What Pier 1 Must Do Now to Make a Turnaround Plan Work

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Pier 1's earnings release out Monday afternoon revealed the company is planning on significantly downsizing, but in order for the losing retailer to make a potential new plan work, it will have to act fast.

Monday, Pier 1 said it is closing 450 store locations, almost half of its current store count of 936. The company is also slashing roughly 40% of its corporate staff. The furniture and home goods retailer has been losing to e-commerce and, on some products, big-box retailers. The stock has lost almost all of its value since 2013, when it was trading at $463 a share.

With the stock down 28.89% to $3.68 a share Tuesday, the company is now worth just $15.48 million.

Pier 1 told media this week that its strongly considering filing for bankruptcy, but also mentioned to reporters it proposed to creditors a new business plan that would be aimed at being effective as a smaller company with roughly $900 of sales per year. The company is expected to have just over $1 billion in sales for 2019 and it saw $1.5 billion in sales in 2018. Net losses are widening, with a $198 million loss for 2018 and an expected loss of more than $200 million for 2019.

In order for the new — non-bankruptcy — plan to work, Pier 1 needs to move quickly. The company has $350 million of total debt, a large portion of which comes due soon. Some of the bonds mature in 2021 and some in 2022. With just $50 million in cash and equivalents and a chunk of debt owed soon, Pier 1 needs not only to launch the new plan and earn profits soon, but it must quickly exemplify to investors that the plan is viable for the long-term, in order to have access to the capital it needs for ongoing operations.

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