Pier 1 Imports is evaluating strategic alternatives after the retailer saw Q3 comparable sales dip 10.5% and net sales drop 11.9% to $413.2 million. Alasdair James has stepped down as CEO after less than two years on the job, with the home furnishings retailer naming board member Cheryl Bachelder as interim CEO, effective immediately. Bachelder most recently served as the CEO of Popeyes Louisiana Kitchen from 2007 to 2017.
In April 2018, James unveiled an ambitious three-year “New Day” turnaround plan, which “did not deliver the desired results fast enough,” Bachelder said in a statement. Under the plan, the retailer focused on reducing store clutter and inventory to drive revenue growth. With inventory down 7.3% in Q3, that initiative was partially successful, but Pier 1 has not posted a profit in the three quarters since the plan started, most recently reporting a net loss of $50.4 million.
The 10.5% comparable sales decline looks even worse when taking into account that Wall Street analysts had projected a dip of only 2.9%. With competitors such as Target, HomeGoods and Williams-Sonoma all taking advantage of strong consumer spending, Pier 1 has a large hole to climb out of — the company’s stock has plummeted nearly 75% year-to-date to a paltry $0.48 per share upon market close on Dec. 20.
Under Bachelder, Pier 1 plans to implement a more rigorous cost reduction program, and trim its capital expenditures for fiscal 2019 from $60 million to $40 million. The company has secured an additional $50 million loan from Bank of America and Pathlight Capital.
Pier 1 will narrow its product lineup to remain “crystal clear on the items and the focus” of its brand, Bachelder said during an earnings call.
“I think we’re going to have to scale back to a few things that have the most impact on top-line sales,” Bachelder said. “We may have confused our customer a bit by the number of items and value opportunities we put in front of them.”
Analysts still appear dubious of the retailer’s latest plans, and the verbiage of “confused” customers can’t help matters. “We are skeptical any bold actions will lead to a favorable outcome,” Michael Lasser, analyst at UBS wrote in a research note. “We agree a more aggressive turnaround approach is needed. But at this point, it’s unclear how much benefit it can generate.”