More Retailers In A Jam: Future Uncertain For Pier 1, Forever 21
Pier 1 Imports is raising its pace of store closures for this year, now planning to shutter as many as 57 locations, an increase from the 45 the company said in April it would close. Meanwhile, Forever 21 is struggling through some drama amid weak sales.
"We’re evaluating the chain and we’ll continue to close stores that do not meet our performance goal, bringing occupancy costs in line with store sales performance, [which] is vital to ensuring the long-term viability of our portfolio," Pier 1 interim CEO Cheryl Bachelder said during the company's most recent earnings call in late June.
If the company can't achieve its performance goals, sales targets and reductions in occupancies and other costs, it could close up to 15% of its portfolio, Bachelder said. That would total roughly 145 stores out of the currently open 965 stores, or about 90 more than it already plans to close.
Word of the new closures came after Fort Worth, Texas-based Pier experienced weak returns for its first quarter, which ended June 1. The company suffered a comparable-store sales decrease of 13.5% compared with the same quarter a year earlier. Also, net sales decreased 15.5% to $314.3M year over year.
The company undertook a 1-for-20 reverse stock split late in June. If it hadn't done so, Pier 1 would be a penny stock. Under the new scheme, its stock closed at about $7.50/share on Monday. A year ago (taking the reverse split into account), shares traded for as much as just over $51/share.
The company's previous CEO, Alasdair James, left suddenly in December after his turnaround plan didn't produce a desired result, CNN reported. Pier 1 is in a tough struggle with online retailers as well as a plethora of other physical brands in the home furnishing space.
The home furniture and furnishing sector is on the whole experiencing relatively weak sales growth, despite a strong overall U.S. economy. In May, sales at home furniture and furnishing stores eked out a 0.1% gain for the month, and the sector saw 0.6% sales growth compared with the same month in 2018, according to the Census Bureau. That compares with overall retail sales growth of 0.5% for the month in May and 3.2% for the year.
Forever 21, a separate struggling retailer in an equally treacherous sector — clothing — has reportedly been the subject of efforts by some of its officials to find landlords willing to take a stake in the company.
A faction of officials that didn't include the company's co-founder, billionaire Do Won Chang, approached such retail property giants as Simon Property Group and Brookfield Property Partners about various options, including a sale or partial sale, the Los Angeles Times reports, citing anonymous sources.
The Los Angeles-based company denies that it has made any official overtures about a sale.
“While Forever 21’s policy is not to comment on speculations, we feel it’s important to refute these rumors, which are categorically incorrect,” the company said in a statement.
“As a normal course of business, Forever 21 has been in regular rent renegotiation meetings. We have not had any conversations with mall operators regarding an investment in the company, nor a sale,” the company said.
There are more than 800 Forever 21 stores in the United States, Europe, Asia and Latin America, with most locations in the U.S. It too has been beset by online and physical competition, as well as being in a weak sector. Clothing sales were flat in May, according to the Census Bureau, and down 2.3% compared with a year ago.