Pier 1 Imports Management Discusses Q1 2013 Results - Earnings Call Transcript

Pier 1 Imports (PIR)

Q1 2013 Earnings Call

June 14, 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, Senior Executive Vice President and Treasurer

Analysts

John Marrin - Jefferies & Company, Inc., Research Division

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

David Berman - Berman Capital Management LP

Helen Pan - Barclays Capital, Research Division

Simeon Gutman - Crédit Suisse AG, Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

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

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

Denise Chai - BofA Merrill Lynch, Research Division

Presentation

Operator

Good morning, ladies and gentlemen. This is the Pier 1 Imports First Quarter 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, Ashley, and good morning, everyone. Prior to market open today, we issued a press release which included the detailed financial results for the first quarter ended May 26, 2012. In just a few moments, we will hear comments from Alex and Cary about the financial results and the company's growth initiatives, 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 27A of the Securities Act of 1933 and 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 any 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 release, you may obtain one, along with copies of prior press releases and all SEC filings, by linking through to the Investor Relations page of our website, pier1.com.

Now I'd like to turn the call over to Alex Smith, our President and Chief Executive Officer. Alex?

Alexander W. Smith

Thanks, Kelley. Good morning, everyone, and thanks for joining us today. Also on the call with us is Cary Turner, our Senior Executive Vice President and Chief Financial Officer. Cary will, of course, provide a detailed review of our first quarter financial results in just a few minutes.

We are very pleased to begin the new fiscal year with another quarter of strong financial performance. In fact, this is our 11th consecutive quarter of comp store sales and profitability gains. Total sales were up 7.9% to $361 million while comp store sales rose 7.2%, reflecting strength throughout all of our merchandise categories and across all geographic regions.

Customers responded well to our outdoor spring and Easter assortments during the early spring month of March and April. In May, our biggest month of the quarter, we achieved strong sales gains surrounding Mother's Day and the Memorial Day weekends, both benefiting from our creative marketing campaigns and an optimal level of promotional offerings.

In the first quarter, we delivered strong gross profit and merchandise margins, drove further improvements in operating margin and posted a 33% increase in earnings per share. At the same time, we returned value to shareholders through share repurchases under our buyback program and our quarterly cash dividend.

Our investments in marketing are certainly helping our business with a media strategy that utilizes creative communication to strengthen our brand positioning and drive traffic. We finesse in realtime our media budget in order to maximize overall customer reach, shifting more of our investments into those vehicles that are driving a higher customer response rate. We had great success with our television campaigns and have plans for this year for national cable television in nearly every month.

For the launch of Pier 1 To-You nearing, we will increase the level of our paid search in digital media, increase the awareness of pier1.com and, more importantly, drive traffic to our sites. Subsequent to the launch of the new pier1.com, we will up the weight of our digital media program more significantly starting early this fall.

You'll remember that in April we announced our new 3-year growth plan designed to drive profitable top line growth, expand our market share and increase shareholder value. Here's an update on some of the key components of the plan.

First and foremost, we are fully prepared to execute the soft launch of our new e-Commerce-enabled website. The launch date is July 28. We have fully redesigned the look, feel and functionality of our site, which will be unveiled in conjunction with the launch of Pier 1 To-You. Excitement and anticipation is, as you may imagine, building throughout the whole organization as the launch date approaches. Our operational teams are in testing, training and implementation phases and we are building and training new customer relations teams specifically to support our e-Commerce business.

The buildout of our fulfillment space is complete. We've begun to receive inventory and we're running capacity and final systems testing. Importantly, our current online trends remain strong with increases in both the number of unique visitors and time spent on the site. Our current initiative Pier 1 To-Go continues to account for about 1% of our comp store sales increases.

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