Pier 1 2Q16 Earnings call Notes

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Alex Smith – President and CEO

Not happy with 2Q; inventory issues

“looking at the business from a high-level perspective, we’re not happy with our second quarter earnings. Our principle frustration centers around the ongoing inventory related issues impacting our business.”

Cause of problems going away, but fallout continues

“inventories are now down year-over-year. So the cause of our problems is going away, but the fallout continues and we expect it to continue to be the case for the balance of the year.”

Ecommerce 17% of sales

“E-commerce represented 17% of sales in the quarter highlighted by continued increases in online traffic conversion and average ticket.”

Will continue to feel effects of inventory the remainder of the year

“Suffice it to say, we will continue to feel the effects of our elevated inventory levels, the remainder of this year. This is particularly frustrating and we are disappointed about the impact it’s having on our margins and profitability. Nevertheless, we have substantially reduced inventory growth since the beginning of fiscal ’16 which puts us on the path through improvements.”

Numbers are being dragged down by clearance

“I think this is just an interesting perspective as well for you. If we look at the achieved margin on our mark down merchandise and if we look at the achieved margin in our full price merchandise and our achieved margin on our promotional merchandise, those numbers really are rock solid compared with previous years. What has changed is the mix so we’re selling less full price at the full margin and a little less promotional and a lot more clearance and that’s really what drag the number down.”

A lot of this is self inflicted

“So if you’re asking in terms of your question I think a lot of this is sell-inflected in one way or another.”

Competition is more intense than it was 4-5 years ago

“you’re absolutely right the competition is certainly more intense than it was four or five years ago with some smaller chains rolling out nationally and the pure e-com players that you referenced. And all those guys take some sales, but that doesn’t in anyway get the quality of our market position and all the qualities on merchandise. ”

You have to be on your game all the time in this environment

“So listen you’ve got to be – in this sort of environment you got to be on your game all the time. Your product has to be spot on, your marketing has to be spot on, but I don’t see any weakness in what we’re doing.”


Jeff Boyer – EVP and CFO

Sales growth below expectations

“Total sales in the second quarter increased 2.7% to $430 million, while company comps increased 2.5%. On a constant currency basis, total sales were up 4% and company comps were up 3.8%. This was below what we had expected and primary reflects the discipline in outdoor season that Alex discussed previously.”

Not a promotional issue, an inventory issue

“we aren’t going deeper on the promotional intensity. This isn’t a matter of going deeper on the offers. We had more clearance inventory”


Laura Coffey – EVP of Planning and Allocations

Wont give margin on ecommerce sales, but have said that it’s higher margin that store sale

“And I think what we have said consistently Denise, is that the contribution from operations level or fulfilled sales has a higher margin than the store sale and we’ve been very consistent on that and that’s been the story as how that fulfilled sale percentage grows, it will over time move that contribution from operations up. There is really no change in that, that’s still the case.”