Home furnishings retailer Pier 1 Imports Inc

posted a first-quarter profit versus a prior year loss, due to a gain on the repurchase of debt.

The company earned $29.3 million, or 32 cents a share, compared with a net loss of $32.8 million, or 37 cents a share, a year earlier.

Pier 1 said it recorded a gain of $48 million in the first quarter on the repurchase of debt.

Net sales for the quarter fell 9 percent to $281.1 million due to fewer stores and a 7.5 percent decline in comparable-store sales.

Pier 1 has been axing jobs, closing stores and negotiating with landlords to slash rents as part of its efforts to cut costs as the recession curbs consumer appetite for its home decor and furniture.

Merchandise margin rose to 54 percent in the quarter from 51 percent a year earlier, due to reduced supply chain costs and decreased clearance activity.

Inventories declined $91 million from prior year levels.

The company's stock closed at $1.94 Wednesday on the New York Stock Exchange.

(Reporting by Amitha Rajan in Bangalore, Editing by Saumyadeb Chakrabarty)