A New Day: Pier 1 plans 3-year revamp for modern retail environment

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Pier 1 Imports Inc. unveiled a new three-year strategy April 19, but customers in the Dallas-Fort Worth area can get a glimpse of the company’s new strategy by visiting one of several local stores where the company has implemented some of the changes it expects to roll out across its more than 1,000 locations.

Facing pressures in a brutal retail environment, Pier 1 Imports Inc. has embarked on a new strategy known as “Pier 1 2021: A New Day.”

“During the past several months, we have, with an external specialist, undertaken a rigorous assessment of Pier 1’s brand and enterprise,” said Alasdair James, president and CEO. “I am pleased to note we have a number of inherent strengths on which to build as we embark on Pier 1 2021: A New Day.”

Capital investments in fiscal 2019 are expected to total $60 million, which includes approximately $45 million of expenditures for Pier 1 2021: A New Day, primarily deployed toward information technology, supply chain and a revamp of stores.

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The company also plans to make selling, general and administrative expenses (SG&A) investments in fiscal 2019 in the areas of marketing, corporate services and facilities planning and store operations as part of the plan.

The plan aims for sales growth and profitability in the last two years of the plan, but net losses are expected for the first quarter and full year.

“[T]hese investments are expected to drive sales growth and profitability in fiscal 2020 and 2021 and are necessary to help us return the business to a sustainable growth trajectory,” James said.

“As the results of the plan are fully realized in fiscal 2021, we expect to achieve sustainable net sales growth of 4 percent to 6 percent EBITDA [earnings before interest, taxes, depreciation and amortization], margin of 6 percent to 8 percent, and earnings per share in the range of $0.60 to $0.70. This effectively expands our EBITDA margin by 100 to 300 basis points and delivers an increase of approximately three times in earnings per share in three years’ time as compared to the adjusted metrics presented in our fiscal 2018 year-end earnings release,” he said.

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According to the presentation given to analysts on April 18, Pier 1 wants to develop a brand purpose and value proposition for the company’s primary customers – described as confident style shoppers and up and coming decorating enthusiasts – with a focus on its strongest categories: home accessories, décor and accent furniture.

The company plans to differentiate the Pier 1 brand with its unique assortments, sharpened price points with good/better/best options, simplified store and online environments and with creative merchandising that increases the desire to buy.

To market this new message to consumers, Pier 1 plans to use a wide variety of marketing tools, from traditional mass media to search engine optimization to social engagement.

The Fort Worth-based home furnishing retailer also said during the April 18 earnings call that it plans to will close up to 25 stores in the next two years.

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Like many traditional brick-and-mortar retailers, Pier 1 has faced struggles in a new online-based economy. But not only is it competing with the likes of Amazon for online sales and Walmart and Target in the home décor market, it is also battling other retailers in its space including Restoration Hardware, Crate and Barrel and Pottery Barn.

On April 18, Pier 1 reported fiscal fourth-quarter net income of $15.1 million.

The home decor company posted revenue of $512.2 million in the period, which fell short of Wall Street forecasts. Four analysts surveyed by Zacks expected $538.3 million.

For the year, the company reported profit of $11.6 million, or 14 cents per share. Revenue was reported as $1.8 billion.

The company’s stock, which has taken a drubbing all year, fell to a price of $3.46 per share. A year ago, shares were trading at $6.88.

“Our financial performance in fiscal 2018, and specifically the fourth quarter, underscores the urgent need for change,” said James, in announcing the results. “In fiscal 2019, we will be investing in the tools and resources needed to execute against the plan.

“We are confident in the potential of the business to respond and have already begun implementing new initiatives across sourcing, supply chain, stores, merchandising, marketing and promotions,” James said. “These investments will pressure profitability in the near-term, bringing us to an expected net loss for the full year in fiscal 2019, but are expected to drive sales growth and profitability in fiscal 2020 and 2021 and are necessary to help us return the business to a sustainable growth trajectory.”

James became president and CEO of Pier 1 in May 2017. James replaced Alex Smith who left in 2016. James’ background includes stints at Sears Holdings, where he was president of Kmart, GlaxoSmithKline PLC and British retailer Tesco PLC.

Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

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