Pier 1, kids division not turning profit
Staff -- Kids Today, 7/1/2006
Forth Worth, Texas-based Pier 1 Imports, which hasn't seen a profit in more than a year as same-store sales have declined, may be paying the price for looking good a few years ago.
"We probably are a little bit of a victim of our own success," Pier 1 Chairman and CEO Marvin Girouard said at the retailer's annual shareholders meeting in June. "We did so well after 9/11 for about 11 or 12 months that Target and Wal-Mart said, 'We want to really try to duplicate what they've got.' And they did."
Today, the company is competing more directly; Pier 1 has an $80 million media budget compared with Target's $1.6 billion, so it's a struggle to be noticed, he said.
Pier 1 reported a loss of $23.2 million in the fiscal first quarter ended May 27, nearly double its loss in the same period a year earlier, while same-store sales declined 6.6%. Dramatic changes in merchandising along with a new advertising campaign, have yet to bear fruit and Girouard didn't promise any immediate fixes.
"This next quarter doesn't look any better than the first quarter," he said. He does believe the company has a good shot at returning to profitability in the third and "certainly the fourth quarter."
When questioned by a shareholder about Pier 1 Kids, Girouard said the division has not been profitable.
"We are in the process of improving the performance of the Pier 1 Kids stores by realigning the business and pulling them into Pier 1 systems this summer," he said.
That move, he said, was the intention when the company got involved with Cargo Kids about four years ago. The company had been waiting for the lease to expire on a facility; Pier 1 Kids will move to the home office headquarters in August.
Other streamlining moves include having Pier 1 Kids merchandise shipped into and out of the Savannah warehouse and consolidating some of the larger Pier 1 stores and putting Pier 1 Kids stores within them.
Girouard said though the division's results in the last several months have been very good, it is not yet profitable.
"We realize that we're going to have to invest in them at some time," he said. "We review monthly with this group and they are very prudent at looking at operating expenses that are only necessary to run the business. Profits are the name of the game. You've got to get sales and then you've got to get profits, and we have not been rewarded because we haven't made profits, and I think that's appropriate."
Girouard said Pier 1 has been working hard to pull away form its mid-priced position and concentrate on more of an upscale consumer, "choosing to compete with higher-end home furnishings retailers but still with our known value and uniqueness."
Pier 1 also is axing its unprofitable stores at an accelerated pace, with plans to close 50 of its 1,299 units this year.
Despite rumors, no key management changes are in the cards.
Changing the teams would have been inappropriate Girouard said, adding, "We went in as a team, this group and I, and we intend to keep operating as a team."
