Pier 1 Files Bankruptcy and Searches for a Buyer

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Pier 1 Files Bankruptcy and Searches for a Buyer

By Jamie Grill-Goodman - 02/18/2020

A little more than a month after Pier 1 Imports said it would close up to 450 stores, almost half of its store base, the retailer has filed for Chapter 11 bankruptcy protection.

The struggling home goods retailer plans to use the process to complete the store closings, which includes closing of all locations in Canada, and also said it is pursuing a sale of the company. 

The filing was not unexpected. Last April, when S&P Global Ratings warned that Pier 1 was in danger of bankruptcy in the wake of continued sales woes, the retailer responded by stating it had “developed an action plan that the company believes will provide sufficient liquidity to implement the strategic initiatives that are part of its new fiscal 2020 plan.

Then in November, Pier 1 brought on Robert Riesbeck as its new CEO, who had served as Pier 1’s CFO since July 2019. He replaced Cheryl Bachelder, who served as interim CEO since December 2018.

Sales in Pier 1’s most recent quarter, which ended Nov. 30, fell 13% to $358 million, while comparable sales decreased 11.4%. The company also reported a net loss of $59 million for the quarter.

“In recent months, we have taken significant steps forward in our business transformation and cost-reduction initiatives,” Riesbeck said in a statement announcing the Chapter 11 plan. “We have worked to establish an appropriately sized and profitable store footprint, operating structure and merchandise assortment that will enable Pier 1 to better serve our customers across store and online channels. Today’s actions are intended to provide Pier 1 with additional time and financial flexibility as we now work to unlock additional value for our stakeholders through a sale of the company.”

Regarding a sale, Riesbeck said the company is “pleased with the initial interest as we engage in discussions with potential buyers.”

The deadline to submit qualified binding bids will be around March 23, 2020, subject to procedures to be approved by the court.

Currently, Pier 1 has closed or initiated going-out-business sales at more 400 locations. It’s also closing two distribution centers to reflect its revised store footprint.

A&G Real Estate Partners has published a full list of the locations closing here.  

Meanwhile, remaining stores and its online platform are open and operating and Riesbeck said the company “will continue to serve our customers regardless of how and where they shop with the style, value and selection of merchandise they want as we move through this process, and we are committed to working seamlessly with our vendors and partners.”

Pier 1 has received $256 million in debtor-in-possession financing from Bank of America N.A.Wells Fargo National Association, and Pathlight Capital LP.

“Looking at the most recent 10-Q, equityholders are unlikely to receive any form of recovery as sales proceeds will likely be insufficient to cover creditor claims, particularly after giving effect to the $256 million in debtor-in-possession financing now sitting at the top of the capital structure,” Seeking Alpha reports.

Which Retailers Stand to Gain?

“Although it has experienced years of struggles and slumping sales, Pier 1 is one of the most recognizable home goods brands within the United States,” notes Kelly Lynch, retail solutions manager at ActiveViam. “Therefore, the company’s collapse leaves a very appealing opportunity for other players to jump in and eat up the market share left behind. There is no shortage of brands that will look to capitalize on Pier 1’s bankruptcy. To successfully gain this vacated market share, current home goods players need to further rely on their distinguished ethos, price structures and price image as a way to differentiate themselves from competitors and illustrate their unique value to consumers.”

In January, Placer.ai reported that it sees “a huge opportunity for Walmart to take advantage of Pier 1’s closings- with their massive stores, huge distribution and the ability to quickly fill in stock.”

Placer.ai analyzed four different states, California, Florida, New York and Pennsylvania, to see which stores stand to benefit the most.  It reported, while Bed Bath & Beyond, Home Depot and Lowe’s are all positioned to see elements of their business enjoy a bump, none provide a direct competitor to Pier 1, and will therefore likely only see a fraction of new traffic.

The data highlights from June 2019 through December 2019 include:

  • In Florida, 10.6% of Pier 1 visitors also visited a Target on the same day. 
  • In California, Target and HomeGoods again see a huge potential gain with 9.9% of Pier 1 customers also visiting Target during the given timeframe and about 7.6% visiting a HomeGoods during that period. 
  • Results didn’t vary much for New York and Pennsylvania. Target saw 8.3% and 9.2% cross-shopping in those states respectively, while HomeGoods saw 7.4% and 7.3%.

As far as a buyer for Pier 1, bids remain a matter of speculation. Forbes reports, the private-equity sector and liquidation specialists would be first possibilities.

“As a real-estate play, Pier 1 stores are generally too small for HomeGoods or Home Sense (both divisions of TJX) to consider. The same goes for Ross and Burlington. And while off-pricer Tuesday Morning could fit into the Pier 1 footprint, it has its own problems that preclude any major expansion.”