The struggling Pier 1 Imports said Monday it intends to close up to 450 stores and some of its distribution centers, and make reductions in its “corporate headcount,” as the company suffered through poor third-quarter sales and profit margins.
The store cuts, announced as part of the home furnishings and accessories retailer’s third-quarter earnings release, would amount to nearly half of the Fort Worth company’s 936. Pier 1 said it received permission from its lenders under the company’s revolving credit facility to make the reductions.
Robert Riesbeck, the company’s CEO, said in a statement that sales and margins sagged as the company cleared out discontinued merchandise. Sales in comparable stores – those open at least a year, a key measure of retail performance - decreased 11.4% during the third quarter, which ended Nov. 30, Pier 1 said.
“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,” Riesbeck said.
“Although decisions that impact our associates are never easy, reducing the number of our brick-and-mortar locations is a necessary business decision. We thank our team of hard-working associates for their commitment to Pier 1 and to serving our customers.”
Riesbeck described Monday’s announced cuts as better positioning the company to move ahead as an “omni-channel retailer, and better position Pier 1 to meet our customers where they shop.”
Pier 1 hired Riesbeck, an executive with substantial prior bankruptcy experience, as its chief financial officer last summer and promoted him to CEO in November. Entering the current fiscal year, the company's board implemented a plan aimed at driving improvements in revenue and margins, marketing and promotions, sourcing and supply chain, cost cutting, and stores.
Monday, Pier 1 did not identify which stores and distribution centers it planned to close, or specify the number of potential staff cuts. In its third-quarter 10-Q securities filing Monday, it said it could not estimate at this point what kind of charges it could incur through the closures and staff cuts. The company did not conduct its regular quarterly earnings conference call with securities analysts and reporters.
Pier 1 has seven distribution centers nationally, six of which it owns, according to an annual securities filing it made in early 2019. Two of the centers are in Fort Worth. The company has 5.4 million square feet of distribution space, including 770,000 square feet in Fort Worth.
In the quarterly filing, Pier 1 said its cash on hand, cash equivalents, and forecasted cash flows "are not expected to be sufficient to meet the company’s obligations that will mature over the next 12 months. In addition, future borrowings may not be available or may not be sufficient to enable the company to fund its obligations and working capital needs through the next 12 months.
"However, the company is taking a number of actions to support its ongoing transformation including cost cutting, lowering capital expenditures, seeking additional capital and reducing its store footprint including related distribution centers and corporate headquarters support," Pier 1 said in the filing. "The company will continue to seek reductions in rental obligations with landlords in its determination of the appropriate footprint."
Pier 1 said its comparable-store sales in the third quarter fell “primarily” due to “lower traffic.” But it also attributed part of the drop to several sales days that were in the prior year’s third quarter, but not in 2019’s.
Net sales for the quarter were $358.4 million, down from the prior year’s $413.2 million. Gross profit – the difference between sales and cost of sales, as a percentage of sales - was 30.8%, down from 31.6%.
Selling, general and administrative expense was 42.2% of sales in the most recent quarter, up sharply from 35.6%.
Pier 1 posted a net loss of $58.9 million for the quarter, including a $14.1 million charge for impairment of assets, compared to a loss of $50.4 million for the same quarter the prior year.
For the first nine months of the fiscal year, the company lost $241.2 million, compared to a loss of $130 million for the same period the prior year.
Pier 1 started operations with one store in 1962.
