Founded with a single store in 1962, Pier 1 Imports is a leading omni-channel retailer of unique home décor and accessories. The Company’s products are available through approximately 541 Pier 1 stores in the U.S. and online at pier1.com. For more information or to find the nearest store, please visit pier1.com.
Failure by the Company to identify, develop and successfully implement immediate action plans and longer-term strategic initiatives would negatively impact the Company.
The Company must be able to anticipate, identify and respond to changing trends and customer preferences for home décor and furniture.
The Company outsources certain business processes to third-party vendors and has certain business relationships that subject the Company to risks, including disruptions in business, cybersecurity threats and increased costs.
An overall decline in the health of the economy in the United States and its impact on consumer confidence and spending could negatively impact the Company’s financial results.
A disruption in the operation of the domestic portion of the Company’s supply chain, or its e‑Commerce website, could impact the Company’s ability to deliver merchandise to its stores and customers, which could impact its sales, operations and financial results.
Failure to successfully manage and execute the Company’s marketing initiatives could have a negative impact on the Company’s business and financial results.
Failure to control merchandise returns could negatively impact the Company’s business and financial results.
Changes to estimates related to the Company’s property and equipment, financial results that are lower than its current estimates at certain store locations or determinations to close underperforming stores may cause the Company to incur impairment charges on certain long-lived assets, negatively affecting its financial results.
The Company’s ability to execute its strategic initiatives could be impaired if it fails to identify a successor CEO and CFO and retain its senior management team.
Risks Relating to Liquidity
If the Company is unable to generate sufficient cash flows from operations, it may not be able to fund its obligations. Insufficient cash flows from operations could result in the substantial utilization of the Company’s secured revolving credit facility or similar financing, which may limit the Company’s ability to conduct certain activities.
The Company is dependent on the availability of adequate operating cash flow, trade credit, borrowed funds and capital.
The Company operates in a highly competitive retail environment with companies offering similar merchandise. If the Company fails to effectively compete for and retain customers, sales could decline.
The success of the business depends on factors affecting consumer spending that are not controllable by the Company.
The Company’s success depends, in part, on its ability to operate in desirable locations at reasonable rental rates and to close underperforming stores at or before the conclusion of their lease terms.
Failure to attract, motivate and retain an effective management team or changes in the cost or availability of a suitable workforce to manage and support the Company’s stores, distribution and fulfillment centers and e‑Commerce website could negatively affect the Company’s business.
Failure to successfully manage the Company’s omni-channel operations could negatively affect the Company’s business.
Factors that may or may not be controllable by the Company may negatively affect the Company’s financial results.
The Company’s business may be harmed by adverse weather conditions and natural disasters.
The Company is heavily dependent on various kinds of technology in the operation of its business.
Failure to protect the integrity and security of individually identifiable data of the Company’s customers and associates could expose the Company to litigation and/or regulatory action and damage the Company’s reputation.
Failure to successfully implement new information technology systems and enhance existing systems could negatively impact the Company’s operations and financial results.
The Company’s business operations, including the Company’s e‑Commerce website, are subject to inherent cybersecurity risks and e‑Commerce related fraud that may disrupt its business and negatively impact the Company’s operations, financial results and reputation.
Failure to maintain positive brand perception and recognition could have a negative impact on the Company’s operations, financial results and reputation.
As an importer and retailer of imported merchandise, the Company is subject to certain risks that typically do not affect retailers of domestically produced merchandise.
The Company’s business may be adversely affected by changes in U.S. policy related to imported merchandise.
Risks Relating to the Company’s Common Stock
Many factors, including factors beyond the Company’s control, could affect the Company’s common stock price.
The Company must remain in compliance with the New York Stock Exchange’s requirements for the continued listing of its common stock on the exchange.
The Company’s business or the value of its common stock could be negatively affected as a result of actions by activist shareholders.
Legal and Regulatory Risks
The Company is subject to laws and regulatory requirements in many jurisdictions. Changes in these laws and requirements, or interpretations of them, may result in additional costs to the Company, including the costs of compliance as well as potential penalties and fines for non-compliance.
The Company is subject to claims and litigation that are inherently unpredictable and could have a material adverse effect on the Company’s business, financial condition and results.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the “Company”) directly imports merchandise from many countries, and sells a wide variety of decorative accessories, furniture, candles, housewares, gifts and seasonal products in retail stores throughout the U.S. and Canada and online at pier1.com. The Company conducts business as one operating segment. As of November 30, 2019, the Company operated 942 stores in the U.S. and Canada. The results of operations for the 13 and 39 weeks ended November 30, 2019 and December 1, 2018, are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Historically, the strongest sales of the Company’s products have occurred during the holiday season beginning in November and continuing through December.
During the third quarter of fiscal 2020, net sales decreased 13.3% from the prior year third quarter and company comparable sales decreased 11.4% compared to the third quarter of fiscal 2019; the Company estimates that the shift of certain holiday selling days, which were included in last year’s fiscal third quarter, negatively impacted the third quarter of fiscal 2020 company comparable sales by approximately 650 basis points. The impact of this timing shift is expected to reverse in the fourth quarter of fiscal 2020. The decline in company comparable sales was primarily a result of lower traffic. Gross profit for the third quarter of fiscal 2020 was $110.3 million, or 30.8% of sales, compared to $130.5 million, or 31.6% of sales, in the same period last year, a decrease of 80 basis points. The decrease in gross profit as a percentage of sales primarily reflected increased promotional and clearance activity compared to the same period last year, as well as 190 basis points of deleverage in store occupancy costs due to lower sales. The Company remains on track to realize approximately $90 million of selling, general and administrative (“SG&A”) cost cutting initiatives for fiscal 2020, but continues to incur substantial transformation and advisory costs, which reduced the bottom-line benefit of the progress made in cost cutting during the third quarter of fiscal 2020.