Pier 1 to close up to 450 stores as it faces uncertain future

Discussion
Photo: Getty Images
Jan 08, 2020
George Anderson

Pier 1 Imports announced on Monday that it plans to close up to 450 stores, an unspecified number of distribution centers while cutting the numbers of people who work at the retailer’s corporate headquarters.

The chain comes off a third-quarter where same-store sales fell 11.4 percent. Pier 1 pointed to lower traffic and fewer shopping days during the recent holiday season as factors in its results. The retailer also announced that its gross profit of 30.8 percent fell from 31.6 percent the previous year as a result of increased promotions and clearance sales.

Robert Reisbeck, who was named CEO of Pier 1 in November in addition to his CFO duties, said that the company had accomplished its goal of clearing out “non-go-forward merchandise” during the most recent quarter.

“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,” said Mr. Reisbeck.

Not all are as confident about the chain’s prospects, which has posted declining sales in eight consecutive quarters.

“As Pier 1’s losses deepen, the planned large-scale store closures and cost cuts will likely be insufficient to turn around the business in time to address the company’s looming debt maturities, making restructuring or bankruptcy highly likely scenarios,” said Raya Sokolyanska, VP-senior analyst for Moody’s, in an email to RetailWire. “Increasing competition in the sector from online players, mass merchants and off-price retailers are compounding Pier 1’s already challenging turnaround.”

Cutting its debt load is a major concern for Pier 1. The chain, Fortune reports, is currently carrying over $300 million in debt and is working with outside firms including Kirkland & Ellis, AlixPartners and Guggenheim Partners to restructure its business and perhaps pursue bankruptcy. 

Unlike Bed Bath & Beyond, which earlier this week announced a $250 million sale-leaseback deal with Oak Street Real Estate Capital, Pier 1 does not own much of its property. 

DISCUSSION QUESTIONS: What do you see as the major competitive challenges facing Pier 1 Imports? What other steps – financial or otherwise – do you think Pier 1 may take to try and set its business on a positive path going forward?

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Braintrust
"Pier 1 Imports is one of those retailers which has not focused on rebuilding their business for today's needs and finding a contemporary audience. "
"When 1,000 store chains fail, it doesn’t happen overnight."
"Without fixing store traffic and top line growth, no amount of rigorous cost reduction can save the company. "

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16 Comments on "Pier 1 to close up to 450 stores as it faces uncertain future"


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Mark Ryski
BrainTrust

When 1,000 store chains fail, it doesn’t happen overnight. According to Bloomberg, Pier 1 posted eight straight quarters of declining sales and six consecutive quarterly losses, but I’d argue that Pier 1’s challenges started years before.

Retail is a zero-sum game and there’s no doubt that new e-commerce players like Wayfair played a role but, if you stand still like Pier 1 did, the market will blow past you. There was nothing particularly special about Pier 1’s offerings or stores. The revolving door in the executive suite didn’t help either.

Sadly, I believe Pier 1 is in a very deep hole and I’m not hopeful they can find a path forward.

Art Suriano
BrainTrust
Pier 1 Imports has been struggling for a long time, so this is nothing new. Today we have three types of retailers: 1.) new ones with new concepts 2.) retailers that have been around for years but are constantly adapting and fitting into the world of technology and online shopping and 3.) old retailers that have remained “old” with very little modernization into today’s times. Pier 1 Imports is one of those retailers which has not focused on rebuilding their business for today’s needs and finding a contemporary audience. Whether it be a Sears or some other old retail chain, these businesses are failing one-by-one for lack of attention to the customer of today, how that customer shops, and how to attract that customer to their brand. I don’t think they’ll turn the company around, and I expect them to go out of business. It’s sad, but not every retailer will have a place in today’s world. Yet, retail remains exciting and profitable for those who have made the leap into the world of today,… Read more »
Carol Spieckerman
BrainTrust

The major competitive challenge for Pier 1 isn’t just Amazon (though of course that is a huge factor). Digital home purveyors like Wayfair and Hayneedle are everywhere and mega retailers like Walmart and Target are attacking home in-store and online. The endless digital marketplace aisles are increasingly crammed with sofas, end tables, chairs and décor and delivery and set up times are shrinking. I’ve been impressed with Pier 1’s store refinements that make it much easier to shop by color or category and the service has been top notch as of late. Pier 1 has lost some of its hippie-ish heritage which has dinged its differentiation. Even so, the brand enjoys recognition so partnerships with other retailers could make sense.

Neil Saunders
BrainTrust
There are two main reasons for the current poor store performance. The first is the location of some of the shops. The second is the nature of the stores. Many Pier 1 stores are in locations suffering from weak customer traffic. With its smaller store footprint and more specific offering, this is not something Pier 1 can completely remedy on its own – although it has tried with initiatives like in-store events. Quite a number of stores are also located in odd places, such as in strip malls with dollar stores and discount players. Regarding the nature of the stores, while some recent improvements have been made to the layout, the proposition is not as clear and compelling as it should or could be. Pier 1 has some nice pieces, often at good (discounted) price points, but these can be hard to find. Meanwhile, categories like furniture need more space if they are to be showcased properly. In short, stores are not terrible; but neither are they inspiring enough to drive visitation. With stores not… Read more »
Bob Phibbs
BrainTrust

As the middle class erodes, we seem to be entering a time when scavaging and renting are becoming the norm. When it doesn’t matter what you buy as long as it is on sale and you can return it up to six months later, or simply rent someone else’s discards, it is not conducive to buying. Couple that with the image of a bastion of wicker furniture not of high quality and you have a recipe for a challenged brand. It is smart to close half, find who likes your look, and recapture them entirely first before venturing to expand selection.

Brandon Rael
BrainTrust

This is not a new development, and Pier 1 has faced significant challenges over the past few years. Particularly as they have seemingly lost their “why” and brand purpose while competing with both traditional home decor companies such as Crate & Barrel, West Elm, Restoration Hardware, and facing disruption in the form of digital-native companies such as Wayfair.

Unfortunately, Pier 1 has not found the magic in the bottle to differentiate them against the deep competition they are facing. Perhaps with the smaller store fleet, a focus on the customer experience, a differentiated brand purpose, curated assortment, a focus on omnichannel, as well as connecting the physical and digital shopping experiences via BOPIS, the company may have an opportunity to turn things around.

The immediate future isn’t clear. Let’s see how this plays out.

Mark Heckman
BrainTrust

Closing stores can be a solid long term strategy, if there is a strong core group of stores that can carry the sales and profit load and provide a base from which to re-build. However, there appears to be a inherent problem with the business model, the product mix and even perhaps the inability of Pier 1 to compete in an omnichannel environment. CEO, Bob Riesbeck knows from his experience at Marsh Supermarkets and more recently at HH Gregg that cost reduction measures in and of themselves will likely not suffice. Unless there are plans to make consumer-driven changes effecting the way in which Pier 1 does business, there could be more bad news to come.

Richard Hernandez
BrainTrust

Pier 1 has been in this situation for a long time — Like Bed Bath & Beyond, it has been passed by other brick-and-mortar retailers and online retailers who have upped their game. I don’t know if Pier 1 can survive unless they radically change how they do business and how they offer their store experience to customers.

Suresh Chaganti
BrainTrust

It is hard to see how Pier 1 will recover. There is hardly any differentiation, and no adaption to the contemporary audience. More than anything else, the lack of ability to adapt is the death knell. The trends of changing customer preferences, attitudes, and relevance of their products is all macro and nothing happened overnight. Yet it is depressing to see this retailer not moving quickly and letting the brand die a slow, painful death.

Dave Bruno
BrainTrust

I fear the assortments at Pier 1 have just not remained as relevant as they must to compete with a host of new entrants. I am saddened by this news and sincerely hope they bounce back, but I have long feared that their assortments have lost touch with their core segments.

Stephen Rector
BrainTrust

While I am very interested in seeing what will happen with Bed Bath & Beyond over the upcoming year with Mark Tritton at the helm, I am afraid that I don’t have the same excitement with Pier 1. Even if they can emerge out of Chapter 11, the relevancy of the brand is lacking, especially among younger consumers. This looks like an uphill battle in my opinion.

Mohamed Amer
BrainTrust
A year ago, Pier 1 Imports announced that its CEO and former president of Kmart, Alasdair James, had stepped down and that Credit Suisse has been retained to explore financial alternatives. They were less than a year into a “New Day” turnaround strategy that did not deliver on reigniting top line growth. Over the past several years, Pier 1 customers have come to competitively associate the company with At Home, Cost Plus World Market, HomeGoods and Target. Previously, Pier 1 competed at a higher price point with the likes of Williams-Sonoma, Pottery Barn and Crate & Barrel. This brand positioning mismatch was indicative of how out of sync management had become with brand perception and its core customer. Without fixing store traffic and top line growth, no amount of rigorous cost reduction can save the company. I personally enjoy walking the Pier 1 stores but what I found novel and interesting 10 years ago, is non-differentiating today. Retailing is unforgiving and will continue to challenge every taken for granted assumption about consumers, assortments, choices, and… Read more »
Ed Rosenbaum
BrainTrust

This is similar to RadioShack and is as sad in some ways to me. I did business with both Pier 1 and RadioShack. They are/were both located in Ft. Worth. They both built and moved into large new buildings around the same time. RadioShack’s campus is now housing a community college. Pier 1’s building was housing an energy company. Sad to see the rise and fall almost simultaneously.

Peter Charness
BrainTrust

I wonder how much time and energy will be spent on closing stores, trimming expenses and cleaning up inventory, vs. on developing a product/brand strategy that speaks to a targeted customer group. I’m afraid a lot of retailers in trouble spend most of their energy retrenching rather than achieving relevance. No amount of circling the wagons will reignite a retailer that has lost its connection to a viable customer group.

Dick Seesel
BrainTrust

From my experience, Pier 1 locations tend to be “neither here nor there.” Some of them are in or near regional malls, others in power centers, but a large number of them are in random neighborhood strip centers. They aren’t destination stores, and the merchandise mix doesn’t help, either — it’s dated, along with the company’s brand identity.

Closing a lot of unproductive stores is a good first step, but Pier 1 faces a lot of the same challenges as Bed Bath & Beyond — they need to rethink the entire business model top to bottom.

Steve Dennis
BrainTrust

As I have been saying for years, show me a retailer that is closing a lot of stores and I’ll show you a retailer with a customer relevancy problem, not a too-many-stores problem, as I touched on in a piece earlier this year.

Pier 1 is paying the price for not leaning into a digital transformation a decade ago and failing to differentiate their product and service offering in the face of increasing competition from more traditional retailers like Target and AtHome, and fast-growing online players such as Amazon and Wayfair.

Mass store closings almost always start a downward spiral from which few retailers ever pull out. And the reason is simple. Closing stores makes the brand less accessible for large numbers of customers and often deleverages the cost structure and branding footprint.

A brand that is not acquiring, retaining and growing sales and profits with its core customers is, before long, a dead brand walking.

wpDiscuz
Braintrust
"Pier 1 Imports is one of those retailers which has not focused on rebuilding their business for today's needs and finding a contemporary audience. "
"When 1,000 store chains fail, it doesn’t happen overnight."
"Without fixing store traffic and top line growth, no amount of rigorous cost reduction can save the company. "

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