Shareholder group urges cuts at Pier 1
Letter suggest closing as many as 300 stores
Clint Engel -- Furniture Today, April 10, 2007
FORT WORTH, Texas — A group of investors holding a 5.5% stake in Pier 1 Imports is urging the retailer to pick up the pace in its cost-cutting and restructuring moves, suggesting it close as many as 300 poor-performing stores and lease out at least one-third of its corporate headquarters facility.
Pier 1 “has reacted at a glacial pace to the intensified competitive landscape that has developed in the U.S. home furnishing retail industry over the past five to 10 years,” wrote Joshua Hertz, portfolio manager representing investors Elliot Associates L.P. and Elliott International L.P., in a letter to Pier 1’s Board that also was filed with the Securities and Exchange Commission.
The retailer, with 1,257 stores as of March, operates upwards of 450 more units than its largest competitor, the letter said. “Elliott believes it should close 250 to 300 underperforming stores as quickly as possible, returning Pier 1’s store count to no more than 1,000 stores,” Hertz wrote.
The April 9 letter goes on to say Pier 1’s current level of selling, general and administrative expenses “is representative of a cost structure predicated on revenue growth assumptions that never came to fruition.” But, it said, if the company moves quickly it can cut expenses and “right size” the business.
The letter said the retailer spent about $100 million on a new 460,000-square-foot corporate headquarters here, and should lease out at least a third of the building because it’s more space than the company needs, given its recent performance.
“We welcome the recent announcement by the company to reduce its workforce by 175 positions and view this as a first step in the right direction, however, much more needs to be done,” the letter said.
Pier 1 President and CEO Alex Smith was out of the office Monday and couldn’t be reached immediately for comment. In the letter, Hertz said Elliott’s calls to the company over the past few weeks have not been returned.
In its fiscal third quarter ended Nov. 25, Pier 1 reported a loss of $72.7 million, including a $24.8 million charge for “store level asset impairment.” Sales were down 11.8% to $402.7 million.
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Pier 1 shareholders urge cost-cutting measures
Apr 29, 2007
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