Pier 1 Imports (NYSE:PIR) spooked Wall Street on Thursday as the furnishings store operator revealed a deeper-than-feared 32% drop in fiscal second-quarter profits and cut its full-year outlook.
Shares of the Fort Worth-based company tumbled about 8% in premarket action on the disappointing results and guidance.
Pier 1 Imports said it earned $17.8 million, or 17 cents a share, last quarter, compared with a profit of $26.2 million, or 24 cents a share, a year earlier.
Excluding one-time items, it earned 19 cents a share, trailing the Street’s view by two pennies.
Total sales jumped 7.6% to $395.6 million, which is slightly below estimates from analysts for $405 million. Same-store sales increased 3.5%, or about half of the year-earlier period’s growth of 6.7%.
Gross profits shrank to 40.8% from 41.2%. Expenses ticked up to $122.6 million, or 31% of sales, compared with $112 million, or 30.5% of sales, a year earlier.
Alex Smith, Pier 1’s CEO, cited marketing initiatives that did not include “appropriate messaging around clearance” and sales as well as customer acquisition, hurting store traffic.
“We should also have done a better job of flowing new product to the stores and reflecting those items in the floor set,” Smith said in a statement.
Looking ahead, Pier 1 projected full-year EPS of $1.23 to $1.29, compared with earlier guidance for $1.27 to $1.33. Even the high end of the new range would trail the Street’s view by two pennies.
Earnings before interest, depreciation, amortization and taxes, or EBITDA, is seen growing 12% to 16%, compared with 15% to 18% previously.
Despite the lower profit outlook, management reaffirmed its call for same-store sales growth in the mid-single-digit range.
Smith also said Pier 1 remains on track to achieve the goals spelled out in its three-year growth plan and to return to historical levels of sales and profit growth in the second half of 2013.
“Customers are responding favorably to both regular and seasonal merchandise,” Smith said. “We’re confident in our plans for the holiday season, including a stepped up marketing campaign which will see our return to advertising on network TV.”
While management tried to reassure shareholders, Pier 1’s shares dropped 8.05% to $21.60 in premarket trading on Thursday morning. The selloff will eat into Pier 1’s 2013 rally of 18%.