Rent Reductions Help Pier 1 Bounce Back

Pier 1 Import’s impressive return to profitability and sales gains make us wonder about all of those landlords out there that said they would refuse to give any tenants concessions. According to the retailer’s fourth-quarter report, it received rent reductions at 350 of its 1,054 stores.

That break must have had something to do with Pier 1’s impressive fiscal-year earnings. It reported a net income of $87 million, a vast improvement from the $129-million net loss the previous year.

The savings at those 350 stores resulted in a 23% rent reduction over a two-year period and a cash savings of $10 million during the fiscal year. Additionally, Pier 1 is slowing its store-closure rate, from 38 units last year to planned 10 to 15 closures in 2010.

Pier 1 has cut these deals as vacancy rates in malls and shopping centers continue to rise while rental rates fall.

At the same time, though, retailers — not just Pier 1 — are posting sales and earnings improvements. Were landlords too quick to give concessions, or did they have no choice?

4 Responses to “Rent Reductions Help Pier 1 Bounce Back”

  1. 1 Wayne Prescott,MAI, CCIM April 8, 2010 at 9:55 am

    In any real estate market where supply exceeds demand, the old adage “Location Location Location” becomes more important. My observation is that Pier 1 is not in top-tier locations. Landlords required financials to prove the need, and Pier 1 had the numbers to back up their request. I’m not surprised that they achieved reductions. Landlords did not act too soon. Many tenants asked for reductions but did not respond to the request for financials. For those willing to share them, there was usually a real need for some help.

  2. 2 Cindy Hopkins April 8, 2010 at 10:44 am

    I think most Landlord’s had no choice, especially seeing their losses for the previous year. It was either rent reduction or lose the tenant altogether. Some money is better than no money – especially now, and it looks as if Pier 1 will keep most of its stores.

  3. 3 Lou Klein April 9, 2010 at 12:39 pm

    Amazing how landlords have to give rent reductions during times of distress, but when times are good, they dont ask for more rent during the duration of the lease.

  4. 4 James April 12, 2010 at 7:39 am

    This is a $216 million dollar swing with rent reduction contributing $10 million of that, about 4.6% Looks like Pier 1 did a lot more than renegotiate rent on about a third of their stores. More power to them, they are still there and the lights are still on!

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April 2010

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