Thursday, home furnishings retailer Pier 1 Imports, Inc. (PIR), which is planning a hostile takeover of Cost Plus Inc. (CPWM), reported a narrower loss for the first quarter as the company's cost control initiatives helped it to partially offset the impact of lower sales. However, the company's loss came in wider than Street estimates. Looking ahead, the company expects to report a modest net income before charges for the full year.
Weak housing market and tighter credit have compounded trouble for home-goods retailers like Pier 1 as consumers were pressured by higher gasoline and food costs. To stay afloat, among other things, Pier 1 sold its corporate headquarters, reduced its marketing spending and cut jobs.
The Fort Worth, Texas-based company reported a first-quarter net loss of $32.8 million or $0.37 per share, compared to a loss of $56.4 million or $0.64 per share in the same period prior year. On average, 16 analysts polled by Thomson Financial/First Call expected a loss of $0.15 per share for the first quarter. In the fourth quarter, Pier 1 reported a profit of $13.74 million, or $0.16 per share.
First-quarter total sales decreased to $310 million from $356 million in the year-ago quarter. Twelve Wall Street analysts' revenue consensus estimate was $338.16 million. Sequentially, the sales declined from $436.71 million generated in the fourth quarter. Comparable store sales for the first quarter declined 5.4%, reflecting the aggressive liquidation in March and April that was included in last year's results.
Traffic levels in March and April declined year over year because of last year's promotional efforts to liquidate the Modern Craftsman merchandise, and improved during the month of May. The company also moved fiscal 2009 marketing dollars into the second half of the year so there was less marketing support. As a result, marketing expense in the first quarter was $8 million or 40% less than the same period last year.
During the quarter, the company continued its disciplined focus on merchandise margins especially during this difficult macro economic environment. Consequently, merchandise margins improved to 51.3% from 45.5% in the same period last year, reflecting company's changes in merchandising efforts and a decreased use of promotional and clearance markdowns. On a comparable store basis, merchandise margin dollars increased approximately 3% over last year. Store occupancy costs were $71 million, down from $75 million last year, and overall gross profit dollars increased to approximately $88 million from $87 million last year.
Selling, general and administrative expenses declined $22.7 million in the first quarter. The company incurred a $1.9 million charge in the first quarter of fiscal 2009 related to severance and outplacement costs incurred with the elimination of 70 full time positions in its distribution centers as well as additional headcount reductions in its home office.
Excluding charges, ongoing selling, general and administrative expenses declined $19.7 million from the year ago period. The primary drivers of the decrease in costs were savings of approximately $8.2 million in marketing expense, $4.6 million in store payroll, and $6.9 million in other general administrative costs when compared to the same period last year.
During the quarter, the company continued to concentrate its supply chain efforts on decreasing the inventory levels in the distribution centers. As a result, inventory at the end of the quarter was $384.8 million. The company expects to continue reductions in inventory throughout the year and now expects a $50 million reduction to $360 million by year-end.
Among the competitors, Cost Plus announced a first-quarter net loss of $31.9 million or $1.45 per share, wider than $11.1 million or $0.50 per share in last year period. Net sales for the first quarter were $211.7 million, up 4.5% from $202.5 million in the first quarter last year. Same store sales for the quarter increased 0.6%.
Earlier this month, home products retailer Williams-Sonoma Inc. (WSM) reported first-quarter net earnings of $10.45 million or $0.10 per share, lower than $18.15 million or $0.16 per share in the prior-year quarter. Net revenues for the quarter declined 4.2% to $781.78 million from the same quarter last year.
Among the recent developments, Pier 1 offered to acquire Cost Plus in a strategic stock-for-stock deal, valued at $4 per Cost Plus share. However, Cost Plus rejected the bid saying that the offer is not in the best interests of the company and its shareholders. As a result, Pier 1 said it is planning to go to Cost Plus shareholders to make the deal possible.
On June 9, the Pier 1 completed the sale of its corporate headquarters building to an affiliate of Chesapeake Energy Corp. (CHK). The closing of the sale generated additional cash of about $100 million.
Looking ahead, based on early results from June, Pier 1 expects to report slightly negative to modestly positive comparable store sales for the second quarter with merchandise margins at or above first quarter levels. The company also expects to incur charges of about $3.5 million, which includes a one-time charge related to the closing of excess distribution center space. In addition, the second quarter EBITDA before special charges is expected to be slightly negative to slightly positive.
For the full-year, the company anticipates flat or slightly positive comparable store sales with merchandise margins of at least 53%. Additionally, the company expects to report a modest net income before charges for the full year. The company's expectations are contingent upon achieving expected results during the holiday selling period November through January.
Pier 1 stock closed Wednesday's regular trading session at $6.24. In the past 52-weeks, the stock has been trading in the range of $3.26 - $8.96.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.