Pier 1 Imports’ CEO Reports the Tide Has Turned

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Pier 1 Imports’ CEO Reports the Tide Has Turned

By Tim Denman - 12/20/2016
The word omnichannel gets thrown around so much, that for many, it has lost all meaning. But that does not mean that the strategy/concept is blasÉ and easy to implement. Omnichannel is still hard.

Over the past few years Pier 1 Imports has been working on its omnichannel transition, as it expanded its business to meet the growing needs of digital shoppers. But on a recent earnings call with analysts CEO Alexander Smith declared that things have official taken a positive turn for the home furnishings retailer.  

“We have talked at length over the last two years about our capabilities, but they have largely been obscured by the mists of the retail environment and our own inventory related problems,” Smith said. “Our enhanced business model and omnichannel platform we believe will allow the company to thrive far into the future and generate meaningful returns for our shareholders.
“Generally speaking, we believe the improvement we delivered this quarter is the turn we have been anticipating.”

For Q3 the retailer posted a 1.8% comp sales increase, fueled by a highly successful last two weeks of November and a record Cyber Monday performance. E-Commerce sales increased 28% for the third quarter - expanding to 20% of total sales, an increase from 16% of total sales year-over-year.

Smith points to three main factors that helped facilitate the retailer’s rebound: strategic use of promotions, improved inventory levels and an increase in loyalty shoppers.

Promotions. Pier 1 has implemented a broad-based approach to it is promotions. Instead of doing SKU specific discounts, Pier 1 is focused on balancing its product discounts with broad chain-wide offers. “[This is a more balance strategy], which resulted in fewer promotional discounts and improved clearance markdowns,” Smith said. “We also captured improvement from general overall efficiency in our DCs, favorable comparisons related to the recognition effects of last year's DC issues and lower DC handling and freight costs.”

Inventory. Recently Pier 1 has been over-stocked forcing the retailer to become more promotional and sacrifice margin, a situation that has be addressed through a renewed emphasis on merchandising efforts and supply-chain efficiencies. “The strengthening of our merchandise margin is the result of a few key factors, including greater efficiency in our distribution centers and reduced inventory levels,” Smith said. “Equally important, we continue to improve the effectiveness of our promotional activity in the third quarter, which enabled us to maximize merchandise margin dollars.”

Loyalty. Pier 1 has always had a loyal customer base, but it has been taken to new levels thanks to its new “Pearl” multi-tender loyalty tier, which has helped bring a lot more people into the retailer’s database. Nearly 75% of sales for the quarter were attributed to loyalty members, a massive increase from the 33% that were associated with the loyalty program a year ago.

At the end of the year Smith will be stepping down as CEO and chairman Terry E. London will act as interim CEO as the board continues its search for a new chief executive.