Like many retailers, Pier 1 Imports was hit hard by the
bursting of the housing and consumer credit bubbles. The chain
posted losses each year from 2006 to 2008.
Since then, this retailer of imported furniture and household
accessories has produced 13 straight quarters of growth in
overall revenue, same-store sales and operating margins. In so
doing,Pier 1 (
) has rung up "among the best same-store sales not only in home
furnishings, but in all of hard-line retail," said Barclays
analyst Alan Rifkin.
In the third quarter, reported in mid-December, same-store
sales grew by 7.9%. This extended the pattern of market share
gains in home furnishings. Total sales increased by 10.9% to
Key to the turnaround, according to industry trackers, was the
arrival fromTJX Cos. (
) in 2007 of new CEO Alex Smith.
Back then, some wondered if Pier 1's time had passed. Was it
simply a relic of the counterculture, catering to consumers
craving novelty in decor as well as lifestyle?
"Pier 1 to most outsiders looks like a lost cause," wrote one
analyst in April 2009.
Smith quickly understood that merchandise selection would be
the key to survival. In a classic case of staffing up to do a job
better, he more than doubled the number of Pier 1's buyers. This
gave the chain more expertise in what was going on in subsectors
of the furnishings market, notes Joan Storms, analyst with
More funky than fancy, Pier 1 offers such items as scented
candles and seven-foot, hand-carved zebras from Indonesia.
Most of its goods are sourced from China, Malaysia, Vietnam
and other Asian locales.
Pier 1 stores, numbering 1,061 as of the end of the third
quarter, also sell more pedestrian domestic wares, like pillows,
lamps and salad bowls.
The more distinctive merchandise is a bit off the beaten
track. That's a good thing, notes analyst Brad Thomas with
"What Pier 1 offers is items that really spruce up a room," he
said. Pier 1 customers are looking for "fun, unique, whimsical
items." For that reason: "It's very important you get the fashion
With the help of all those new buyers, CEO Smith seems to have
gotten the fashion element right.
"The merchandise will always be the sales driver," said
Smith took steps to make sure all those imported items landed
in the right stores at the right time.
Different outlets have established unique buying patterns and
tastes over time. It is the job of planning and allocation pros
to make sure the goods coming in from Asia are swiftly dispatched
to the proper outlets. So Smith beefed up staffing in planning
and allocation. "They brought in new talent," said Storms.
Pier 1's core shoppers are educated women buying for
households whose income might range from $40,000 to $60,000, says
Barclays' Rifkin. These shoppers are often buying out of want
rather than need. They might opt for "a cool set of wine glasses"
even though they already have more than enough, he noted. Hence,
the central importance of merchandise that stimulates impulse
Increased activity in housing markets has also helped.
New-home buyers as well as foreclosed homeowners moving to rented
facilities are potential customers.
More generally, Pier 1 has gained as consumers, many of whom
had lightened onerous debt levels, began spending again.
"There is a closer correlation to consumer confidence than to
housing," said Storms.
Pier 1 can't control the macroeconomics of housing. But it is
trying to do a better job controlling its store environments.
Store investments lagged during the recent stretch of down years.
"They really underinvested in the tough years," said Thomas. More
recently, Pier 1 has paid more attention to the physical state of
One area of focus has been lighting. These investments, said
Thomas, are "yielding good returns."
On The Web
Pier 1 has also improved its online commerce efforts. Though
an earlier effort to sell online foundered, Pier 1 has fared
better of late.
CEO Smith told analysts in December that
is hosting nearly 1 million visitors per month.
Especially encouraging is the fact that 35% customers who
order online like to pick up their purchases at local stores.
That's important because these customers tend to add to their
purchases once they're in the store.
Management does not break out online sales totals. They are
growing, but it's clear they remain a small part of the business.
This is evidenced by management's stated goal of building online
sales to 10% of total revenue by 2016.
That's a nice kicker, but brick and mortar business sales
counts most. Retailers live and die by their
Pier 1 sales per square foot bottomed in 2008-09 at $152.
Since then, that number has risen steadily and last quarter stood
That's still well off the high of $235 per square foot
achieved in 2002. That's why Smith contends that Pier 1 has
"plenty of room to expand as we continue to finesse our
assortments and in-store experience."
KeyBanc analyst Thomas thinks Pier 1 can top its historic
"We see the potential for Pier 1 to get to $250 (sales per
square foot), if not higher. That'll take a few years," he said.
But he notes that such progress "requires a continuing housing