Pier 1 Imports, Inc.

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Pier 1 Imports, Inc.

founded: 1962

Contact Information:

headquarters: 301 commerce st., ste. 600

fort worth, tx 76102 phone: (817)878-8000 fax: (817)878-7883 toll free: (800)245-4595 url: http://www.pier1.com

OVERVIEW

Pier 1 Imports, a chain of specialty retail outlets carrying home furnishings, decorative accessories, and gifts imported from more than 40 countries around the world, operates more than 725 stores. Pier 1 stores may be found in 47 states, the District of Columbia, 4 Canadian provinces, Puerto Rico, the United Kingdom, Mexico, and Japan. Each store stocks between 4,000 and 5,000 items of merchandise, 50 percent of which change each year.

The company imports more than 80 percent of its merchandise from outside the United States. By buying directly from overseas suppliers, Pier 1 eliminates the intermediary markup, keeping the prices in its stores reasonable and attractive to consumers. In addition to its stores, the company has warehouse distribution centers located in Los Angeles, Chicago, Baltimore, Savannah, Columbus, and Fort Worth, its home base.

Pier 1 was born in the early 1960s when Luther Henderson and Charles Tandy invested in Cost Plus, a rattan furniture outlet based in San Mateo, California. In 1962 the company's headquarter was moved to Fort Worth. A few years later when Tandy moved on to establish Radio Shack, Henderson engineered a leveraged buyout of Pier 1. Cost Plus continued to operate as a separate entity. By the end of the 1960s, the company, which had grown to more than 40 stores, went public.

COMPANY FINANCES

Pier 1's revenue in fiscal 1998, which ended February 28, 1998, topped the billion-dollar mark at almost $1.1 billion, producing net earnings of $78.0 million; this compared to a net income of $44.1 million on revenue of $947.1 million in fiscal 1997. The company posted net earnings of $10.0 million on revenue of $810.7 million in fiscal 1996, compared to a net of $24.9 million on revenue of $712.0 million in fiscal 1995. In fiscal 1998, furniture sales accounted for 34 percent of total revenue, while decorative accessories generated another 23 percent. Sales of bed and bath products made up 18 percent of total revenue, followed by housewares at 14 percent and seasonal products at 11 percent.

ANALYSTS' OPINIONS

In a February 1998 interview with Pier 1's CEO Clark Johnson on the Fox News Network, Neil Cavuto, host of the Cavuto Business Report, praised the company's sharp growth in sales. Referring to a January 1998 same-store sales increase of more than 21 percent, Cavuto said, "It is the 28th straight month that Pier 1 has reported double-digit sales growth. Wall Street likes this consistency of late."

HISTORY

Pier 1's roots go back to 1958 when a California rattan furniture wholesaler experienced financial problems. He opened his doors to liquidate the inventory under the name Cost Plus. The sale was successful, so in 1962 when he decided to open a retail store with a similar inventory in San Mateo, California, he sought the help of a successful Fort Worth businessman, Charles Tandy, whose hobby and leather craft stores were becoming increasingly popular. As part of the deal, Tandy was given the right to open and operate more of these Cost Plus stores. In a convoluted switch, the 16 Cost Plus stores changed their names to Pier 1 in 1965. The following year, Tandy, wanting to concentrate on the chain of electronics hobby stores he purchased in 1963, divested himself of Pier 1. The company was purchased by Luther Henderson and 30 investors.

Pier 1 went public in 1969. At that time, the company had 42 stores and was launching its first Canadian retail shops. The early 1970s were years of growth and frustration for the company. Additional retails stores opened in the United States, Australia, and Europe during this period. Then, in the mid-1970s, inflation and a deregulation of exchange rates for the dollar increased the cost of imported items. The company tried retailing a variety of other merchandise, but none of these efforts succeeded. The stores were closed, as were a number of Pier 1 stores abroad. In 1979, a Pier 1 outlet became the first in the chain to chalk up $1 million in sales, and the company announced plans to merge with Cousins Mortgage and Equity Investments.

The company underwent another metamorphosis in the 1980s. Rather than selling inexpensive trinkets, the company decided to sell more high-ticket goods. Pier 1 was purchased from a holding company in 1985, which brought even more changes—the most notable of which was the appointment of Clark Johnson as president and chief executive officer. That same year, Pier 1 spun off its nursery and real estate businesses and also launched a campaign to increase the number of stores in the chain. By 1989, Pier 1's annual sales had topped $500 million.

Despite economic problems in the early 1990s, the company successfully reorganized and brought advertising in house to cut operating costs. In 1992, the company celebrated its thirtieth year in business and reported earnings of $26.3 million.

The company discovered it had $19.3 million in trading losses in December 1995. Robert Herndon, chief financial officer, reportedly failed to monitor the financial firm with which the company was dealing. Capital Insight Brokerage Inc.'s S. Jay Goldinger was investigated by the Securities and Exchange Commission after huge losses were posted by his biggest clients, including Pier 1 Imports Inc.

The Asian economic crisis that emerged in the latter half of 1997 turned out in some ways to be a blessing in disguise for Pier 1. The currency devaluations in several Asian countries increased the buying power of the dollar in the region. Though the company enjoyed this decrease in the cost of some of its imports, Pier 1 executives realized it was a temporary phenomenon. It acknowledged that if civil unrest eventually erupted, it could disrupt the import flow. In a February 1998 interview on the Fox News Network's Cavuto Business Report, CEO Clark Johnson said he expected the Asian economies to bounce back. "I think a year from now they'll be back on the move again. So we're positive about the fact that this thing is going to have a resolution. And we're going to continue to buy a lot of products over there and help support them."

FAST FACTS: About Pier 1 Imports, Inc.

Ownership: Pier 1 Imports is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: PIR

Officers: Clark A. Johnson, Chmn. & CEO, 66, $1,300,000; Marvin J. Girouard, Pres. & COO, 57, $900,000; Stephen F. Mangum, Sr. VP, CFO, & Treasurer, 43, $280,000

Employees: 11,000

Chief Competitors: Pier 1's competitors include: Bed, Bath & Beyond; Bombay Company; Crate & Barrel; Hanover Direct; Lechter's; Linens 'n Things; and Williams-Sonoma Inc.

Despite the ever-changing tide of national and global economies, Pier 1 remains successful, according to company literature, because it "eliminates wholesale markup and is able to offer quality products at a value to the consumer." Pier 1 plans to have 900 stores operational in the United States, Canada, and Puerto Rico by the year 2000.

STRATEGY

Most of Pier 1's stores are located in urban downtown areas or strip centers, but a 1996 experiment put eight Pier 1 stores in shopping malls that also contained other high-end home furnishings merchandise. Though the stores involved in the experiment did break even, company executives, leary about the future of mall retailing, said this was not a path the company immediately planned to pursue, according to HFN The Weekly Newspaper for the Home Furnishing Network.

Pier 1 CEO Clark Johnson said the company's buying strategy "has always been to buy lots of different items but not too much of them," according to the Wall Street Corporate Reporter. "If they turn out to be good sellers, we reorder and we continue to reorder as long as the business supports that kind of behavior. If they turn out to have been a buyer mistake or for one reason or another don't sell to the degree we thought they would, then we simply close out that item."

INFLUENCES

As of 1986, the typical Pier 1 customer came from a household income of $26,500, but the company wanted to increase that to a customer from a median income of $50,000. The company's strategy for this involved reprogramming store locations, improving the quality of the product line, and putting an even higher priority on customer service. The strategy paid off. By December 1996, the company had a customer base with a median income of $54,000, which was 42 percent above the median income in the United States. According to CEO Clark Johnson, "This is one of the reasons that the company has been enjoying unusual success in the last several years."

CURRENT TRENDS

Stephanie Schlecht-Maki, a buyer for Pier 1 told HFD-The Weekly Home Furnishings Newspaper in 1994 that about 8 percent, or $54.83 million, of the company's sales were from tabletop items. These items are moderately priced in the range of $2 to $12 per piece for dinnerware, glassware, and flatware. The emphasis on home furnishings embellishment by "nesting" consumers in the mid-1990s translated into increased sales for Pier 1.

In the 1980s Pier 1 ventured into apparel during the era when chains such as the Gap and the Limited were booming. Pier 1 and other retailers nationwide reported slower apparel sales—a result of declining sales, bankruptcy, and consolidation within this retail segment. According to an analysis of the market, "the seasonality of clothing means lots of markdowns to clear out stock as seasons change; there's far less change in home furnishings." Consumer research also found that the public had no idea the company even sold clothing. Pier 1 eliminated its clothing line in favor of an all-home-merchandise format, which was completely implemented in its retail stores before the end of 1997.

Retail experts are not surprised. "There's been an explosive shift from apparel to the home," said Jackie Bivins, a retail consultant based in New Jersey, in a wire service interview. "Boomers aren't buying the big-ticket items, like sofas and washing machines, so much, but after 15 or 20 years in the same home, they're sprucing up the place with some new pillows and placemats," she said.

Among the steps taken by Pier 1 to increase sales in its U.S. and Canadian stores was an aggressive national television advertising campaign, the 1997 price tag for which exceeded $40 million. CEO Clark Johnson said of the ad campaign that when consumers see Pier 1 commercials squeezed between those for companies like General Motors and Coca-Cola, "it brings legitimacy to the company and helps to drive our traffic."

CHRONOLOGY: Key Dates for Pier 1 Imports, Inc.

1962:: The first Cost Plus store opens in California
1965:: Cost Plus changes its name to Pier 1
1969:: Goes public
1977:: The company pays its first quarterly dividend
1979:: A Pier 1 outlet in Detroit becomes the first to hit the $1-million mark in sales
1985:: Pier 1 is purchased by a holding company
1993:: Partners with The Pier, a chain of retail import stores in London, England
1998:: Sales top $1 billion for the first time

PRODUCTS

Pier 1 is a retail firm specializing in home furnishings. Its primary merchandise, according to corporate information, includes rattan and wicker furniture, decorative pillows, baskets, hand-carved wood items, hand-painted ceramics, and candles. The primary product areas for Pier 1 are furniture, home and decorative accessories, tableware, kitchenware, baskets, seasonal products, specialty items, bed and bath products, and a special line of private label food items.

CORPORATE CITIZENSHIP

Pier 1 Imports takes seriously its responsibility to the communities in which it operates. The company pursues a number of philanthropic concerns on the international, national, and local levels. On the international front, Pier 1 is the world's largest retailer of UNICEF greeting cards. The company also is a cosponsor of UNICEF's "Kids Help Kids" greeting card contest.

On the national level, since 1991 Pier 1 has been a sponsor of the Susan G. Komen Breast Cancer Foundation's Race for the Cure series of five-kilometer and one-mile walk/runs, held in scores of cities across the United States. The company pays the entry fee for any of its employees who want to race on behalf of Team Pier 1. Locally, Pier 1 has been active in the United Way and Adopt-a-School campaigns in its hometown of Fort Worth, Texas. In 1986, the company adopted E.M. Daggett Elementary School, one of Fort Worth's largest inner-city schools. Both the corporation and its employees are committed to a number of programs at the school designed to reinforce the importance of academic pursuits.

GLOBAL PRESENCE

Pier 1 is a solidly international company on two levels. First, most of the products in its retail outlets have been imported from more than 40 countries around the world. Secondly, the company has pursued an aggressive program of expansion outside the United States. In addition to stores in Canada and Puerto Rico, Pier 1 is a partner in The Pier, a chain of stores in the United Kingdom. In Mexico, the company operates boutique-type outlets in a number of Sears de Mexico stores. Pier 1 is also involved in a joint venture with Atasuki Printing Company of Japan and has opened a number of stores in that country.