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04/19/2018

Pier 1 prepares for ‘urgent change’ after dismal Q4

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On the heels of a disappointing fourth quarter, Pier 1 Imports unveiled a three-year plan to improve its business in the long-term. It also said it is ceasing its dividend payments.

The plan, called “Pier 1 2021: A New Day,” features a number of initiatives and organizational changes to drive growth, including targeting niche groups of consumers, refining the merchandise mix, and new marketing strategies. Pier I said it will reimagine the shopping experience, leveraging and strengthening its omnichannel platform.

“In fiscal 2019, we will be investing in the tools and resources needed to execute against our plan,” said Pier 1 president and CEO Alasdair James. “This will pressure profitability, bringing us to an expected net loss for both the first quarter and full year. These 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.”

The retailer expects to see a comparable sales decline from 8% to 7% in the first quarter of fiscal 2019, but a 1.5% to 2.5% increase for the full year as the new plan takes form. By fiscal 2021, Pier 1 expects net sales growth of 4% to 6%, and earnings per share in the range of $0.60 to $0.70.

Pier I unveiled its plan on the heels of a disappointing fourth quarter. For the quarter ended March 3, net income decreased 43.5% to $15.1 million. Earnings per share decreased to $0.19 from $0.33.

Net sales decreased 3.1% to $512.2 million. Same-store sales declined 7.5%, but e-commerce business rose, representing approximately 25% of total sales compared to about 20% a year ago. Analysts has forecast a 2.7% drop in same-store sales, and earnings $0.20 a share on sales of $540 million.

Neil Saunders, managing director of GlobalData Retail, noted that Pier 1’s weak fourth-quarter performance came during a period when many of its rivals performed well. He said the poor performance of its stores is driving the retailer down.

“With stores not pulling their weight, the bottom line suffers,” Saunders said. “This is particularly true given the higher costs of online fulfillment — something that Pier 1 has started to address, but where it has much further to go before it achieves optimum efficiency.” For more, click here.

For the full fiscal year, Pier 1’s sales decreased 1.6% to $1.8 billion, and same-store sales decreased 2%. Net income dropped off 61.4% to $11.6 million from $30.1 million the previous year. Earnings per share decreased dropped to $0.14 from $0.37. The retailer closed 21 stores and opened seven, ending the fiscal year with 1,032 stores.

“Our financial performance in fiscal 2018, and specifically the fourth quarter, underscores the urgent need for change,” James said. “We are confident in the potential of the business to respond.”

The company ended fiscal 2017 with roughly 1,020 locations.