In the latest sign that Pier 1 Imports may be inching closer to bankruptcy, the retailer revealed that it intends to close 450 of its 942 stores. The store closures come following a dismal Q3 that saw comparable sales dip 11.4% and net sales plummet 13.3%, alongside a net income loss of $59 million. Pier 1 has not disclosed which stores will close, or the timeline for when liquidation sales will start.
Bloomberg first reported that Pier 1 has drafted a Chapter 11 bankruptcy filing and has sent it to creditors in hopes of securing funding throughout the process. The plan would lead to a smaller post-bankruptcy company designed to generate approximately $900 million in annual sales.
The home furnishings and décor retailer said it also plans to shut certain distribution centers and reduce its corporate expenses, which includes dismissing 300 headquarters employees. CEO and CFO Robert Riesbeck has decided to cut expenses by about half, including canceling some existing orders to align Pier 1’s buying with plans for a smaller store base, according to the Bloomberg report. As of Q3, Pier 1 was saddled with long-term debt of $258.3 million.
“As Pier 1’s losses deepen, the planned large-scale store closures and cost cuts will likely be insufficient to turn around the business in time to address the company’s looming debt maturities, making restructuring or bankruptcy highly likely scenarios,” said Raya Sokolyanska, VP and Senior Analyst at Moody’s in commentary provided to Retail TouchPoints. “Increasing competition in the sector from online players, mass merchants and off-price retailers is compounding Pier 1’s already challenging turnaround.”
In November, Riesbeck was named CEO to turn around the business, replacing Cheryl Bachelder, who had been serving as interim CEO since December 2018. Additionally, Riesbeck has been Pier 1′s CFO since July 2019.
Pier 1 executives said the company was planning to shutter approximately 70 stores in fiscal 2020 in a conference call in September, but company stock is down more than 40% over the past 12 months. The retailer faced delisting from the New York Stock Exchange (NYSE) twice before accepting an 18-month compliance plan in November 2019 to regain conformity with continued listing standards. The company’s shares plunged as much as 30% on Jan. 6 after the announcement and were hovering at nearly 17% down when trading was halted.
In its 10-Q, Pier 1 admitted that in its current debt-laden state, the company has “substantial doubt” regarding its ability to have sufficient liquidity to fund its obligations and working capital needs through the next 12 months.