Dive Brief:
-
Pier 1 Imports on Wednesday reported that second quarter revenue dropped 6.7% on declining traffic and discount pressure, leading to a loss of $4.1 million, or 5 cents per share, down from earnings of $3.2 million, or 4 cents per share in the year-ago quarter. Q2 revenue declined to $405.8 million from $435 million the previous year, and Q2 same-store sales fell 4.3%.
-
Pier 1 now expects earnings of between 16 cents to 24 cents per share and adjusted earnings of between 24 cents to 32 cents per share, a reflection of some $10 million of estimated costs for the planned exit of CEO Alex W. Smith, who will leave after the holidays. That’s down from the home furnishings retailer's earlier estimate of 32 cents to 40 cents per share.
-
The earnings report followed a day after Pier 1 announced a new shareholder rights plan of one right on each outstanding share of the company's common stock, a so-called “poison pill” measure making any potential takeover attempt more expensive. Hedge fund Alden Global Capital revealed in a Securities and Exchange Commission filing last week that it had acquired a 9.5% stake and intends to nominate a member of Pier 1’s board. “This is a nonsensical scare tactic being used by the Board to make us appear to be a threat," Alden President Heath Freeman said in a statement.
Dive Insight:
Pier 1 once seemed to be on a recovery trajectory under CEO Smith, who made a concerted effort to boost the retailer’s e-commerce business, which was more or less nonexistent when he took over 10 years ago. Digital sales accounted for some 20% of the company's total sales in its second quarter.
But Pier 1's stock has been in decline since Feb. 2015, when CFO Cary Turner abruptly resigned, and analysts have expressed concern about the retailer's ability to withstand intense competitive pressures, noting that while the housing market is improving, consumers enjoy a growing number of home furnishing options both offline and on the web.
Smith will step aside as president and CEO on Dec. 31. He also will resign his position on the company's board of directors. Pier 1 is working with executive search firm Korn Ferry to find a replacement. Alden Global Capital said it wants to play a role in the search, but denied it plans to take over the company.
“We have expressed to [Pier 1 Chairman Chairman Terry London] that our strong preference is to work collaboratively with the Board regarding our desire to be involved in the ongoing CEO search process, as well as our belief that shareholder representation is required on the Board at this critical juncture," Freeman said in a statement. "At no point during our discussions have we mentioned anything even close to an intention or interest in acquiring Pier 1. It is therefore entirely disingenuous for Mr. London to assert that the Poison Pill is required to 'guard against coercive or unfair tactics to gain control of the Company without paying all shareholders an appropriate premium.’”