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GuruFocus has detected 6 Warning Signs with Pier 1 Imports Inc $PIR.
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Pier 1 Imports Inc (NYSE:PIR)
Gross Profit
$697 Mil (TTM As of Feb. 2017)

Pier 1 Imports Inc's gross profit for the three months ended in Feb. 2017 was $207 Mil. Pier 1 Imports Inc's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was $697 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Pier 1 Imports Inc's gross profit for the three months ended in Feb. 2017 was $207 Mil. Pier 1 Imports Inc's revenue for the three months ended in Feb. 2017 was $528 Mil. Therefore, Pier 1 Imports Inc's Gross Margin for the quarter that ended in Feb. 2017 was 39.16%.

Pier 1 Imports Inc had a gross margin of 39.16% for the quarter that ended in Feb. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Pier 1 Imports Inc was 43.58%. The lowest was 27.52%. And the median was 38.96%.

Warning Sign:

Pier 1 Imports Inc gross margin has been in long term decline. The average rate of decline per year is -3%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Pier 1 Imports Inc's Gross Profit for the fiscal year that ended in Feb. 2017 is calculated as

Gross Profit (A: Feb. 2017 )=Revenue - Cost of Goods Sold
=1828.446 - 1131.138
=697

Pier 1 Imports Inc's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

Gross Profit (Q: Feb. 2017 )=Revenue - Cost of Goods Sold
=528.352 - 321.44
=207

Pier 1 Imports Inc Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was 148.967 (May. 2016 ) + 145.036 (Aug. 2016 ) + 196.393 (Nov. 2016 ) + 206.912 (Feb. 2017 ) = $697 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Pier 1 Imports Inc's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

Gross Margin (Q: Feb. 2017 )=Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=207 / 528.352
=39.16 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Pier 1 Imports Inc had a gross margin of 39.16% for the quarter that ended in Feb. 2017 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Pier 1 Imports Inc Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
Gross_Profit 440363440555651743765768705697

Pier 1 Imports Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
Gross_Profit 205233170155184197149145196207
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