Pier 1 Imports Inc. — the once-trendy supplier of home goods like papasan chairs and throw pillows — filed for bankruptcy protection Monday after years of sliding sales.
The company and its subsidiaries commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Eastern District of Virginia. A hearing is scheduled for Tuesday at the U.S. Bankruptcy Court for the Eastern District of Virginia.
The retailer, which was founded in 1962, has been struggling with increased competition from online retailers such as Wayfair as well as retail giants like Walmart and Target.. Pier 1 said it will pursue a sale, with a March 23 deadline to submit bids.
In the meantime, Pier 1 said lenders have committed approximately $256 million in debtor-in-possession financing so it can continue its operations during the Chapter 11 proceedings.
Pier 1's sales fell 13% to $358 million in its most recent quarter, which ended Nov. 30. It reported a net loss of $59 million for the quarter as it struggled to draw customers to its stores.
Last month, Pier 1 announced it would close 450 stores, including all of its stores in Canada. The company is also closing two distribution centers.
Pier 1 leaders warned then that the retailer may not be able to continue as a going concern and announced a plan to close up to 450 stores and cut jobs.
In a 2018 presentation to investors, the company acknowledged that shoppers thought its merchandise was outdated and expensive. It was also burdened by high sourcing and supply chain costs.
Ted Gavin, a retail bankruptcy expert and managing partner of the consulting firm Gavin/Solmonese, said he hasn't shopped at Pier 1 in more than a decade.
“People have been talking about Pier 1 heading for bankruptcy for a few years now. They've closed stores, they've struggled to find a steady customer base, they've struggled with falling sales," Gavin said.
Pier 1 was founded in 1962 in California, where it made its name selling incense, beanbag chairs and love beads. The company moved to Texas in 1966 and went public in 1970.
But in recent years, it struggled to draw customers to its often cramped and cluttered stores. The company has been trying to streamline its merchandise, improve online sales and draw in younger customers, but it was an uphill climb. On Monday, Pier 1 was selling a tufted velvet armchair for a sale price of $399 on its web site. Target was offering a similar one for $214.
In its most recent fiscal year, which ended in February 2019, Pier 1 reported sales of $1.55 billion. That was down 18% from 2015. Pier 1's sales tumbled 13% to $358 million in its most recent quarter, which ended Nov. 30.
Pier 1 is in talks with multiple potential buyers and has received approximately $256 million of debtor-in-possession financing from Bank of America N.A., Wells Fargo National Association and Pathlight Capital LP. T
“In recent months, we have taken significant steps forward in our business transformation and cost-reduction initiatives,” said Robert Riesbeck, Pier 1’s CEO and chief financial o. “We have worked to establish an appropriately sized and profitable store footprint, operating structure and merchandise assortment that will enable Pier 1 to better serve our customers across store and online channels. Today’s actions are intended to provide Pier 1 with additional time and financial flexibility as we now work to unlock additional value for our stakeholders through a sale of the company. We are moving ahead in this process with the support of our lenders and are pleased with the initial interest as we engage in discussions with potential buyers.”
Pier 1 intends to conduct a court-supervised sale process and complete the sale through a Chapter 11 plan. Pier 1 expects that the deadline to submit qualified binding bids will be on or around March 23, 2020, subject to procedures to be approved by the court.
Pier 1’s stores and online platform are open and operating and the company said it expects to operate its business during the Chapter 11 process.
In connection with its plans to close all its stores in Canada, Pier 1 is also commencing proceedings in Canada.
A&G Realty Partners is assisting the company with its previously announced store closures and lease modifications. Pier 1 landlords can contact A&G Realty Partners through its website, www.agrep.com.
Kirkland & Ellis LLP and Osler, Hoskin & Harcourt LLP are serving as legal advisors to Pier 1 in the U.S. and Canada, respectively. AlixPartners LLP is serving as the company’s restructuring advisor and Guggenheim Securities, LLC is serving as the company’s investment banker.
Court filings and other documents related to the court-supervised process are available at https://dm.epiq11.com/Pier1