FORT WORTH, TX Jan. 6, 2020– Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the third quarter ended November 30, 2019 and provided a business update.

Third Quarter Fiscal 2020 Financial Summary

• Company comparable sales decreased 11.4% compared to the third quarter of fiscal 2019; the Company estimates that the shift of certain holiday selling days, which were included in last year’s fiscal third quarter, negatively impacted third quarter fiscal 2020 company comparable sales by approximately 650 basis points. The impact of this timing shift is expected to reverse in the fourth quarter of fiscal 2020;
• Net sales decreased 13.3% to $358.4 million compared to the third quarter of fiscal 2019;
• Net loss of $59.0 million, or ($14.15) per share;
• Impairment charges totaling $14.1 million which consisted of $9.2 million for lease right-of-use assets and $4.9 million for fixed assets;
• Inventory of $328.9 million, down approximately 15.3% year-over-year; and
• Cash and cash equivalents of $11.1 million at quarter end, $189.5 million outstanding under its senior secured term loan, $50.0 million of borrowings under the Company’s FILO tranche, $96 million of borrowings under its $350 million revolving credit facility and $46.5 million in letters of credit outstanding under the Revolving Credit Facility, with $158.5 million remaining available for cash borrowings, all as of November 30, 2019.

Robert Riesbeck, Pier 1’s Chief Executive Officer and Chief Financial Officer, said, “Fiscal third quarter sales and margins remained under pressure as we completed our efforts to clear out non-go-forward merchandise. Looking ahead, we believe that we will deliver improved financial results over time as we realize the benefits of our business transformation and cost-reduction initiatives. To further advance our progress, we are announcing additional actions today that will enable us to move forward with an appropriately sized store footprint and operating structure as an omni-channel retailer, and better position Pier 1 to meet our customers where they shop.”

Business Update

In order to better align its business with the current operating environment, Pier 1 intends to reduce its store footprint by up to 450 locations. To reflect the revised store footprint, the Company also plans to close certain distribution centers and reduce its corporate expenses. This includes a reduction in corporate headcount.

In order to maintain the same high standards customers have come to expect and ensure a seamless experience for customers at these locations, the Company is utilizing the services of a third-party liquidator to help manage the store closings.

On January 6, 2020, the Company received consent from its lenders under the Revolving Credit Facility to permit the reduction to the store footprint and related actions.

Mr. Riesbeck added, “Although decisions that impact our associates are never easy, reducing the number of our brick-and-mortar locations is a necessary business decision. We thank our team of hard-working associates for their commitment to Pier 1 and to serving our customers.”

Third Quarter Fiscal 2020 Results of Operations

Net sales for the third quarter of fiscal 2020 decreased 13.3% to $358.4 million, compared to $413.2 million for the third quarter of fiscal 2019. Company comparable sales decreased 11.4% compared to the year ago period, primarily as a result of lower traffic. In addition, the Company estimates that the shift of certain holiday selling days, which were included in last year’s fiscal third quarter, negatively impacted third quarter fiscal 2020 company comparable sales by approximately 650 basis points. The impact of this timing shift is expected to reverse in the fourth quarter of fiscal 2020. The Company operated 942 stores at the end of the third quarter, a decrease of 45 from the third quarter of fiscal 2019.

Gross profit for the third quarter of fiscal 2020 totaled $110.3 million, or 30.8% of net sales, compared to $130.5 million, or 31.6% of net sales, for the third quarter of fiscal 2019. The year-over-year decline in gross margin rate primarily reflects increased promotional and clearance activity, as well as 190 basis points deleverage in store occupancy costs due to lower sales.

SG&A expenses for the third quarter of fiscal 2020 were $151.4 million, or 42.2% of net sales, compared to $147.0 million, or 35.6% of net sales, for the third quarter of fiscal 2019. The following table details the breakdown of SG&A expenses for the third quarter of fiscal 2020 as compared to the prior year period (in millions).

Operating loss for the third quarter of fiscal 2020 was $53.3 million compared to operating loss of $28.9 million for the prior year period. Net loss for the third quarter of fiscal 2020 totaled $59.0 million, or ($14.15) per share, which includes transformation costs of approximately $10 million, primarily related to professional fees, and a non-cash charge of $14.1 million related to store impairment. This compares to net loss of $50.4 million, or ($12.49) per share a year ago. Per share figures have been adjusted to reflect the Company’s 1-for-20 reverse stock split effected on June 20, 2019. EBITDA in the third quarter of fiscal 2020 was ($41.0) million, which includes the transformation costs and impairment charge referred to above, compared to EBITDA of ($16.9) million in the third quarter of fiscal 2019. A reconciliation of this non-GAAP measure to GAAP is provided below.

Year-to-Date Results of Operations

Net sales for the 39 weeks ended November 30, 2019 were $977.3 million, a decrease of 14.3% compared to $1.140 billion for the same period of fiscal 2019. Company comparable sales for the year-to-date period decreased 12.5% from the prior year, reflecting lower average customer spend, which is primarily attributable to changes in the Company’s merchandise mix, as well as decreased store traffic.

Gross profit for the year-to-date period of fiscal 2020 totaled $239.9 million, or 24.5% of net sales, compared to $344.1 million, or 30.2% of net sales, for the same period a year ago.

SG&A expenses for the 39 weeks ended November 30, 2019 were $426.3 million, or 43.6% of net sales, compared to $428.7 million, or 37.6% of net sales, for the period ended December 1, 2018. The following table details the breakdown of SG&A expenses for fiscal 2020 as compared to last year (in millions).

For the 39-week period ended November 30, 2019, operating loss was $222.9 million compared to operating loss of $122.8 million in the same period a year ago. Net loss for the 39 weeks ended November 30, 2019 totaled $241.2 million, or ($58.36) per share, which includes transformation costs of approximately $36 million, primarily related to professional fees, and a non-cash charge of $18.7 million related to store impairment. This compares to net loss of $130.0 million, or ($32.31) per share, in the year ago period. Per share figures have been adjusted to reflect the Company’s 1-for-20 reverse stock split effected on June 20, 2019. EBITDA for the 39-week period was ($186.1) million in fiscal 2020, which includes the transformation costs and impairment charge referred to above, compared to EBITDA of ($84.8) million in the same period of fiscal 2019. A reconciliation of this non-GAAP measure to GAAP is provided below.

Balance Sheet and Financial Position

As of November 30, 2019, inventories totaled $328.9 million compared to $388.3 million a year ago. At quarter end, the Company had $11.1 million in cash and cash equivalents, $189.5 million outstanding under its senior secured term loan, $50.0 million of borrowings under its FILO tranche, $96.0 million of borrowings under its $350 million revolving credit facility and $46.5 million in letters of credit outstanding under the Revolving Credit Facility, with $158.5 million remaining available for cash borrowings, all as of November 30, 2019.