UPDATE 1-Pier 1 Imports posts narrower quarterly loss

1 (Adds sales, outlook)

NEW YORK, June 19 (Reuters) - Home furnishings retailer Pier 1 Imports (PIR.N: Quote, Profile, Research) on Thursday posted a worse-than-expected quarterly loss, hurt by weaker traffic in March and April.

The retailer, which has been trying to turn around its business with store closures, job cuts and less marketing spending, expects "modest net income" before charges for the full year.

The loss narrowed to $32.8 million, or 37 cents a share, for the first quarter ended on May 31, compared with a year-earlier loss of $56.4 million, or 64 cents a share. The results were helped by lower expenses and decreased promotional activity.

Sales fell to $310 million from $356 million, hurt by lower traffic in March and April because of a year-earlier promotional event. Pier 1 said traffic improved during May. Analysts expected sales of $338.5 million for the quarter, according to Reuters Estimates.

Sales at stores open at least a year, or same-store sales, fell 5.4 percent in the quarter, but the company noted that same-store sales rose 7.5 percent in May.

Merchandise margins improved to 51.3 percent during the quarter from 45.5 percent a year earlier, reflecting lower promotional and clearance activity. Selling, general and administrative costs fell 17 percent.

Pier 1 offered to buy fellow furnishings retailer Cost Plus Inc (CPWM.O: Quote, Profile, Research) for about $88.4 million in stock earlier this month, but the operator of Cost Plus World Markets rejected the bid this week, saying it was not attractive financially or strategically.

Falling home sales and values and tighter credit have compounded trouble for home-goods retailers as higher gasoline and food costs pressure consumers. Linens 'n Things recently filed for bankruptcy protection.

For the second quarter, Pier 1 forecast "slightly negative to modestly positive" same-store sales, with earnings before interest, taxes, depreciation and amortization expected to be "slightly negative to slightly positive." (Reporting by Karen Jacobs; Editing by Derek Caney)