Pier 1 Imports Inc., the struggling home furnishings chain, announced the sudden departure of its top executive and said it will evaluate strategic options for the company, sending shares tumbling.
The retailer, which has five stores in the Indianapolis area, unveiled an ambitious turnaround plan in April intended to achieve sales growth and profitability in three years. But Pier 1 saw its sales slump deepen last quarter as it entered the critical holiday shopping period.
Its board has launched a process to “evaluate a full range of strategic alternatives” and retained Credit Suisse to advise it in the process.
As part of the overhaul, CEO Alasdair James is being replaced, effectively immediately. Board member Cheryl Bachelder, 62, a former CEO of fast-food chain Popeyes Louisiana Kitchen, will take the role on an interim basis. She said the strategy that James announced eight months ago didn’t deliver results fast enough.
“It is clear we’re not giving our Pier 1 customer the style, the value, the selection that she wants to find in stores and online,” Bachelder said on the company’s Wednesday afternoon earnings call. “Now it’s all about focus, execution and taking the bold actions needed to restore the health and promise of the business.”
The company said it had no timetable set to complete the evaluation of strategic options and won’t comment further until a course of action has been approved by the board.
Shares fell as much as 17 percent after the close of regular trading to less than $1 a share. The stock has tumbled 73 percent this year to date.
Pier 1’s challenges come at a time when many other retailers are thriving. With America sporting a growing economy, low fuel prices and rising wages, consumers are spending heavily, and this holiday season is expected to be one of the best in recent memory. If retailers aren’t doing well in an economy like this, then it’s going to be even harder to stay afloat if consumer sentiment takes a turn for the worse, analysts warn.
“While Pier 1 has adequate near-term liquidity, including no maturities until 2021 and ample revolver capacity,” the third quarter results reflect “continuing challenges in executing its turnaround strategy—particularly in a strong consumer spending cycle," Moody’s analyst Raya Sokolyanska said in an email.
Pier 1 posted same-store sales, a key gauge of a retailer’s health, that drastically missed analysts’ estimates in the quarter ended Dec. 1—which included Black Friday. GlobalData Retail analyst Neil Saunders said following his team’s Black Friday store checks that Pier 1 was one of the few quiet storefronts on the traditionally busy shopping day.
With Bachelder at the helm, the company plans to put in place a more rigorous cost reduction program and trim its capital expenditures for fiscal 2019 to $40 million from $60 million.
It’s also going to try to narrow its product lineup. Pier 1 may have confused its customers by the vast number of items it sells, Bachelder said. The company needs to get “really crystal clear on the items and the focus,” she said, adding that she’ll lay out a formal plan “in short order.”