- Suzanne KapnerThe Wall Street JournalCANCEL
Feb. 11, 2015 5:24 p.m. ET
Pier 1 Imports
’s race to build an online business resulted in escalating costs and uneven financial performance that upended its profit forecast and contributed to the abrupt retirement of its chief financial officer.
The home goods retailer warned that increased costs related to distribution centers would continue through the end of May weighing on the company’s profitability.
didn’t fully explain what went wrong with the profit forecast, but said the company had overestimated its ability to recapture sales that had been lost during storms last year. Sales in February could be weaker than expected as well.
Shares of Pier 1 fell 24% Wednesday to $12.84.
“The failure to adequately forecast the revenue and expenses in our business is a financial issue which has been aggressively addressed,” Mr. Smith said in a statement.
- Pier 1 Imports Slashes Guidance, Replaces Financial Chief (Feb. 10, 2015)
- Pier 1 Profit Falls On Higher Costs to Expand Online Business (Dec. 18, 2014)
- Pier 1 Imports Profit Falls, Company Lowers Full-Year Guidance (Sept. 17, 2014)
The company late Tuesday announced the sudden retirement of
who had served as chief financial officer since 1999. As of the company’s last annual filing in April, Mr. Turner was 57.
48, senior vice president of planning, will take over the responsibilities of finance chief on an interim basis.
Pier 1 has pushed hard into e-commerce, building an online business that will account for about 10% of sales for the year ended Feb. 28, up from virtually nothing a few years back. Along the way the company has had to absorb the costs of building distribution centers and other infrastructure, while also adjusting to having a greater share of online sales, where margins are lower than sales at physical stores.
Other retailers have dealt with similar growing pains as they migrated online, but the fast pace at which Pier 1 has expanded magnified the difficulties of adapting to a new cost structure, according to
an analyst with
“They moved so aggressively online and they were figuring a lot of stuff out as they went along,” Mr. Sigman said. “They may not have been equipped to deal with these changes.”
The company declined to comment further.
Pier 1 has steadily whittled down its earnings forecasts for its current fiscal year, from an original range provided in April of $1.16 to $1.24 a share. First in June and then again in September, the company lowered that range. And on Tuesday, the company again decreased the forecast, now saying full-year earnings would likely come in between 80 cents to 83 cents a share.
A shortfall in sales played a part, but the company is also grappling with unplanned supply chain expenses.
“They misjudged some of the operating expenses associated with running a growing online business,” Mr. Sigman said. “The question is whether these issues are fixable or will they impact the longer-term outlook for the business?”
Mr. Sigman said Pier 1’s e-commerce margins are roughly 15% lower than margins at its brick and mortar stores.
The company’s fourth quarter got off to a good start, with sales excluding newly opened or closed stores rising 8.2% in December. By January, however, sales growth had slowed to 5.7%, well below the company’s forecast, prompting Pier 1 to take a more cautious view of February sales as well, Mr. Smith said.
Still, analysts are expecting sales at existing stores to rise 5% for the year, at the low end of Pier 1’s forecast range.
Pier 1 recently has shown restraint in using promotions to drive sales, which analysts have said should help margins, but with inventories on track to rise 27% for the year that raises questions about whether the company will need more discounting to move merchandise.
Mr. Sigman said some of the merchandise build up was due to a decision to take early receipt of goods to avoid delays associated with bottle necks at the West Coast ports.
contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
Recommended article: Chomsky: We Are All – Fill in the Blank.
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.
Powered by WPeMatico