Pier 1 2Q Losses Narrow

Fort Worth, TX, September 21, 2007--Pier 1 Imports reported a smaller quarterly loss as it phased out its Kids and Internet segments, but the results missed expectations and its stock fell as much as 6%.

The loss narrowed to $43.4 million or 49 cents a share, in the second quarter ended Sept. 1, from $73.1 million, or 84 cents a share, a year earlier. Analysts, on average, expected a loss of 44 cents, according to Reuters estimates.

Sales fell 7% to $344.6 million while sales in stores open at least a year, a key retail metric, dropped 3.6%.

Pier 1 has posted losses in 10 consecutive quarters. In an effort to become profitable once again, the retailer has cut jobs, closed stores and vowed to spend significantly less on marketing after pouring millions into futile efforts to boost customer traffic last year.

But in reducing marketing expenses, Pier 1 may have a difficult time driving sales as competitors ramp up marketing for the upcoming holiday shopping season, Deutsche Bank analyst Mike Baker wrote in a research note.

"We remain concerned with (Pier 1's) ability to drive sales without markdowns in a weak demand environment," wrote Baker, who has a "hold" rating on Pier 1's stock.

Home furnishings retailers have been hurt by an anemic U.S. housing market.

CEO Alex Smith said on a conference call that Pier 1 will move away from "high ticket" furniture, instead focusing on smaller decorative items to help weather the challenging retail environment.

Smith also sees its core wicker and bamboo seating "coming back to life" next spring.

"Hopefully we're coming to the end of the story that's been going on a long, long time at Pier 1 Imports," Smith said.

"Our comps have been declining for almost five years."

Pier 1 has lost customers in recent years after abandoning its hallmark wicker furniture in favor of modern items like those of its rivals. It has also been battered by competition from discounters like Target and Wal-Mart.