Once upon a time, there was big money to be made in finding undiscovered merchandise dirt cheap, then selling it at full retail value in well-lit stores on mall outparcels.
It’s just one of many businesses that have gone to the cloud. Because Pier 1 Imports (NYSE:PIR) didn’t change with the times, it’s going there too — as in it’s disappearing.
Amid reports of an imminent bankruptcy in January, the imports retailer said it was closing almost half its stores. Even its website looks like it’s about to close, 10 years out of date and screaming “discount!”
PIR stock, meanwhile, has collapsed. It opened for trade Feb. 10 at just $3.58 per share, a market capitalization of $14.2 million. Not billion, mind you. Million. This for a company that had sales of $1.4 billion last year.
Picking Over the Bones
Pier 1 isn’t alone. Far from it.
So far in 2020 over 1,200 stores have put out the “going out of business” sign. These include one-time mainstays like Macy’s (NYSE:M), J. C. Penney (NYSE:JCP), Express (NYSE:EXPR) and American Greetings. This is on top of 9,200 closings last year, including the disappearances of Fred’s, Payless ShoeSource, Gymboree and Charlotte Russe.
The pain is across the board, but it’s especially pronounced among stores that used to cater to the American middle class.
Specialty retailing is dead. The winners have been scaled department stores like Walmart (NYSE:WMT), warehouse stores like Costco Wholesale (NASDAQ:COST) and online retailers like Amazon (NASDAQ:AMZN).
The other winners, as I’ve noted, are brands selling an upper-class lifestyle, like Lululemon (NASDAQ:LULU), or the aspiration of one, like Ulta Beauty (NASDAQ:ULTA). Stores that completely control their supply chain, manipulating supplies to avoid sales, and branding their merchandise are the only winners left.
People don’t shop anymore. At least, they don’t leave their phones to do it. A store must be a destination, a defined experience. Serendipity, the idea of wandering between shops with only a vague idea of what you’ll come out with, is dead.
The Pier 1 Story
Pier 1 was pure serendipity. You never knew what you would find there.
The chain began business in 1962, focused on baby boomers seeking things like beanbag chairs and incense. It grew to over 1,000 stores by 2003, selling a “globally inspired, one-of-a-kind mix of home furnishings and accessories.” At its height it had a 400,000 square foot, 20-story headquarters on 14 acres of land in Fort Worth. It sold the building in 2018.
The end seemed to come quickly. As recently as fiscal 2017, Pier 1 had earnings of $57 million on sales of $2.1 billion. For the quarter ending in November, sales dropped 13% and the net loss widened to $14.15 per share. Cash was down to $11 million, long-term debt up to $258 million.
The new plan is to become an “omni-channel retailer,” according to CEO Robert Riesback. A 1-for-20 reverse split has, for now, kept the stock trading. The market met Riesback’s announcement by selling the equity that was left. The shares are down nearly 47% since the year started. Even after the store closings there will still be 492 Pier 1 stores, but most analysts say not for long.
The Bottom Line on PIR Stock
As InvestorPlace’s Luke Lango notes, there are retail stocks that will benefit from Pier 1’s failure. Target (NYSE:TGT), Home Depot (NYSE:HD) and online retailer Wayfair (NYSE:W) are all mentioned. So is Bed, Bath & Beyond (NASDAQ:BBBY), which I’ve been pounding the table for.
But Pier One lacks leadership, it has no real turnaround plan and its business model is obsolete. The next chapter for the company, sadly, is Chapter 11.
Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and BBBY.