Pier 1 is a 'dumpster fire' and it's fighting for its survival

  • Pier 1's market value has been almost completely wiped out over the past five and a half years, falling 97% since 2013.
  • Analysts say the outlook is discouraging. Of the few surveyed by Bloomberg who cover the name, none rate the stock a "buy," two carry a "sell" rating, and four say "hold."
  • Analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees.

Pier 1 is fighting to stay afloat.

Shares of the home-furnishings retailer have gotten decimated, down 97% from their 2013 high, as the company has struggled to compete against the likes of online retailers and its turnaround strategy has yet to take hold. Additionally, investors have had to grapple with a second executive departure in two months. All of this has culminated with shares sliding below $1 last month for the first time in a decade. 

So what happened?

Pier 1, based in Fort Worth, Texas, said last week that its chief information officer, Bhargav Shah, was terminated effective in November, a change the company did not mention in its December earnings report. Last month, Pier 1 named longtime board member Cheryl Batchelder as its interim CEO after Alisdair James stepped down following 19 months at the helm of the company. 

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The jewelry chain Claire's filed for bankruptcy in March.

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Southeastern Grocers, the parent company of the grocery chains Winn-Dixie, Harveys and Bi-Lo, filed for Chapter 11 bankruptcy protection in March.

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Nine West Holdings filed for bankruptcy in April.

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The owner of the Fallas chain of discount stores filed for bankruptcy in August.

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Samuels Jewelers filed for Chapter 11 with an agreement for bankruptcy financing in August.

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Toys R Us filed for bankruptcy in September.

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Read more: Pier 1 CEO steps down after turnaround efforts fail

Executive departures were just the latest chapter in what seems to be an increasingly concerning story for the retailer. In April, Pier 1 announced a three-year strategic plan to right the ship.

At the time, James said, "Pier 1 has a rich brand history and loyal customer base, a highly competitive e-Commerce platform and a team with the talent, experience and determination to succeed."

But analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees.

"We are both sad and angry: sad that the company's associates and customers are now at significant risk and angry at a Board of Directors that, in our view, is culpable for allowing this crisis to develop," Budd Bugatch and Bobby Griffin, analysts at Raymond James, told clients after the company's most recent quarterly earnings report in December.

"F3Q19 was a 'dumpster fire,' which unfortunately has become all too common for Pier 1 quarterly earnings," they wrote.

Specifically, the analysts pointed to its 11.9% decline in total sales, 10.5% plunge in comparable sales, and a drop in operating income from $13.4 million last year to -$28.9 million this year.

Read more:We went shopping at Pier 1 Imports and saw why it has struggled to turn things around and compete with Amazon and TJ Maxx

Others tracking the stock echo a dim outlook. Pier 1 is one of three stocks in UBS's 28-member hardline retail coverage universe — alongside Office Depot and Sleep Number — that analyst Michael Lasser rates a "sell." He told clients earlier this month that Pier 1 would likely see "another tough year" after reporting "significant top-line deterioration" in 2018 despite last year's relatively strong spending environment.

"It seemed like everything was on sale at Pier 1," Business Insider's Jessica Tyler wrote after visiting a Pier 1 location in Manhattan last month.

"The issues raised about Pier 1's inability to keep up with trends, its overwhelming stores, and efforts to keep prices down were all clear when we visited the store. The brand has announced plans to rebrand the store and fix these issues, but it has a ways to go."

Ratings agency Moody's has taken notice of the company's struggles. Following Pier 1's quarterly earnings report in December, Moody's cut its outlook from "stable" to "negative," pointing specifically to the risk the company's turnaround efforts would have a hard time gaining traction.

"Pier 1's third-quarter fiscal 2019 results indicate that its turnaround will be more challenging and protracted than previously anticipated," analyst Raya Sokolyanska said in a report, adding that while liquidity was expected to be adequate in the next 12 to 18 months, it would "weaken over time if earnings do not recover."

Pier 1 Imports did not immediately respond to Business Insider's requests for comment.

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