By Neil Saunders
After a torrid first half, in which both total and comparable sales growth stubbornly remained in negative territory, Pier 1 has bounced back this quarter. Admittedly, total sales growth is still slightly negative, but this is to be expected given the company is operating 33 fewer stores than last year. However, comparable sales growth is respectably positive and e-commerce is booming. Even net income registered growth, which is something of a relief after the sharp declines of the past year.
The selling environment and shop floors are now easier to navigate and products are easier to find. The new focus on individual products and categories — rather than its more ambiguous prior approach of merchandising by theme — is improving customer engagement and conversion. The improved loyalty program also played its part in raising sales.
There is no doubt that the end of the election benefitted Pier 1 and, from our calculations, sales over the span from November 9 through the end of the reporting period were very robust. This is in marked contrast to the first part of the quarter which was somewhat more choppy.
The end of the election is not responsible for the entirety of the uplift, however. In our view, Pier 1 deserves some credit for the changes it has been making. Foremost among these is a much simpler promotional calendar with far more targeted offers. This has both protected margins and stimulated greater interest and demand among consumers. These margin gains have been augmented with further uplifts from savings in the distribution network, most notably the transport of goods from Asia.
Changes have also been made to the selling environment and shop floors are now easier to navigate and products easier to find. We believe that Pier 1’s new focus on individual products and categories — rather than its more ambiguous prior approach of merchandising by theme — is improving customer engagement and conversion. This new approach is much more evident in winter and holiday collections, which bodes well for the next quarter.
Despite the progress there is, in our view, still some way to go on certain aspects of the proposition. Furniture, for example, is one of the areas that could do with further attention, not least because this is an area where Pier 1 punches well below its weight. These changes should come through in the new calendar year which will provide further uplift to the top and bottom lines.
The improved loyalty program also played its part in raising sales. Here we are encouraged by the in-store events that Pier 1 is holding off the back of the scheme, these are aiding both card sign-ups and sales.
One standout area this quarter is e-commerce where sales have increased by 28% — well above the average rate of increase over the past year. Strong digital marketing campaigns helped here, as did the new gift registry which continues to perform well.
In our view, Pier 1 is now on a much more positive trajectory.
Neil Saunders is CEO of research firm Conlumino.