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Pier 1's CEO talks tactics.


EIGHTEEN MONTHS AFTER taking the chief executive officer spot at Pier 1, Alex Smith said the chain's units per transaction and sales have improved, a result of a merchandising about-face.

That redo is tied to returning Pier 1 to its "historical position" as a merchant known for "serious, whimsical and handcrafted" globally sourced home goods for middle-income consumers, but "reinterpreted for today's customers," Smith told investors at a Goldman Sachs' retail conference here recently.

Under Marvin Girouard, Pier 1's longtime CEO and Smith's predecessor, the retailer made an ill-fated move toward upscale, modern looks when the business started to soften.

"A lot of pain" could have been avoided had the retailer not made that strategic misstep, Smith said.

"Our core business model is a wide assortment with a broad demographic and psychographic appeal that's a mix of wants and needs," he said. "We had gotten away from that."

While most of the merchandising revamp is behind the company and major cost-cutting measures that included closing over 100 stores, shuttering its e-commerce arm and selling its headquarters building, there's still work to be done to return the chain to profitability, he said.

Pier 1 is now focused on beefing up marketing, including the reintroduction of television ad spots, and ramping up direct mailers.

Speaking with his signature candor, Smith called Pier l's back-to-school strategy "flawed."

The retailer focused too much on low-ticket items rather than furniture. What's more, the company "miscalculated the markdown cadence."

Still, although Pier 1's August comparable-store sales, down 1.7 percent, were "less than stellar," they were better than a lot of retailers, Smith said.

"Our market share is pretty tiny," Smith said. "We don't need to take anybody else's business" to effect a meaningful turnaround, but instead capture "a fraction to make money," he said.

The retailer is also working on shortening its lead times for getting products to the stores.

"We're still buying pretty far out," he said.

For the make-or-break holiday selling season, "Our purchases are predicated on a pretty conservative sales plan."

Smith touched on Pier l's failed attempt to buy rival Cost Plus in June.

Cost Plus, which shares a similar store format to Pier 1 of globally imported home decor, rejected Pier 1's offer to purchase the company.

"It would have been a great deal today," Smith said. By now, "We could have been well into ... leveraging sales and gross margin dollars."

A recent research note from Goldman Sachs analyst Matthew Fassler said that "Despite recent choppiness, Pier 1 is outperforming its peers in a tough macro backdrop. Furthermore, the company has provide itself a sizable cash cushion with its headquarters sale, and we highlight CEO Alex Smith's enthusiasm and merchandising energy."
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Title Annotation:home page
Author:Thau, Barbara
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Sep 22, 2008
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