Fort Worth, Texas — Pier 1 Imports Inc., a home goods retailer based in Fort Worth, has announced its intention to shutter up to 450 stores, which represents nearly half of its current store count of 936.
The retailer also plans to close a select number of distribution centers and reduce its corporate expenses, which includes corporate layoffs. Pier 1 says that its efforts will help right-size the company’s omni-channel operations and allow it to move forward with an “appropriately sized store footprint.”
Pier 1 has hired a third-party liquidator to help manage the store closings. The locations of the closing stores and distribution centers were not disclosed.
Pier 1 (NYSE: PIR) reported that its net sales are down 13.3 percent in its third-quarter fiscal 2020 calendar to $358.4 million compared to the same time period a year ago. The company’s fiscal calendar runs from December 1 through November 30.
Pier 1 also reported a 15.3 percent reduction in its inventory compared to this time last year.
Jeff Green, partner at retail consulting firm Hoffman Strategy Group, says Pier 1 has lost its “point of differentiation.”
“Pier 1 Imports used to be seen as unique in its Asian-oriented style. Now it has a broader appeal, which means it competes with the growing big-box home furnishings retailers,” he says.
Green also says that unlike other retail categories where smaller store footprints are increasingly popular, home furnishings consumers still prefer big box space, another factor that has hurt Pier 1.
“This phenomenon goes against everything we are seeing in the retail industry. The home furnishings customer is tending to shop big boxes to the detriment of the smaller specialty stores,” says Green.
Another problem the retail consultant observes is that Pier 1 has historically signed leases at “sites that are very expensive,” such as outparcels with high visibility.
Robert Riesbeck, CEO and CFO of Pier 1, says that the company has been seeking to clear out its “non go-forward” merchandise.
“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,” says Riesbeck, who took over as Pier 1’s CEO in November and CFO in July. “Although decisions that impact our associates are never easy, reducing the number of our brick-and-mortar locations is a necessary business decision.”
The closures will help Pier 1 transfer sales to existing locations, helping those to generate more sales, points out Green.
Green says other retailers can learn from Pier 1’s announcement.
“Given the changing and challenging brick-and-mortar environment retailers have to be very careful in their expansion strategies,” says Green.
As of Nov. 30, 2019, Pier 1 Imports had $11.1 million in cash and cash equivalents and $189.5 million outstanding under its senior secured term loan. Bloomberg reports that Pier 1 plans to file for bankruptcy, though that was not included in the retailer’s announcement.
Pier 1’s stock price closed Monday, Jan. 6 at $3.63 per share, down from $11.10 a year ago.
— John Nelson