Pier 1 on Wednesday said that CEO Alasdair James has stepped down and that board member Cheryl Bachelder replaces him in the interim. The company has also retained Credit Suisse to help evaluate "a full range of strategic alternatives to enhance shareholder value," according to a company press release.
In another release, the retailer reported that third quarter net sales fell 11.9% year over year to $413.2 million as store comps tumbled 10.5%, even with a benefit of about 600 basis points thanks to a shift of certain holiday selling days into the calendar.
The bottom line narrowed to a net loss of $50.4 million from $51.1 million in the second quarter and from net income of $7.4 million in the year-ago quarter, the company said. Gross profit reached $130.5 million or 31.6% of net sales, compared to $176.7 million or 37.7% of net sales in the third quarter last year.
James arrived last year as part of a smooth and planned transition, but the furniture and home goods retailer was already showing signs of slipping.
The retailer's challenges have only grown more acute as its competition has gained strength, and its troubles last month helped land it on Retail Dive's list of possible bankruptcies in the next year. Meanwhile, Walmart and Target, as part of their efforts to take on Amazon (which has both expanded and refined its furniture and home decor offering), as well as Wayfair (which has added design services and a membership tier), have sharpened their furniture and home goods merchandising, adding new lines and easing online shopping and fulfillment of bulky orders.
Bachelder acknowledged the situation in her remarks to investors on Wednesday. "It's become clear that we are not giving our Pier 1 customer the style, the value, the selection that she wants to find in our stores and online," she said, according to a conference call transcript from Seeking Alpha. "The sector is performing well. So, we know the opportunity is there for Pier 1."
The turnaround will be more focused, she also said, adding "we've basically been trying to do too much at once."
That narrower strategy will be led by Donna Colaco, former brand chief of Chico's White House Black Market brand, who was appointed chief customer officer earlier this month. In such dire straits, the retailer is also redoubling its expense reduction efforts. With the help of a procurement firm, the company has "identified and captured approximately $20 million of annualized savings for fiscal 2020," CFO Nancy Walsh said on the call.
The retailer's finances are in good order, which gives it time. The company proactively expanded its secured revolving credit facility, which Bachelder said "will immediately enhance liquidity and create greater financial flexibility."
Despite that, the third quarter results reveal how challenging the turnaround will be, according to Moody's Investors Service analysts. "While Pier 1 has adequate near-term liquidity, including no maturities until 2021 and ample revolver capacity, the third quarter declines reflects continuing challenges in executing its turnaround strategy — particularly in a strong consumer spending cycle," Moody's Senior Analyst Raya Sokolyanska said in comments emailed to Retail Dive.
The company is evaluating its store fleet (Pier 1 shuttered 24 stores in the past year), but conversion in stores is healthy once shoppers enter them, executives said. Customers are giving new store formats good reviews, according to Walsh. "Approximately, 85% of customers tell us in surveys that the stores feel more spacious and are easier to shop," she said. "Notably, our conversion rates continue to strengthen in the third quarter."
The trick, then, will be to get more customers to shop at Pier 1.