New Pier 1 Imports CEO is no stranger to turnarounds. Her last one scored a $1.8 billion deal | Retail

New Competition

The furniture and home decoration space has gotten crowded in recent years, with heavyweights Inc. and Wayfair Inc. buying allegiance and market share with low or free shipping as well as two-day home delivery on many items.

Competitors are finding success in other ways. At Home Group Inc., for example, stands out: While products are listed online, they can only be purchased in one of the Plano-based company’s 180 stores, or delivered by a third party. That means At Home doesn’t have to worry about online shopping cannibalizing in-store sales or lowering profit margin.

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At the same time, Pier 1 — founded in San Mateo, California, when John F. Kennedy was president — has struggled to appeal to young consumers without alienating part of its older base. It established its corporate headquarters in Fort Worth in 1966.

“I think it’s really tough to get those millennials,” said Chukumba of Loop Capital Markets. “They don’t want to shop at their mother’s home furnishing store.”

It’s not yet clear if Pier 1 has a longer term CEO in mind, or if Bachelder moves from interim chief to the role permanently. Either way, Chukumba said, “she or whoever they hire has a real uphill climb.”

Debt Load

Fortunately, Pier 1 has some runway: It has “adequate” near-term liquidity, Moody’s said. Still the majority of its $251 million of debt comes due in the next two years, meaning the turnaround needs to materialize soon. Pier 1’s $200 million first lien term loan B, which matures in 2021, is trading around 71 cents on the dollar, Bloomberg data show.

It also pledged to cut capital expenditures in fiscal 2019 to $40 million from $60 million in order to manage cash flow. For now, investors are awaiting the retailer’s fourth-quarter report, which is expected in April.

“If they have a hard fourth quarter, it’s another name you could see moving to bankruptcy sooner or later,” Keybanc’s Thomas said, noting that one way to cut costs will be to close stores. “Otherwise, I don’t know what you go in and cut.”

Carmen Reinicke, Bloomberg, with assistance from Katherine Doherty


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