Dive Brief:

• Shares of Pier 1 Imports on Wednesday surged more than 20% in late trading after the retailer reported third quarter net sales fell 0.4%, with e-commerce sales (some 20% of net sales in the quarter) rising 28% to $97.4 million. Q3 same-store sales rose 1.8%.

• Gross profit as a percentage of net sales in the quarter rose 280 basis points to 41.3%. Earnings were 17 cents per share and adjusted earnings were 22 cents per share compared to earnings of 13 cents per share in the third quarter last year. That beat the company’s own projection for per-share earnings of 9 cents to 15 cents per share and FactSet analysts’ estimate for 13 cents per share.

• The company also appointed chairman Terry E. London to the position of interim President and Chief Executive Officer, effective Jan. 1, 2017 in conjunction with the planned departure of President and CEO Alex W. Smith on Dec. 31.

Dive Insight:

Improvements to stores and the end of the U.S. election helped sweep Pier 1 to more positive territory in the third quarter, which it has a good chance to maintain. Conlumino CEO Neil Saunders said the retailer ”is now on a much more positive trajectory.”

Pier 1 boosted its guidance for the fourth quarter and full-year fiscal 2017. Adjusted earnings for the holiday quarter are now expected to range between 28 cents and 32 cents per share. The adjusted earnings per share guidance excludes estimated costs of some $2 million in the fourth quarter and $10 million for full-year fiscal 2017 related to Smith's departure, according to CFO Jeffrey N. Boyer.

CEO Alex Smith noted in a statement on Wednesday that the conclusion of the election did in part allow the retailer to beat its own expectations. Additionally, he added that seasonal assortments are resonating with customers. “We have a great deal of confidence in our brand positioning and long-term financial outlook,” he said. “Pier 1 Imports has always been known for inspirational merchandise, great value and outstanding customer service. Layering our omni-channel capabilities on top of that foundation makes Pier 1 Imports a formidable force in the home furnishings space.”

E-commerce in particular was a strong suit for Pier 1. Its 28% gain in digital sales were aided by strong marketing and its new gift registry, by Conlumino’s estimation. “Admittedly, total sales growth is still slightly negative, but this is to be expected given the company is operating 33 fewer stores than last year,” Saunders wrote in an email to Retail Dive. “However, comparable sales growth is respectably positive and e-commerce is booming. Even net income registered growth, which is something of a relief after the sharp declines of the past year.”

The company still has work to do, he said, especially in furniture, in which it “punches well below its weight.” But the retailer is seeing results from changes to its merchandising displays and better targeted promotions, which allows it to protect margins and stimulate interest from customers, Saunders said.

“In our view Pier 1 deserves some credit for the changes it has been making," he said. "These margin gains have been augmented with further uplifts from savings in the distribution network, most notably the transport of goods from Asia.”