Pier 1 files for bankruptcy; pursuing a sale
After several years of trying to right its business, Pier 1 Imports faces an uncertain future.
The struggling home goods retailer filed for Chapter 11 bankruptcy protection, with plans to use the process to complete its previously announced a plan to shutter up to 450 stores (nearly half of its portfolio), which includes the closure of all its locations in Canada. Pier 1 also said it is pursuing a sale of the company.
Pier I said it is in discussions with multiple potential buyers that could acquire the retailer out of bankruptcy. Pending court approval, the company expects the deadline to submit qualified bids will be on or around March 23.
To date, Pier 1 has closed or started going-out-business sales at more than 400 locations. A&G Realty Partners, which is assisting the retailer with its store closings and lease modifications, published a full list of the locations closing here. The company also is closing two distribution centers to reflect its downsized store footprint.
Pier 1’s filing was not unexpected and follows nine consecutive quarters of sales declines amid increased competition from the likes of Wayfair and Amazon, off-pricers such as Home Goods and traditional retailers, notably Walmart and Target, which have both expanded their home décor offerings. Sales in Pier 1’s most recent quarter fell 13% to $358 million as store traffic dropped. The company also reported a net loss of $59 million for the quarter, which ended Nov. 30.
“In recent months, we have taken significant steps forward in our business transformation and cost-reduction initiatives,” said Robert Riesbeck, who was tapped as CEO of Pier 1 in November. “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.”
As to what retailers stand to benefit the most from Pier 1's downfall, the most likely candidate appears to be Walmart, according to foot traffic analytics platform Placer.ai. In January, Placer.ai reported that it saw “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.”
Pier 1 has secured approximately $256 million in debtor-in-possession financing from Bank of America N.A., Wells Fargo National Association, and Pathlight Capital LP. Following court approval, the company expects this financing, together with cash flows from operations, to provide ample liquidity to support continued operations and the sale process through the Chapter 11 process.
Pier's 1's remaining stores and its online site are open for business as usual, and 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,” Riesbeck said.
“Looking at the most recent 10-Q, equity holders 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.