Pier 1 sees growth in online sales

Posted Thursday, May. 09, 2013  comments  Print Reprints

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Pier 1 Imports is making strides with its resurrected e-commerce site, hoping to see 10 percent of sales from the Internet by the end of 2016.

And so far, the chain doesn’t see much poaching from its brick-and-mortar customers, executives told analysts at an investor day meeting in Fort Worth.

“In the future, we will give our customers a selection of unique and special products many times bigger than what it is today,” CEO Alex Smith said at Tuesday’s event. “They will be able to shop our full assortment online, from their home, their office or on the move.”

In the fourth quarter, Pier 1’s online site offered bedding, which is not offered in stores, and management indicated that it will continue to sell such exclusive merchandise to Internet shoppers while keeping the number of store products relatively flat.

Online growth will mean enlarging its fulfillment center, now in its Mansfield distribution building.

“Five years from now, if not sooner, we know there’ll be a need to expand beyond just one center,” said Cary Turner, Pier 1’s chief financial officer. “Our plans include expanding into multiple e-commerce fulfillment centers by effectively leveraging our existing supply chain so that we are ready when the time is right.”

Turner said the e-commerce retail channel is still in its “crawl” phase but eventually could generate up to 20 percent of the home furnishing chain’s sales. Pier 1 returned to online sales in July after shutting down the business when Smith was hired in 2007 to resurrect the ailing enterprise.

Some analysts liked what they saw and heard Tuesday.

Bradley Thomas of KeyBanc Capital Markets said in a research note: “We continue to believe the [Pier 1] story remains compelling with same-store sales that are among the best in our coverage. … We remain positive on the company’s strategic direction, marketing and merchandising initiatives, and ability to gain market share. As such, we reiterate our buy rating” for the stock (ticker: PIR).

Shares of Pier 1 declined by 3 cents to $23.97 in trading Wednesday.

According to an edited transcript of the event, Pier 1 gave a glimpse of its customer profile.

“Our research tells us we have a high brand awareness with a very loyal customer base,” said Don Kinnison, vice president for marketing and visual merchandising. “Our customer base consists of a wide range of demographics and psychographics. Our core customer is between the ages of 25 and 55, with an average household income of around $80,000 and 75 percent own a home.”

Sales per square foot in the chain’s stores were $198 at the end of 2012, down from $235 a decade ago (about $275 in today’s buying power). Turner said the three-year sales target is $225, with a potential for $250.

The CFO also discussed initiatives to raise the operating margin from 11.7 percent achieved last year.

Barry Shlachter, 817-390-7718

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