Pier One's expansion plan remains on course
December 23, 2002-- Home Textiles Today,
Still on track for 1,000 stores in the United States and Canada by the end of the fiscal year and 1,500 by the end of the decade, Pier 1 Imports plans to open 115 new units and relocate 35 others next year, executives said during the company's third-quarter conference call last week.
Marvin Girouard, chairman and ceo, said that over the past five years the company has relocated 50 percent of its store base, which usually adds to its square footage since many times it closes an 8,000- to 9,000-square-foot store to reopen as a 10,000- to 12,000-square-foot unit.
Overall, the retailer has seen positive low-single-digit comps for the first two weeks of December and expects to generate comps in the range of 2 percent to 4 percent for the month. For the first nine months of the year, home textiles was one of several categories that was particularly strong, a trend that should continue through the month.
Its larger-format stores —with locations in Dallas, Alaska, Hawaii, Denver, Houston, St. Louis and South Hampton, NY — are performing above expectations in most locations, Girouard said. The Dallas location, in the Galleria Mall, just went above the $3 million sales mark for the first time, and the Hawaii store is "phenomenal," he said. He speculated that the struggling locations may be too close to other Pier 1 units.
And though the company saw a flat average ticket for the quarter, in the low $50 range, "the entire business is driven by traffic in the quarter," said Cary Turner, senior vp and cfo. "The ticket goes down, but we have more transactions." High-ticket furniture items, which are 30 percent of the business for a large portion of the year, dip to about 9 percent of sales in December, he said, and the merchandising emphasis switches to holiday and gift-giving items.
Turner said that since October traffic counters have been implemented in all of its stores. The system provides insight to how many are coming in and who is buying. "It's a great metric to measure business; it's a very interesting science."
Pier 1's marketing budget is operating at 4.5 percent of sales, and the company remains committed to television advertising, though it did place more fall and holiday inserts this year to create "a more specific call to action," said Girouard.
Its Cargokids division, which it acquired early 2001, has real potential and will become a meaningful part of growth strategy within two to three years, said Turner, and the company is satisfied with its progress. Now the division's sales account for 1.0 percent of the company' revenues.
With a goal of 300 stores by the end of the decade, the division added four new units and will have 27 units by yearend, with plans to put in 10 more stores by March.
Accessories and linens, high-margin businesses for the retailer, have grown from 5.0 percent of Cargokids' sales a year ago to 22.0 percent at the end of November, and the company wants to see it grow to 40 percent eventually. "We've got a great shot at improving margins," said Girouard. Since the company acquired Cargo, it also shifted its furniture sourcing from mostly domestic suppliers to Brazilian manufacturers. In the future, it plans to source from Chile as well.
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