A holdover from a previous regime, svp and CFO Charles Turner, has retired from Pier 1 Imports, Inc., the retailer announced. His retirement follows a post-holiday period when Pier 1 president and CEO Alex Smith declared that the company’s financial forecasting “overestimated” potential weather-associated sales advances.
The move may reassure investors and other stakeholders that Pier 1 has addressed a temporary glitch, but at least one analyst isn’t so sure.
The company also announced Turner’s replacement, Laura Coffey, who had been svp/planning and now is evp, interim CFO, and revised financial guidance for the fiscal year ending February 28.
The Pier 1 outlook reflects softer than expected sales in January and February, the company stated, as well as higher than presumed expenses, primarily related to incremental supply chain costs.
Smith stated, in announcing Turner’s departure and the new financial outlook, “I am extremely disappointed that we will not achieve our prior financial guidance. Following a strong holiday period, we registered respectable company comparable sales growth of 5.7% in January, but the results were well below our forecast, which had overestimated the recapture of lost sales from last year’s storms. This is also causing us to take a more cautious view of sales for February. From an earnings perspective, our revised outlook reflects the sales shortfall, as well as unplanned supply chain expenses, some of which will be ongoing through the first quarter of fiscal 2016. These primarily include incremental distribution center costs that affect our gross profit.”
After revision, guidance called for:
- Company comparable sales growth, including e-commerce operations, of approximately 5%.
- Gross profit of approximately 40.2% of sales.
- Selling, general and administrative expenses of approximately 31% of sales.
- EBITDA of approximately 9.4% of sales.
- Depreciation expense of approximately $47 million.
- Interest expense, net of other income, of approximately $8 million.
- An effective tax rate of approximately 38%.
- Earnings per diluted share in the range of 80 cents to 83 cents excluding retirement-related expenses based on a fully diluted share count of approximately 92 million.
- Inventories at fiscal year-end of approximately $480 million.
In addressing the change in guidance, Smith added, “The failure to adequately forecast the revenue and expenses in our business is a financial issue which has been aggressively addressed. From a brand and competitive perspective, our business is sound. Sales trends are in the mid-single-digits and customer response to our spring and Easter assortments has been good. Equally important, we are managing our promotional cadence well, with promotional discounts below last year. We are also continuing to experience momentum in e-commerce sales penetration, which exceeded 15% in January and is running above 10% year-to-date. The problems impacting our fourth quarter financial results do not undermine our confidence in our 1 Pier 1 strategy, our customers’ view of the Pier 1 Imports brand or our ability to move toward the productivity levels we enjoyed as a brick-and-mortar retailer now that our transition to omnichannel is nearly complete.”
Seth Basham, a Wedbush Morgan analyst said Pier 1’s pinning the approximately 20% lower 2014 EPS guidance on sales falling short of mistakenly aggressive forecasts, which led to a buildup in inventories, resulting in extra inventory management costs and the deleverage of other costs, wouldn’t necessarily sooth stakeholders.
In a research note, the analyst observed, “The company sees this as a temporary operational issue, indicating that new Easter and spring merchandise is resonating well and its gross margin reduction is unrelated to its promotional discounts, which are down year over year and on plan. Given the magnitude of the earnings revision and the volatility of results in recent quarters, we believe it will take some time for investors to regain confidence in this name.”
Pier 1 stated that Laura Coffey, a 17-year veteran of Pier 1 Imports, has been named evp, interim CFO. Coffey, a CPA, joined Pier 1 Imports in 1997 and early on was vp/assistant controller, rising to svp/business development and strategic planning and, after, to her most recent position before being name interim CFO.
Turner had been with Pier 1 for 23 years. In 2007, Smith, a former TJX executive, succeeded Pier 1 CEO Marvin Girouard in a period of declining results at the retailer. Girouard had been with the company for almost 32 years, according to reports at the time.