Pier 1 just posted a $29-million first-quarter profit. Who would’ve guessed?
Of course, net sales dropped 9.3% and same-store sales were down 7.5% year over year. But even those results weren’t as bad as projected. “The sales declines are getting smaller,” said Alex Smith, the company’s president and chief executive, during its quarterly conference call.
Pier 1 only has 50 store closings planned this year out of its 1,073-unit portfolio. Here is Pier 1′s store closing site listing units it is shutting through June 25. Seems kind of low, huh?
Additionally, management says it’s having luck with rent reductions. It says it has saved $9 million so far this year and will continue to renegotiate leases.
So how is Pier 1 staying afloat without mass store closures? Improvements in its operations of landlord concessions?
Obviously, they have greatly reduced their overall cost structure. It must have been through internal downsizing, decreased advertising expenditures, negotiated rent reductions, and other severe cost cutting means. Personally, I have not seen or heard a Pier 1 ad in a long time. At some point, though, to survive and potentially thrive, they will have to reverse and make positive the net sales and same-store sales declines. Product, brand, and perception has to become more relevant and appealing. It can be done but, at some point, probably when retail has a “come back,” they will have to revamp lines then spend more aggressively again on advertising to gain appeal and show new relevance. This will be the next great test for Pier 1.
In response to Paul, they are relying soley on e mail adverting and direct e mail blasts.
Besides the requisite downsizing, they sold off inventory, which won’t be replaced until the market recovers, and they gave their lenders a real hair cut, reducing debt service.
Rent reductions are a relatively small part of the equation. More power to them, I hope they can emerge as a retailer with relevance again. The Third quarter results may reveal more about where their stabilization point is.
Kudos for Pier 1! Need to change heading of blog to “I will Survive” by Gloria Gaynor!