Pier 1 to Stop Selling Online

FORT WORTH — Pier 1 Imports announced that it will shut down its electronic-commerce business and close its clearance outlets and children’s furniture stores to focus on turning around the core stores in the Pier 1 chain, as the company’s losses continued to pile up to the tune of $56.4 million in the quarter ended June 2.

The retailer will also stop airing television commercials, relying instead on Internet advertising and monthly mailings.

Pier 1 will stop selling online by Aug. 31, although it will keep its Web site as a source of marketing and information, Chief Executive Alex Smith announced Thursday on a conference call with Wall Street analysts. The company will also wind down its catalog operations, ending an experiment that started three years ago under former CEO Marvin Girouard.

Pier 1 will also close its 24 clearance centers — including one on North Belt Line Road in Irving — by July 31, and its 33 Pier 1 Kids stores — including locations near North East Mall in Hurst and on Preston Road in Frisco — by Oct. 31. That will bring the store reductions for the year to 100, including the planned closure of Pier 1 stores with expiring leases or rents that executives had decided were too high relative to the profitability of the locations. The closings will leave the company with 1,100 stores at the end of the year.

"Exiting these businesses is not only about cost reduction," said Smith, who has slimmed down the company’s work force and advertising budget since joining the chain in February. "It is about focusing on what really matters, which are the 1,000-plus Pier 1 Imports stores."

Pier 1 entered the children’s furniture business in 2001 with the acquisition of 25 Cargo Furniture stores. The chain, first renamed Cargokids and later Pier 1 Kids, had 45 locations by 2005, and executives talked of having as many as 300 stores by the end of this decade, but Pier 1 drastically reined in the expansion as its primary business stumbled.

Devising a strategy

Smith has been undoing several of the bolder but unsuccessful moves the company made in recent years in an attempt to pull out of a sales slump. He oversaw the liquidation of Pier 1 Modern Craftsman, a short-lived merchandise collection featuring more contemporary styles that failed to resonate with customers, and redirected the buying department to focus on unique merchandise with intricate decoration and what he called a "high level of handiwork" that "nods in the direction of the country in which it was made."

Pier 1 now plans to stock 2,000 new pieces that Smith said will be reminiscent of the offbeat, international looks that defined Pier 1 through the late 1990s.

Smith said a sampling of the incoming pieces will be on display at the company’s annual shareholders meeting, to be held Thursday at the Pier 1 headquarters in Fort Worth.

Aiming for profits

In the meantime, Pier 1 has been clearing out the Modern Craftsman line and other slow-selling goods, cutting its fiscal first-quarter gross profit to 45.5 percent of sales, compared with a gross profit margin of 53.8 percent a year earlier. Sales declined 5.2 percent to $356.4 million. The per-share loss of 64 cents compares with a loss of $23.2 million, or 27 cents a share, in last year’s first quarter.

Pier 1 shares (ticker: PIR) fell 33 cents to $8.30 in Thursday’s session, signaling that investors had been hoping to see stronger evidence of a turnaround.

Executives declined to provide specific financial estimates for the second quarter. Chief Financial Officer Cary Turner said the store closings and the discontinuation of the catalog and e-commerce businesses would result in about $10 million of expenses, including $8 million in lease-termination costs, $1.3 million in asset disposal costs and $700,000 in related severance expenses.

Dumping the television campaign will help Pier 1 cut its marketing budget for the year to $67 million, $50 million below last year’s level, Smith said.

"Television and catalog advertising just haven’t provided a good return on our investment, and so we’ve decided to cut them," he said.