Pier 1 Warns on Earnings -- Again

Retailer Pier 1 Imports Inc. (PIR) Tuesday warned for the 10th time in the past year that quarterly results would fall short of expectations, saying weak customer traffic is hurting its margins and sales.

The home goods retailer also posted a loss for its first fiscal quarter, in line with lowered expectations, as its sales slumped sharply during the quarter.

For the current second quarter, the Fort Worth, Texas-based chain forecast a further decline in sales as it clears out spring and summer stock in advance of the fall merchandise season. Its bottom line could range from a profit of 3 cents per share to a loss of as much as 7 cents, short once again of analysts' estimates.

According to Reuters Estimates, Wall Street had been looking for Pier 1 to bounce back to a profit of 5 cents per share for the period.

Given the company's recent troubles, this latest warning came as little shock to investors, said Crystal Lanigan, specialty retail analyst at D.A. Davidson & Co.

"They've had some pretty challenging sales trends, so quite honestly, I think that the Street was just expecting that the numbers were a little bit too high and that they would guide down," Lanigan said.

Lanigan noted that Pier 1's shares had already dropped substantially in recent sessions in anticipation of lackluster results. As of Monday's close, its stock was down 10 percent month-to-date.

The company said it expects second-quarter comparable-store sales to decline in the mid-to-high single-digit range. Given the continuing promotionally driven sales environment, Pier 1 estimated gross profit at 34 percent to 32 percent.

The home goods sector has been hurt as discounters including Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT) have increased their offerings of fashionable home decor. Linens 'n Things Inc. warned on Friday that it would report a quarterly loss instead of the profit that analysts had expected.

For the first quarter ended May 28, Pier 1 reported a loss of $12.5 million, or 14 cents per share, compared with a year-earlier profit of $11.7 million, or 13 cents per share.

Sales at stores open at least one year, a key performance measure for retailers known as comparable-store sales, fell 12 percent during the quarter, while total sales fell 6.1 percent to $405.7 million.

Results for the quarter were generally in line with the company's lowered outlook provided earlier this month, when it forecast a loss of 13 cents to 15 cents per share. Following that, Wall Street analysts dropped their loss estimates to an average of 14 cents per share from 9 cents, according to Reuters Estimates.

"Although we began the new fiscal year with guarded optimism on changes to the company's marketing and merchandising programs, we have been disappointed by slow customer response and continued weak traffic in stores," Pier 1 Chief Executive Marvin Girouard said in a statement.

"The current promotional atmosphere has negatively affected our sales and margins for the first quarter," Girouard said. "In addition, our profitability has been impacted by a shift in Pier 1 product offerings in order to make room for fresh, new merchandise."

Pier 1 shares were up 2 cents at $15.06 in mid-morning trading. Year-to-date, the stock is down more than 23 percent, sharply underperforming most other retail shares. The Standard & Poor's 500 retailer index has fallen just 4.4 percent so far this year.