Struggling Pier 1 seeking buyer
Home goods store files for Chapter 11, sets deadline for bids
Pier 1 Imports Inc. — the once-trendy supplier of home goods like papasan chairs and throw pillows — filed for bankruptcy protection Monday after years of sliding sales.
The Fort Worth-based company has been struggling with increased competition from budget-friendly online retailers such as Wayfair and Amazon and discount stores like Home Goods. In a 2018 presentation to investors, the company acknowledged that shoppers thought its merchandise was outdated and expensive. It was also burdened by high sourcing and supply chain costs.
Pier 1 said it will pursue a sale,
with a March 23 deadline to submit bids. A hearing is scheduled today at the U.S. Bankruptcy Court for the Eastern District of Virginia.
In the meantime, Pier 1 said lenders have committed approximately $256 million in debtorin-possession financing so it can continue its operations during the Chapter 11 proceedings.
“Today’s actions are intended to provide Pier 1 with additional time and financial flexibility as we now work to unlock additional value for our stakeholders through a sale of the company,” Pier 1 CEO and Chief Financial Officer Robert Riesbeck said in a statement. Riesbeck, an executive with previous corporate turnarounds, joined Pier 1 last summer.
Pier 1 announced last month it planned to close up to 450 stores, or nearly half its locations. The company has 14 locations in the Houston area, including River Oaks, The Woodlands, Katy, Sugar Land, Cypress, Richmond, Conroe, Humble, Baytown and Beaumont.
Ted Gavin, a retail bankruptcy expert and managing partner of the consulting firm Gavin/Solmonese, said he hasn’t shopped at Pier 1 in more than a decade.
“People have been talking about Pier 1 heading for bankruptcy for a few years now. They’ve closed stores, they’ve
struggled to find a steady customer base, they’ve struggled with falling sales,” Gavin said.
Pier 1 was founded in 1962 in California, where it made its name selling incense, beanbag chairs and love beads. The company moved to Texas in 1966 and went public in 1970.
It grew as the baby boomer generation formed new households. It was the place to shop for a new apartment long before Pottery Barn and Crate & Barrel expanded nationally.
But in recent years, it struggled to draw customers to its often cramped and cluttered stores. The company has worked through multiple leadership changes and with the expense of building a separate online business.
At the same time, competitors such as Amazon and Wayfair gained market share with free shipping and often lower prices. Walmart and Target improved their home selection in recent years as HomeGoods expanded into new markets, going head-tohead with Pier 1 in neighborhood shopping centers.
But all is not rosy with the rapid rise at Wayfair. The online retailer Friday cut its workforce by 550 people, including 350 at its Boston headquarters.
Pier 1 in recent months has been cutting costs and jobs at its headquarters in Fort Worth, while coming up with a plan to close half its stores, including all its sites in Canada. It also closed two distribution centers. Pier 1 wouldn’t say how many jobs will be affected.
Repeated efforts to salvage Pier 1 have fallen short. An “action plan” put in place in April by interim Chief Executive Officer Cheryl Bachelder failed to stabilize sales, and the company replaced her in November with Riesbeck, a turnaround manager. He announced plans in January to dismiss about 40 percent of the headquarters staff and shut almost half the chain.
“We have worked to establish an appropriately sized and profitable store footprint, operating structure and merchandise assortment that will enable Pier 1 to better serve our customers across store and online channels,” Riesbeck said in the statement.
The company has been trying to streamline its merchandise, improve online sales and attract younger customers, but it’s been an uphill climb. On Monday, Pier 1 was selling a tufted velvet armchair for a sale price of $399 on its website. Target was offering a similar one for $214.
In its most recent fiscal year, which ended in February 2019, Pier 1 reported sales of $1.55 billion. That was down 18 percent from 2015. Pier 1’s sales tumbled 13 percent to $358 million in its most recent quarter, which ended Nov. 30.
Pier 1’s shares have fallen 45 percent since the start of the year.
Charles Tandy, the entrepreneur behind Radio Shack, started Pier 1 in California as a single store. The outlet in San Mateo sold rattan chairs, rugs, pillows, lamps, vases, dried flowers and baskets imported mostly from China, India, Vietnam and Indonesia. The lineup sometimes added novelties such as chocolate-covered ants and life-size Spanish suits of armor.
The chain eventually expanded to more than 1,000 stores, with locations in Canada, Mexico, Europe and Australia, but didn’t introduce an e-commerce website until July 2012.
As of March 2019, it employed about 18,000 people in the United States and Canada, about 4,000 of them full time.