Pier 1’s Holiday Results Cause for Serious Concern
While the holiday shopping season kicked off with a bang for Pier 1, when the calendar turned to December sales hit the skids.
Pier 1’s all-out marketing and promotional blitz for Thanksgiving Weekend and Cyber Monday produced impressive results, including the retailer’s best Cyber Monday ever, but the positive momentum was halted in December as sales and margins struggled to keep pace.
“We did see an encouraging uptick in November sales as we intensified our promotional messaging,” Pier 1 president and CEO Alasdair James said on a recent earnings call with analysts. “This resulted in strong positive comps over the Thanksgiving weekend and our best ever Cyber Monday sales. However, given that backdrop the first two weeks of December were much weaker than expected. We believe this declining performance is due to a combination of factors.”
James points to two key factors that produced the interesting and perplexing holiday results. First, Pier 1’s promotional program for December has not resonated with its customers. In addition, the retailer’s product mix missed the mark and was not able to overcome the brand’s considerable marketing investment.
“As we’ve looked to the first two weeks of December, the promotional program was built with the same sort of insight and the same planning as the program that we build for Thanksgiving week,” said James. “One program was very successful, and one has not been. What we’ve been doing is to understand the reasons for that and try to obviously alter and change our program going forward.
“The key takeaway for me I think is that the consumers responding to a much simpler message which communicates value and actually rejecting slightly more complex messages that is harder for her to understand. The other thing I would say is fewer items at a greater discount are more appealing to her than a broad based offer across many items. We need to take the learnings from that and build our plans accordingly.”
Due to the disappointing sales results in December, Pier 1 has reissued its Q4 guidance and is predicting company comparable sales down 3.5% to 1.5%, net sales growth of 1% to 3%. For the full year, the retailer expects net sales to be flat year-over-year.
“We have taken action and adjusted our promotional plans but our substantial change to guidance reflects lower expectations for the fourth quarter and the full-year based on the actual performance that we've seen in the first two weeks of December,” said James. “We are moving as quickly as possible to facilitate change.”
Pier 1 has created two new executive roles at the company focused on pricing promotions and global sourcing to address the promotional and assortment concerns. In addition, the home goods retailer is currently searching for a new chief marketing officer to lead its marketing team.
In addition to the staffing changes, the retailer continues to work diligently to upgrade its omnichannel capabilities and digitally transform the enterprise. The key initiatives Pier 1 is focused on to greater connect with shoppers and succeed in an increasingly digital marketplace include: refining its brand positioning to become relevant to a broader group of consumers; reinventing its marketing programs; improving supply-chain sourcing and inventory management to help reduce the cost of goods and drive efficiency; bringing greater automation to the business; and improving the effectiveness of its promotional programs while delivering a strong value message.