Pier 1 Imports, Inc.

About

“Pier 1 Imports, Inc. engages in the retail sale of decorative accessories, furniture, candles, housewares, gifts, and seasonal products. It offers decorative accents and textiles, such as rugs, wall decorations and mirrors, pillows, bedding, lamps, vases, dried and artificial flowers, baskets, ceramics, dinnerware, candles, fragrances, gifts, and seasonal items; and furniture and furniture cushions that are used in living, dining, office, kitchen and bedroom areas, sunrooms, and patios. As of March 3, 2018, the Company operated 928 stores in the United States and 75 stores in Canada It also operates e-Commerce Website, pier1.com. The company was founded in 1962 and is headquartered in Fort Worth, Texas”.-Bloomberg

Corporate Highlights

9/25/2019:  The Company reports IIQ 2019 results.

  • Company comparable sales decreased 12.6% compared to the second quarter of fiscal 2019;
  • Net sales decreased 14.3% to $304.6 million compared to the second quarter of fiscal 2019;
  • Net loss of $100.6 million, or ($24.29) per share;
  • Inventory of $328.6 million, down approximately 15% year-over-year; and
  • Cash and cash equivalents of $10.0 million at quarter end, $190.0 million outstanding under its senior secured term loan, $50 million of borrowings under the Company’s FILO tranche and $55 million of borrowings under its $350 million revolving credit facility.

4/23/2019: Company hires AlixPartners, “consulting firm known for its expertise in restructuring and turnaround, to help build a new strategy”.

4/19/2019: Company plans to close at least 15% of its stores, according to a news report.  More if necessary.

Pier 1 said that it could shutter “up to 15% of stores if the company is unable to achieve performance goals, sales targets, and reductions in occupancy and other costs.” The company closed 30 stores last year and has roughly 1,000 stores remaining.

4/17/2019: Company released very poor IVQ 2018 results.

“Net sales for the 13-week fourth quarter of fiscal 2019 decreased 19.5% to $412.5 million, compared to $512.2 million for the 14-week fourth quarter of fiscal 2018. Company comparable sales on a 13-week basis decreased 13.7% compared to the year ago period…EBITDA in the fourth quarter of fiscal 2019 was ($51.9) million, which includes the transformation costs referred to above, compared to EBITDA of $41.5 million in the fourth quarter of fiscal 2018”.

“Pier 1 is implementing an action plan designed to drive benefits in fiscal 2020 of approximately $100-$110 million by resetting its gross margin and cost structure. Approximately one-third of the benefits are expected to be realized in gross margin, with the remaining two-thirds coming from cost reduction. After reinvesting in the business, the Company believes it will be positioned to recapture approximately $30-$40 million of net income and $45-$55 million of EBITDA in fiscal year 2020”.

12/19/2018: Company CEO ousted after 8 month tenure. Turnaround plan in question.

The retailer, which in April unveiled an ambitious turnaround plan intended to achieve sales growth and profitability in three years, saw its sales slump deepen last quarter as it enters the critical holiday shopping period. Its board has begun a process to “evaluate a full range of strategic alternatives” and retained Credit Suisse to advise it in the process.

BDC Credit Reporter View

4/17/2019:  Pier 1 is in ever deepening trouble and has been for several quarters. The latest results only deepen the gloom. The two BDCs with exposure had written down their senior debt by a quarter at year end 2018, but the latest valuation – according to Advantage Data’s real-time system – is 50%. That suggests the BDCs will have to take Unrealized Losses of $4mn in the next quarter or two, and with no end in sight. If Pier 1 eventually fails a 50% or greater loss could be crystallized and $1.0mn of annual investment income will be at risk. Given what’s happening elsewhere in retail, the chickens could come home to roost sooner rather than later.

Highlights

IVQ 2018: Following discount to (25%) by BDCs, downrated to CCR 4.

IIIQ 2018:  Based on increased discounts by BDCs to (12%) and (14%), placed on Watch List as CCR 3.

IQ 2018:  BDC exposure of $16.3mn initiated with $14.3mn in senior secured Term Loan.