the financial results and growth initiative, followed by a question-and-answer period.

Before we begin, I need to remind you that certain comments made during this call may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and can be identified by the use of words such as may, will, expect, anticipate, believe and other similar words and phrases. Our actual results and future financial conditions may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside of our control. Please refer to our SEC filings, including our Annual Report on Form 10-K, for a complete discussion of the major risks and uncertainties that may affect our business. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update our forward-looking statements.

If you do not have a copy of today's press releases, you may obtain them, along with copies of prior press releases and all SEC filings, by linking through to the Investor Relations page of our website, pier1.com.

I would now like to turn the call over to Alex Smith, our President and Chief Executive Officer. Alex?

Alexander W. Smith

Thank you, Kelly. Good morning, everyone, and thanks for joining us today. Also on the call with us today is Cary Turner, our newly promoted Senior Executive Vice President and Chief Financial Officer. Congratulations, Cary.

Today, I'll talk about our key accomplishments in fiscal 2012, the strength of our financial results, as well as the key priorities we'll be focusing on in fiscal 2013 as we execute our new 3-year growth plan, which we announced this morning. Following my remarks, Cary will provide a detailed review of our fourth quarter and fiscal year financial results.

Fiscal 2012 was another outstanding year for Pier 1 Imports, marked by a number of milestones and successes. First and foremost, we delivered strong financial results. Both total sales and comp store sales increased nearly 10%, and operating income increased 49%, driving operating margins to 10.1%, which exceeded our 3-year goal of 10%. Additionally, the business generated $142 million in cash. We also returned value to our shareholders through a $100-million share repurchase, acquiring approximately 8% of our common stock.

One year ago, almost to the day, we laid out a 3-year growth plan designed to drive sales, improve profitability and increase shareholder returns. Our plan included investing $200 million over 3 years in initiatives designed to continue to build strength and sustainability into our business, driving both top and bottom line growth, and to capitalize on the numerous opportunities to profitably increase the reach of the Pier 1 Imports brand.

As most of you know, we set out the following financial goals: sales per retail square foot of $200, operating margins of at least 10% and online revenue contribution of at least 10% of sales by fiscal 2016.

One year into our plan, I'm extremely pleased with the progress we have made. And as you can see from today's press release, we have replaced that plan with a new plan that raises the bar even higher. More on the new plan in a moment, but first, I'd like to go through some of the highlights from fiscal 2012.

Broadly speaking, we upgraded the quality of our store portfolio, opened 15 new locations, made great strides in bringing our technology and systems up to the levels needed to support our longer-term growth. We also initiated developments of an e-Commerce platform that prepares us for our new business, Pier 1 To-You.

First, we invested in our store portfolio to start bringing our stores up to the high standards we need to achieve our financial goals. New merchandise fixtures and lighting upgrades have enhanced the shopping experience for our customers and helped drive increases in sales productivity. Indeed, in fiscal 2012, sales per square foot reached $184. That's up dramatically from $168 in fiscal 2011.

During the year, we refurbished 125 stores with the new fixture package and lighting upgrades. We also fully remodeled 3 locations, including our flagship store in Manhattan that many of you saw during our November store tour. We also added some new fixtures in all of our Pier 1 Imports stores. Today, 13% of our store portfolio now has the new look. And additionally, we reconfigured 12% of our stores into the open concept layout using existing store fixtures with no additional capital outlay.

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