Pier 1 FY 2Q17 Earnings Call Notes

Pier 1 Imports’ (PIR) CEO Alexander Smith on Q2 2017 Results

Improved sales trend continued into September

“We told you earlier this year that we expected a tale of two halves. The improved sales trend that started in August and continued into September is encouraging because in the second quarter, our topline performance was below plan with the most significant pressure seen during the month of July. We’re not really sure what happened in July. The internal factors were no different from June or August, but there were some significant events affecting the news cycle. Anyway, we saw sales pick-up in August, comps were minus 1%, and in September, comps are trending positive low single-digits with merchandise margin also ahead of last year.”

Closing stores is not a panacea

“Put another way, 95% of our sales are influenced by a store. That’s a big number, which brings me to our initiatives around real estate. There has been much discussion among investors and retailers about what the right-sized portfolio looks like in today’s omni-channel world. As you’ve just heard, our stores play a central role in almost every aspect of a Pier 1 Imports sale. We believe our current store optimization program, when completed will provide us with an appropriate number of locations for the foreseeable future. Closing stores is not a panacea. We lose store sales, we lose online sales, and we deleverage our costs more rapidly. The importance of stores must not be underestimated. And we all know that store traffic has become an industry-wide challenge and it’s certainly impacted our sales. Eventually, however, we believe equilibrium will be reached between store and site traffic.”

When things are going against you it’s everything, but the opposite when things start to go your way

“Well, all of the above. I think when things go against you it’s very rarely one thing. It’s always an accumulation of a lot of things. It’s just the way it works and what we’re seeing now is the impact we think of a lot of things going right which sort of all add up to better sales performance. Certainly, we’re seeing good traffic increases to the site. We are seeing less bad store traffic if that’s the right phrase.”

Seeing some better traffic

“when we start to get a healthy traffic, we start to get a sort of healthier mix between furniture and non-furniture departments. So I think we’ve seen some of that happening. In terms of ticket, we have seen an uptick in the ticket. That’s partly a consequence of where we are with clearance and partly a consequence of she is liking the product.”

It’s possible to overdo internet marketing

“Okay, Dan. Well, don’t forget that if you think of marketing in those three buckets, print, digital, and TV, everything we do in digital is measurable to the minute degree. So, we know exactly what return we’re getting for spend on everything to do with digital, and we can move dollars around between email and search and display depending on the — how efficacious they are all seeing at the time. So, we just have to make sure with digital that we don’t try and make it too efficient because we have to make sure that we get a balance between reach and efficiency.”

There is a ceiling to the amount of home furnishings a person will buy online

“I think what we do know is from all the research that there is, we’re getting — moving towards a sort of ceiling where the percentage of home furnishings that are bought online starts to — as a percentage of the total starts to slow down very considerably because there’s many, many customers, not just our competitors but our competitors’ customers who like to visit stores for all the reasons that we talked about.”

We are pleased to see traffic has ameliorated in the last nine weeks

“We are certainly not ready in any shape, way, or form to declare victory, but we are pleased to see that the slowdowns in store traffic, the decreases in store traffic have ameliorated over the last nine weeks”

This is who we are:

“Well, I think that’s an intriguing question, and I think I would start by saying I think our merchandise is still exclusive and it’s still highly differentiated on an item-by-item basis compared to any of our competition. And I think the other big difference that we — the other thing that we have which others don’t have is our ability to put together highly edited and thought through collections which make sense to customers. I mean those are our points of difference. I mean we are not aiming to have the biggest assortment in the universe. That’s not our go-to-market proposition, and we are happy for others to do it. We are not driven by being the lowest price in town and that’s not part of who we are as well.”

Jeffrey Boyer

-4.3% comp

“Net sales decreased 6.7% to $406 million while company comp sales decreased 4.3%, primarily reflecting soft store traffic. As Alex mentioned, July was the most challenging month of the quarter. We are encouraged that sequentially sales trends improved in August and have demonstrated further improvement in September.”

Pier 1 FY 1Q17 Earnings Call Notes

Pier 1 Imports’ (PIR) CEO Alexander Smith on Q1 2017 Results

Experiencing same customer trends as everyone else

” clearly we are experiencing the same customer trends as the industry generally, namely the ongoing movement to purchase outside a store. Indeed, our direct-to-customer sales ordered outside the store were up 40% in the first quarter driven by both increased traffic and higher conversion rates on our site.”

Mis-executed in outdoor

“Overall, our topline results in the first quarter were below our plan. We had some categories that performed exceptionally well, tabletop for instance, but that was not enough to pull up our chain average. Our shortfall came principally in outdoor furniture, the result of some new product misses and a reduction in the number of floor models.”

Digital strategy highlighted email, search, display and social

“Now let’s talk about our digital marketing efforts. We are seeing positive results from our initiatives around frequency and retention as well as new customerReturned to TV advertising

“Our return to television advertising commenced in April and we were on air for six weeks during the first quarter. We are on air now for our July 4 One Big Sale and then back again for Fall and Harvest. While it’s still early days we are happy to be back on TV. Our TV ads providers with the opportunity to reinforce our brand messaging, which we have believe will help drive incremental traffic to our Pier 1 Import stores and website. Its full effect of course will be most prevalent during the forthcoming Holiday season.”

It’s not a highly promotional environment, it’s just the environment that we live in

“we said on the last call you know this is no longer a highly promotional environment, it’s just the environment, it’s the world that we live in. So our job is – and by the way I think I said our promotional activity in Q1 was pretty much inline with what we would expected, so our job is as much in some retailers is just to get smarter and smarter about how we use those promotional dollars, make sure that we are only using them on promotional activity that really does drive merchandise margin dollars and not the overexcited by things that drive sales that no margin dollars. ”

Free shipping is a discount like any other

“Well I think you just answered your own question there which is we look at free shipping as just being one of the promotional offers which we can use and we try and balance free shipping along with all the other. I mean free shipping is just another discount and we just look at it alongside all the other discounts opportunities that we have.”‘

Pier 1 FY 4Q16 Earnings Call Notes

Alexander Smith

Increased promotional activity is clearly here to stay

“Increased competitive activity, especially from on and offline deep discounters has altered the home furnishings playing field considerably. That said, specialty home furnishing is still a higher margin business, part of a large and fragmented industry, and there is ample room for many of us to succeed. There is certainly room for vibrant and successful Pier 1 Imports.

It’s clear to us that the high level of promotional activity we’ve been witnessing across the retail spectrum for some time now is here to stay. It’s regrettable that the industry has done it to itself. We will continue to engage and remain competitive.”

Use of data and advanced analytics are changing the company for the better

“I’m very excited to see how our use of data and advanced analytics are changing the company for the better on many fronts. They will help to find cost efficiencies across the organization and help make us better decisions around promotional activity, media spend and real estate. Our use of data is expanding our understanding of how customers behave in the omni-channel world, so we can talk to her the right way and drive our attention and frequency rates even higher beyond the all-time highs we achieved in fiscal 2016.”

Investors have been focused on how retail profitability is being pressured by costs of running omnichannel

“There has been much discussion in the investor community about how retail profitability is being pressured by the costs of running omni-channel businesses and the intense pressure on pricing. Whilst in the short-term there is obviously [truth to these twin thoughts], there has not been as much discussion about how retail companies are responding.”

The promotional environment is just becoming the standard retail environment

“We all talk about the promotional environment, at some point we’re going to have to just all stop talking about it because it’s just going to be the retail environment and it will have our own sort of cadences of promotions to gain or maintain our market share. So I don’t think that it’s changing very rapidly compared to what we have seen.”

Jeffrey Boyer

Operational issues will abate beginning with FY 2Q17

“We’re very pleased with the improvements we’ve made within our distribution centers and anticipate the inventory cost and recognition effects our fiscal 2016 operational issues will abate beginning with the second quarter of fiscal 2017.”

Pier 1 FY 3Q15 Earnings Call Notes

Alex Smith

Decreases in store traffic

“Our disappointing third quarter sales results are largely attributable to decreases in store traffic. Company comparable sales were essentially flat down slightly on a reported basis and up slightly on a constant currency basis.”

Starting from a low base in traffic, the cadence has been as usual through December

“Starting really with the Thanksgiving weekend, our results over that weekend were pretty much what you heard. People report in the industry, which was very good business online particularly direct to customer and a pull back in store traffic. What’s happened since then is from that sort of lower base if you like, the Christmas cadence is pretty much what we normally see. We’re getting day-over-day, week-over-week growth as we approach the biggest weekend of the year, which is coming up, but it’s still right below last year.”

Everyone is being highly promotional

“Well, I’m sure you will look at these things as closely as we do and it’s everybody and it’s the online only guys, it’s the brick and motor only guys, it’s the high end specialty, it’s the big box guys, it’s the mass merchants, it’s the home improvement guys, it’s everybody. There is not anybody who is not doing substantial discounting, which is unfortunate, but it’s the world we live in.”

Tomorrow is the last day we ship for Christmas

“tomorrow I think or today is the last day we ship for Christmas. So the eCom participation does fall now for the next little while until after Christmas and then it will pick up again in January and that’s obviously just factored into our sales.”

Jeff Boyer

We still think we can get back to high 50s merchandise margin again

“No, I think the long term goal still Budd is to get back, again we mentioned before probably won’t be at that 59%, 60% level that we’ve seen perhaps just given the promotional intensity, but we still think the high 50s is a very, very doable metric for us.’

Pier 1 2Q16 Earnings call Notes

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.”

Pier 1 Imports FY 1Q16 Earnings Call Notes

This year is all about leveraging our investments

“When we spoke to you last quarter, we told you that fiscal 2016 would be the start of a multi-year period, during which we will exploit the strength of our brand and our new omni-channel business model, and leverage the investments we’ve made in people, systems and physical infrastructure. It’s all about improving profitability by restoring merchandise margins and leveraging costs while maintaining steady top line growth.”

Sales increased a little less than we thought

” Total sales increased 3.1%, a little less than we thought whilst comp store sales rose 2% or 2.8% on a constant currency basis. We experienced healthy sales growth for much of the quarter, but had some challenging weeks in April.’

DCs not at optimal efficiency

“Pressuring our merchandise margins, as discussed on our year-end’s call, are the temporary costs at our distribution centers and the fact that our DCs are not performing at operational – optimal efficiency. The DCs are going through their own omni-channel transformation and are behind the stores in this process”

Shrinking the store base

“The careful reduction of our real estate footprints will allow us to drive growth to our omni-channel model, reduce store occupancy and payroll costs and improve efficiency. Additionally, other stores we are closing have contributions below the company average, overall profitability of the fleet will increase. We anticipate there will be additional opportunities beyond our initial 100-store assessment as we move through the process. ”

There has been a decline of the casual shopper

“the challenge for many of us in brick-and-mortar retailing today, is the decline of the casual shopper. So more and more is the vast understanding individual customers and putting product in front of her that you know will resonate.”

Expecting eps of 0.83-0.87

“EBITDA margin is expected to be comparable to fiscal 2015. Depreciation will be in the range of $50 million to $55 million. Operating margin is expected to come in comparable to fiscal 2015. We continue to expect that EPS will be in the range of $0.83 to $0.87 and our capital expenditures are expected to be approximately $60 million.’

Too many skus and too much inventory have impacted DCs

“three things have happened in the DCs. Firstly, we have significantly increased the SKU counts in the business both in terms of the online-only SKUs and the XR SKUs. So, the DCs have to pick many more SKUs than they used to in the old brick-and-mortar days. So, that’s added a significant level of complexity for the DCs.

Secondly, as you know we’ve – our inventories are much too high and so that the impacts of that inventory is felt most intensely by the DCs because our store inventories are extraordinarily well controlled. So, the DCs have had a double whammy of a much more complex business and very, very high-levels of inventory to manage. And the combination of those two things has caused the inefficiencies”

No more impulse purchases in store

“It’s what we described in our prepared remarks as the casual customer, because what we’re seeing is what everybody else is seeing is more and more customers are doing more and more of that free shopping online and so when they come to the store a much higher percentage of them and they all brick-and-mortar days have a sense of purpose. They really have a pretty clear reason why they are there and so yes we’re missing those people who are just coming in for a browse and making an impulse purchase whilst they’re there. That’s the new world that we live in.”

Cost need to come in line with the business

“I don’t think there is any part of the business that we’re really not looking at. I mean, we’re very conscious that the cost needs to come in line with the business, the savings across all our cost centers we’re leaving no stone unturned as the saying goes.”

Pier 1 Imports 4Q15 Earnings Call Notes

Over the past year our financial performance has been poor

“Over the past year particularly, our financial performance against our self-stated objectives and guidance has been poor, which has been very frustrating for all of us. The new Pier 1 Imports model – business model is different. The way our customers behave is very different. So, going forward, we intend to give you a greater clarity around the new business model and discuss the various levers which create improved profitability.”

We’re coming out of the investment phase

“With this heavy investment period in the Pier 1 Imports brand behind us, coming into fiscal 2016, we are entering a new phase. We need to ratchet up our profitability by leveraging the investments we’ve made in people, systems, and physical infrastructure.”

Maintain topline trend, but reduce costs

“We are focusing on maintaining a healthy topline trend, moderating our capital expenditures, reducing our occupancy costs through the optimization of our real estate portfolio, and lowering store operational expenses, specifically compensation for operations. We believe these actions will pave the way for strong profit growth well into the future.”

Making significant adjustments to ad spend

“we are making significant adjustments to our media spend in fiscal 2016, shifting from TV to our highly productive direct mail and digital marketing campaigns. Our catalog circulation and page counts will both increase by approximately 25% this year, which we believe will drive traffic to both stores and the site. We are also building a stronger social media platform for the Pier 1 Imports brand, which will include purpose-driven content created for each social platform.”

60% of ecommerce sales touch a store

“Approximately 60% of our eCommerce sales touch a store. Our national footprint is a critical component of our omnichannel platform, and will remain an important driver of growth and profitability over the long-term. But, as we have insinuated before, we don’t need all the stores we have today.”

Deleverage the real estate portfolio

“As eCommerce becomes a larger contributor to our omnichannel model, we can generate significantly higher returns from our sales by tactically deleveraging the real estate footprints.”

CapEx down 27% this year

“This year, our plans for total – our plans call for total capital expenditures of approximately $60 million. That’s 27% down from $82 million in fiscal 2015.”

Increased dividend

I am pleased to point out that we just announced a 17% increase in our quarterly dividend to $0.07 a share.”

Extra costs in distribution centers because of shortfall in sales plan

“As we previously announced, the majority of these expenses can be traced to incremental costs within our distribution centers, which resulted from higher than normal inventory levels. As a result of the shortfall to our sales plan, we had elevated inventory levels, which resulted in much higher processing costs that we did not adequately forecast.”

Our fulfillment costs will leverage as volumes build

“As a percentage of total sales, delivery and fulfillment expense was 2.3% in the fourth quarter and 1.8% for the full year of fiscal 2015. While these costs are largely variable, they will leverage as a percentage of fulfilled sales, as our eCommerce volume continues to build.”

We expect fulfillment costs to rise as percentage of total sales, but fall as percent of fulfilled sales

“As a percentage of total sales, we expect them to increase in the foreseeable future. But as a percentage of the fulfilled sales, we have already seen leverage of these costs and expect that to continue.”

We’ll start to see the effects of cutting capex by 2019

“We will continue to see depreciation behind the next couple of years between this upcoming fiscal 2016 and 2017; in 2018, it will max out. And then by fiscal 2019, we will start to see the impacts of cutting back on the capital expenditures that we are doing this year.”

We have walked our sales projection back

“we’ve walked back that $400 million a little bit, Adam. And here’s why. I mean, when we talked about that number, to achieve that $400 million, we would have to have continued with our foot on the gas in terms of investments in systems and in people. So, for example, the non-tendered loyalty would’ve had to sort of be sort of coming in now.

And so we decided, based on all the things that had happened and all the feedback that we had gotten from our investors, that the best thing to do was to really spend this year and into next year really sort of leveraging the investments we have already made, concentrate on the profitability of the combined business rather than sort of just chasing a specific number. So, yes, we have walked that number back.”

Pier One 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Almost done with the omni-chanel investment phase

“As each quarter goes by, we get nearer to the point when we will view our omni-channel capabilities to be sufficient to claim transition is complete. From that point on, we expect to see progressive improvement in our operating ratios.“
Strong September, weak October, good November though
“After strong start in September, our third quarter sales were somewhat softer than anticipated, primarily reflecting the weak traffic patterns in October. We saw meaningful improvements in November, which finished particularly strong with our five-day events surrounding Thanksgiving.

Cross channel traffic is driving synergistic sales

“The website is driving store traffic. The fast-growing numbers of customers who shop both online and in store is very encouraging as they spend more than online only or store-only customers. Also the fact that 30% of online sales originate in the stores, means stores are driving traffic to the web, two mutually supportive and independent vehicles that’s the beauty of 1 Pier 1.

No impact from west coast port delays

“delays of the West Coast ports have had no impact on our sales, but we continue to closely monitor the situation.

Strong first half of December

“Well, as we said we had a strong half to the month, but of course, as you know we are only half way through December in terms of the volume. So we feel good the way we are positioned.

No sign of retreat from promotional environment as of now

“If I try to give it a sort of a vanilla answer, I’d say we don’t see anything very significantly different than we’ve seen in the last number of years frankly. I mean, it became a while ago a very promotional environment. And there is no sign yet that the customers retreating from that.

Closing stores because of omni-channel

“I think what you see it is a precursor to us thinking differently about our store base as we get to really understand the whole ramifications of our omni-channel strategy. And you’re going to have to bear with us on this because we’re learning everyday. By the end of the fourth quarter, we’ll be a lot smarter.

Fulfill to store obviously costs less than fulfill to home

“Well, fulfilling to the home is obviously more expensive than fulfilling to the store. I mean, you’re absolutely right from that. But we expect the fulfillment cost per item to the home also to decrease over time because we’re going to get the efficiencies of throughput in the fulfillment center, number one and we will get as much about all those costs so. And then we have to offset that what we get in delivery revenue for each of those orders that we fulfill to the home

Pier 1 FY 2Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

E-commerce growing rapidly

“But things are playing out better and differently than we expected, with e-commerce accelerating rapidly. We’ve grown from our launch in July of 2012 to 4% of sales last year to nearly 10% of sales through the first half of this year. ”

Comp store traffic down

“Pier 1 Imports brand traffic remained healthy but comp store traffic was down slightly. We believe that the decline is reflective of a general malaise as well as a shift in purchasing behaviour from stores to the Internet.”

Ticket and conversion were up though

“in-store and online conversion and average ticket were also up.”

Stores are becoming customer experience centers

“our stores are becoming sales and customer experience centers.”

Profitability partially impacted by investment but also gross margin pressure

“our profitability was impacted yet of course by the planned investment in 1 Pier 1, we consider this a good thing. But more than increased costs, our profitability was impacted by a decline in merchandise margin which is certainly not a good thing”

We tried to discount, it didn’t work

“when things got tough last fall, we joined the pack and started promoting differently and more heavily than we had in recent years. We’ve tried this approach for over three quarters now and we’ve proved once more that for Pier 1 Imports coupons do not generate incremental merchandise margin dollars, neither do coupons do anything for our brand.”

I wish we hadn’t and wont be doing it any more

“So beginning with the third quarter, you’ll see a modified strategy that returns us to a more balanced mix of regular versus promotional pricing. With the benefit of hindsight, I wish we had not followed the pack and stuck with what works for us. Our beautiful unique and fashion right products are well priced, we do not need across-the-board discounts.”

Two distinct issues here

“there’s two distinct things going on here. First of all, there is the investments in people and infrastructure to support the acceleration of our 1 Pier 1 omni-channel strategy. And although that has a depressing impact on earnings, we consider that’s a good thing. Short-term pain but it brings a rosier future sooner.

Completely separate to that is what’s going on in the marketplace and what’s going on with our consumer. And that is what has driven those – those not very good deteriorations in our merchandise margin. And we think that we have overreacted in terms of chasing everybody down the plug hole in terms of promotional activity and we’re going to go back to what made us great and what made us great was that we had a very orderly approach to our promotional cadence.”

no one in particular is leading the promotional bandwagon, but everyone is on it

“In terms of who is leading, you know, I think just honestly I think it’s just become a retail habit, and I think most retailers, us frankly included up until today have just got into the habit of assuming that, that’s absolutely what you have to do. And I think we have to break ranks with that piece of group thing. Having said that, I don’t think the situation has changed very much in the last six months. I mean I don’t think there is any more promotional pressure driving prices down. But on the other hand, I don’t think there is upward promotional – lack of promotional pressure driving things upward.”

sales are sanity profits vanity

“when I first started in retail, they used to teach us on day one that sales were vanity and profits a sanity, and although that is a simplistic view of the world, there is an element of truth to it”

Our multichannel customers are our most profitable

“what we know is that in terms of the spend our most profitable customers are our multichannel customers.”

Pier 1 Imports 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

6.3% comp

“achieved a company comparable sales gain of 6.3% against the backdrop of a challenging retail climate. We are delighted with the dramatic increase in e-Commerce and how the advantages of 1 Pier 1 strategy have been embraced by our customers both new and returning.”

Huge growth in e-commerce

“First quarter online sales accounted for 9% of our total business, well ahead of where we were trending in the back half of last year. e-Commerce sales increased 260% from the first quarter last year and almost 50% sequentially from the fourth quarter.”

People adopting e-commerce much faster than plan, hitting targets 1 year early

“When we planned fiscal 2015, we did not expect our customers to engage our brands through Pier1.com with quite this much enthusiasm. We are, of course, responding to this enthusiasm and modifying our plans accordingly. Based on the momentum we are experiencing, we are revising our e-Commerce growth expectations for fiscal 2015 and ’16. We now anticipate that we’ll achieve e-Commerce sales of over $200 million this year, a number that will see us hit our original target 1 year early. We now see for fiscal 2016 e-Commerce sales exceeding $400 million.”

E-commerce good but store performance not so good

“Although our online sales for the quarter were outstanding, overall, the quarter did not unfold as we planned. Store sales and profitability were disappointing, impacted by soft traffic and a higher level of promotional activity than we anticipated.”

Not sure if this is a change in customer behavior, conversion and ticket are both strong though

“Whether or not this softness in store traffic is represented — representative of a permanent sea change in customer behavior or a temporary phenomenon, is hard to tell at this stage. However, for the time being, we are planning our business going forward, assuming store sales are more apt to be driven by increases in conversion and ticket, both of which are strong.”

Gross profit dollars impacted by promotional environment

“Whether or not this softness in store traffic is represented — representative of a permanent sea change in customer behavior or a temporary phenomenon, is hard to tell at this stage. However, for the time being, we are planning our business going forward, assuming store sales are more apt to be driven by increases in conversion and ticket, both of which are strong.”

e-commerce profitability will eventually move ahead of stores

“Sales from our direct-to-customer business are already as profitable as our stores. This is extremely promising, as we have yet to reap the advantages of scale. With the acceleration of the business in the first quarter, we can see how, over time, profitability of e-Commerce will continue to improve and eventually move ahead of the stores.’

25% of ecommerce generated in store

“25% of our first quarter e-Commerce transactions were generated in our stores.”

1/3 of customers ordering online choose to pickup in store

“approximately 1/3 of those who order from home choose to pick up in-store, presenting us with yet another opportunity to drive incremental sales. 1 Pier 1 is playing out even better than we had planned and customers are embracing our omni-channel presence with tremendous enthusiasm.”

Store comps becoming less meaningful

“comparable-store sales increased in the 4-ish range in the first quarter. It is clear to us at this stage, the comparable-store sales are quickly becoming less and less meaningful in terms of the total picture, as we continued to progress under 1 Pier 1, company comparable sales is the metric we’ll be using to measure the strength of the business.”

Gross margin fell by 240 bps, 150bps because of promotion

“As a percentage of sales, gross profit declined 240 basis points to 40%. 150 basis points of the decline is attributable to a promotional cadence that was higher than planned, with the balance resulting from the shift in our channel mix.”

markdowns not driven by clearance, driven by promotion

“it’s not so much the markdown pressure. I mean, we continue to run a very clean inventory as I know you know. So it’s really the promotional markdown, the temporary sale markdowns”

The customer wants to save, we tried, but couldn’t fight it

“The customer wants to save on the initial pricing. And as you know, with Pier 1, we tried for a long time to stay out of following the rest of the market, but that proved really, really hard to do, if you’re going to maintain your market share. So now we’re in there with the rest of the pack promoting away.”

Customers are just gravitating towards clearance items

“We put a fairly fixed amount of our inventory on promotion every month. And what we’re seeing now is that it’s over-indexing much more than we’re accustomed to in terms of a percent to our sales.”

Analyst comment: the weather remains unfavorable

“weather seems to be a little worse this year than last year, a little bit cooler, a little bit rainier.”

Got much better towards labor day and has picked up a lot since

“it was a really slow start for all the reasons that you can imagine. But it really picked up momentum as we’ve got towards Memorial Day and we’ve really had a terrific time on outdoor from, I guess, really the week before Memorial Day and it’s still doing very nicely.”

Some of the effort required to grow an ecommerce platform

“so much of the e-Commerce is based on number of SKUs. And as we’ve talked to you that we’re building the SKU base very rapidly. And every SKU that we have creates a lot of work, in terms of photography and art direction and creating the product base and so on and so forth. There’s a lot of — kind of transactional work that needs to be done.”

Room to improve on how to “manipulate” the customer base

“we understand that some of our competitors are much further down the road than we are in terms of the sophistication with which they can manage and manipulate their customer database. So we’re really playing catch-up on that, but we’re playing catch-up pretty aggressively”

We’re evaluating how many stores we need, but stores are an important part of driving online

“you can be sure that as we look at the strength of our online business in parallel with that, we are thinking how many stores we need to go with it. But don’t forget, the stores are just a very powerful vehicle for online.’

Promotional activity driven by the fact that we’ve trained the consumer ot expect it

“I think the industry generally is somewhat a victim of its own activity and that we have trained the customer to expect a degree of off-pricing and because everybody does it, everybody does it and then she expects this and it just — it becomes a habit. I think that’s a piece of it.”

We tried to fight it but couldn’t

“we tried and succeeded relatively well to hang back from this for a long time, but you’ll recall, when we released our Q3 earnings last year, we talked about this a lot and the conclusion we came to, Brian, is that we just couldn’t be — we couldn’t afford to be giving away market share.”

We think we need to preserve market share

“I don’t want to sound too negative about this, but we are where we are in terms of the competitive environment. And our job is to, we think, preserve our market share.”