UPDATE: October 4, 2018: Pier 1 on Wednesday released final numbers for its second quarter, which showed a same-store sales decline of 11.4% and a 12.8% year-over-year decrease in net sales. Net loss came to $51.1 million, or 63 cents per share. Pier 1 President and CEO Alasdair James said in a statement that following the disappointing Q2 "we have already taken steps to refine our marketing program and product allocation and are encouraged by early signs of improvement in some of our key customer metrics in recent weeks, including conversion and customer growth." He added that management is still confident in their turnaround plan. "[A]s we sharpen our execution on key initiatives around product and marketing, we continue to expect our top-line trend to improve over time," he said.
- Pier 1 is struggling to make good on its turnaround plan, running into execution hiccups early into a three-year initiative. In a press release Thursday, Pier 1 said preliminary second quarter figures showed its comparable sales would decrease 11.4%.
- The company also expects a loss for the quarter of 62-64 cents per share, which would represent a more than 500% increase over the 10 cent loss in the year-ago period. Expected loss could also be more than 10% higher than what management previously projected for the period. At the same time, comps fell woefully short of previous guidance, which projected a drop of 6-7%.
- Pier 1 President and CEO Alasdair James said in a statement that management was "disappointed" in the results, which "primarily reflect execution challenges as we prepared for and implemented our August brand re-launch." He added that "while we remain confident that our plan is the right course for Pier 1, it is now clear that our initiatives are taking longer than expected to gain traction."
Pier 1 has already taken bold, and expensive, steps to try to push its sales back up as the home goods market becomes ever more competitive. That the retailer has already missed on execution is both not surprising and also what no investor, vendor or employee wanted to hear. The company’s stock price, already meager, fell more than 20% at one point in after-hours trading on Thursday following the announcement.
Explaining the sales miss, James said, "Our marketing program did not drive the level of traffic we had anticipated, and we experienced delays in getting certain new products into our stores." However, he did note that the company expects sales to turn positive (though they would "accelerate later than planned"). The retailer also notched improved customer metrics in recent weeks, including conversion and growth in new, retained and reactivated customers, James said.
In June, which saw a steep sales decline, James said Pier 1 was prioritizing the re-launch of its brand as well as working to improve the shopping experience, boost its e-commerce business and tighten its supply chain. None of that comes without a capital outlay. The marketing campaign alone — the one that James this week said failed to drive the customer traffic his team expected — was projected to cost $20 million.
The retailer faces a hyper-competitive landscape, with Target, Walmart, Amazon, TJX Cos., Wayfair and others diving deeper and deeper into the home category and driving prices down. Also not helping things: tariffs. After the Trump Administration in July proposed an expanded list of tariffs, Pier 1 issued a press release that noted nearly 60% of its sales derive from Chinese imports, and about half of those sales would be on goods subject to the proposed tariffs. Yet Pier 1 also said that it was working to mitigate the impact and did not expect its financial results for the fiscal year to be materially affected.
Analysts — including at rating agency S&P Global, which in May downgraded Pier 1's credit — have been pointing out execution risks for Pier 1 that stem largely from the challenges in the market and uncertainty over whether the retailer can adapt to them. As Jeffries analysts put it this summer, "[Pier 1] will need to do even more in areas like product sourcing, supply chain and marketing — to both a millennial audience and its core 51- to 55-year-old customer — to distinguish itself in the market."