Home goods retailer files for bankruptcy
Plans to close two distribution centres
Pier 1 Imports, the home goods retailer that in the 1990s became a popular destination for exotic rattan chairs and cheap embroidered pillows only to cede its market niche over the past decade to lower-priced competitors, announced on Monday that it had filed for bankruptcy and was pursuing a sale of the company.
The retailer has weathered years of declining store revenue and undertook an overly ambitious turnaround plan, industry analysts said.
The company said last month that it would close up to 450 of its 936 stores, including all its locations in Canada.
The Pier 1 bankruptcy underscores fundamental challenges facing US retailers that rely heavily on brick-andmortar stores.
This month, Macy’s announced that it would close about 125 of its stores over the next few years and shed about 2,000 jobs. Last year, a number of fashion retailers declared bankruptcy, among them Barneys New York, Payless ShoeSource and Forever 21.
The rise and fall of Pier 1 offers a case study of a successful business that found itself unable to adapt after competitors began to replicate and scale its retail approach.
Founded in 1962 in San Mateo, California, the retailer developed a novel strategy that focused on importing eclectic home goods from India, Indonesia and other countries and selling them at low prices.
By the 1990s, Pier 1 had developed a recognisable, quirky aesthetic that drew consumers who would drop in just to check out the latest animal-shaped umbrella stands, colorful painted plates and woven baskets.
“Twenty years ago, you could look at a product and you would really know that it came from Pier 1,” said Hart Posen, a professor of management at the University of Wisconsin School of Business who studies corporate decision-making during technological change. “They were really the only big national firm with that kind of unique identity.”
But Pier 1’s appeal began to fade with the rise of popular e-commerce sites like Etsy, Amazon and Wayfair — along with physical stores like Home Goods — which offered similarly eclectic décor items, often at lower prices.
The retailer once known for home furnishings deals suddenly seemed expensive to some consumers.
Pier 1 also struggled to come up with an effective online retail strategy, analysts said, even as it neglected to sufficiently modernise its stores and refresh
its merchandise assortments.
On Friday, Pier 1 stock closed at $3.56, having lost more than 99% of its value since May 1, 2013, when its shares
were priced at about $485.
To try to stop the reputational and revenue slide, Pier 1 announced an ambitious, three-year turnaround
plan in 2018. The plan involved a broad set of changes — including new approaches to product sourcing, merchandising, pricing, store design and
digital marketing.
But the challenges and costs of trying to make all those changes at once backfired, causing a rapid decline in earnings and liquidity, said Raya Sokolyanska, a senior analyst at Moody’s.
“All of the initiatives taken together, which the company subsequently started to change, I believe caused distractions and was also a very expensive and difficult thing to do at the same time,” she said. “The company quickly turned to negative earnings and sales declines.”
Last month, Moody’s downgraded the outlook for Pier 1 to negative from stable.
The company had recently “taken significant steps forward in our business transformation and cost-reduction initiatives,” Robert Riesbeck, Pier 1’s chief executive, said in a statement Monday.
He added that the bankruptcy filing would “provide Pier 1 with additional time and financial flexibility” as it pursued a sale of the company.
Pier 1 has already closed or started going-out-business sales at more than 400 stores, and it plans to close two distribution centres, the statement said.
The company’s online store as well as the several hundred brick-andmortar locations that remain open are operating as normal, according to the statement.
But some retail industry veterans were sceptical that the retailer could survive bankruptcy. “Would anyone care if Pier 1 disappeared?” Posen said. “I think the answer is no.”