When shoppers fish for home decor, Pier 1 wants to be sure they catch something. The company sells about 4,000 items (imported from more than 50 countries) through some 1,045 Pier 1 Imports stores in the US and Canada. Stores offer a wide selection of indoor and outdoor furniture, lamps, vases, baskets, ceramics, dinnerware, candles, and other decorative accessories. Customers can also reserve items on Pier 1's website and pick them up in stores. In addition, the company supplies merchandise to about 40 stores in Mexico owned by Grupo Sanborns. In a bid to boost profits, the retailer has been closing underperforming stores, slashing spending, and refining its product assortment.
The moves, part of a turnaround plan rolled out in 2007, have been paying off. In fiscal 2010 (ended February) Pier 1's profits soared above $85 million, marking its first profitable year since 2005. Its bottom line continued rising in 2011, reaching $100 million. The plan aims for greater efficiency through leaner operations and has guided other significant decisions the retailer has made along the way, including the shutdown of its e-commerce site, the closing of its Pier 1 Kids chain, and the sale of its proprietary credit card business to JPMorgan Chase. Heading into 2012, Pier 1 is tweaking its strategy to build revenues, as well.
Right-sizing its retail and distribution network has been key to Pier 1's restructuring. In 2011 the company opened three stores but closed nearly a dozen. During 2010 it shuttered nearly 40 stores, halted operations at a distribution center in Illinois, and cut about 10% of full-time jobs in its distribution center, home office, and field administration divisions. (Pier 1 operates half a dozen distribution centers in California, Georgia, Maryland, Ohio, Texas, and Washington.) As part of further cost-cutting efforts, Pier 1 continues to negotiate rent reductions with landlords and to consider early terminations at underperforming locations where reductions cannot be granted.
Pier 1's focus on profitability has helped to boost its top line. Merchandising has been another driver. The retailer's sales rose to $1.4 billion in 2011, turning around years of sagging demand for its home furnishings and decor (its sales last peaked at $1.8 billion in 2005). Despite a smaller retail footprint, Pier 1 has reported increased store traffic and higher ticket prices. Stores have been emphasizing a less cluttered look with more contemporary pieces; the firm has cleaned its house of exotic furniture and funky tchotchkes. The merchandising shift sets Pier 1 apart from big-box competitors -- including discounters Target and Wal-Mart -- moving in on its market for trendy, inexpensive merchandise.
While margins remain central to its business, the retailer hopes to continue improving sales going forward. Through 2014 the company plans to invest $200 million from operational cash flow to fund upgrades in existing stores (such as the installation of new lighting and air conditioning equipment) and to open new locations. Pier 1's brick-and-mortar expansion plans will add 50 outlets to its store count (through about 80 openings and 30 closures). The retailer is also re-entering e-commerce. At the start of fiscal 2012 it launched Pier 1 To-Go, which allows customers to reserve merchandise online and then pick it up in stores. Pier 1 aims to launch a fully functional e-commerce site -- where shoppers can pay for merchandise online and have it delivered -- in 2013.