More Store, Staff Cuts for Pier 1

Feb 06, 2009 1:32 AM  By

Home furnishings and decor retailer Pier 1 Imports will cut 10% of its full-time staff and possibly 125 underperforming stores, according to a Feb. 3 filing with the Securities Exchange Commission.

Staff reductions will occur at its corporate headquarters in Fort Worth, TX, as well as within field administration areas and at one distribution center to be shuttered. Officials said in the filing they need to position the company “for optimum performance in a post-recession economy.”

Pier 1 has begun negotiations with landlords to reduce rental expenses across the chain. This may lead to early termination agreements for up to 125 underperforming stores if the negotiations to lower rents on those locations prove unsuccessful.

The company hired an outside firm, DJM Realty, to assist in completing these negotiations by the end of May. Pier 1 also announced plans to cease operations at its company-owned 514,000-sq.-ft. distribution center in St. Charles, IL.

With these moves, the retailer expects to incur costs of about $5 million for severance, outplacement and other charges, according to the filing. The company will also incur one-time charges related to store closings if its attempts to reduce rents don’t work.

Pier 1 public relations manager Kelly Keenum declined comment, citing the SEC filing. The company operates more than 1,100 Pier 1stores in North America. It closed its three-year-old catalog and its seven-year-old e-commerce site in June 2007.

Neil Stern, a retail analyst and senior partner for Chicago-based retail consultancy McMillan Doolittle, says Pier 1 is in a “very difficult situation.” It has been struggling prior to the economic slowdown, “and things are obviously worse now as consumer spending has slowed–particularly in home-related categories.”

Like many retailers, Pier 1 needs to get costs down to attempt to match declining sales, which is never easy to do, Stern says. “From a real estate standpoint, renegotiating leases down may be a preferable option to landlords versus having empty space, so concessions may be available.”

Given the economy, Stern notes, “there is a shot that a number of landlords will allow them to stay at lower rents rather than lose them entirely.”