The retailer lost goodwill after years of mediocre presentation and wobbly strategy, including fickle pricing and product assortments. Since CEO Alex Smith took over in early 2007, Pier 1 has come scratching back.
But there is still a long way to go.
In 2009, Smith noted in a conference call, the company focused its marketing specifically on holders of its loyalty/credit card. The result was a nine percent gain in credit card purchases. Charges on the card represented 24 percent of sales up from 22 percent the year before. That helped Pier 1 generate a $87 million, or 86 cents per share, profit for fiscal 2010 versus a net loss of $129 million, or $1.45 per share, for the previous year. Comparable store sales inched up 1.5 percent.
Those results, however welcome, still only represent a bounce off the floor of a very deep hole. Sales per square foot were $152, even after closing some poor performers. Just a few years ago, they were $235.
With loyalty cardholders coming back, Smith said it's time "to cast our nets a little wider" and go after former customers who might have shopped the store but didn't identify with it enough to keep Pier 1 cards in their wallets. So the retailer is shifting its mix of advertising toward acquiring new customers, with an emphasis on former shoppers.
Without offering specific numbers, Smith called for comparable store sales to advance quicker than total sales in this fiscal year. That won't be easy to achieve. Many Pier 1 customers moved on because they didn't like what the company did while it was struggling. A lost customer is hard to win back.
On top of that, many of those former customers would have caught the new frugality in the recession. They might not accept Pier 1 prices after their sojourn at Kohl's (KSS), Walmart (WMT), Target (TGT), Big Lots (BIG) and HomeGoods, a TJX (TJX) chain. In a twist, CEO Smith is an alum of TJX. All those competitors improved their home furnishings operations as Pier 1 declined earlier this decade. And there is also direct competitions from the likes of Bed, Bath & Beyond (BBBY) and Cost Plus World Markets (CPWM).
The future could be tough indeed.