Peter T. Leach | Jun 17, 2010 12:55PM EDT
Pier 1 Imports says tighter supply chain controls boosted a sharp improvement in margins on home furnishings merchandise in its fiscal quarter ending May 29, pushing the retailer to its first operating profit in the first quarter in six years.
The retailer, the 28th-largest importer into the United States according to The Journal of Commerce rankings, said its merchandise margin for the quarter reached $179.6 million in the quarter, or 58.6 percent of sales. That was an improvement of 4.4 percentage points over last year, when the $152.3 million was 54.2 percent of sales.
Pier 1 has put its supply chain, from vendor management to distribution channels, under tight scrutiny since the specialty retailer began trying to rebuild its troubled finances in 2008 amid a deep decline in the home furnishings market. The moves included the shutdown of some 40 stores and a distribution center, along with the elimination of a range of products, including its children’s furnishings line.
The company’s net profit dropped 74 percent in the three months ending May 29 compared to the same period a year ago, but the comparison included several one-time gains last year.
The national retailer reported a profit of $7.7 million in for the first quarter, compared to $29.3 million for the same period last year, which included the one-time gains.
But the company went from a $26.7 million operating loss last year to an $8.3 million operating profit on an 8.9 percent increase in sales, to $306.3 million. Comparable store sales were up 14.3 percent.
Inventories grew far less than sales, expanding 3.1 percent overall to $303.2 million, and inventory per square foot at its stories was up 5.7 percent.
Pier 1 is continuing to “strategically manage its inventory purchases and monitor its inventory levels to keep in line with consumer demand,” the company said.
-- Contact Peter T. Leach at pleach@joc.com.