Pier 1's online sales grow, and so does its profit loss

Dive Brief:

Pier 1 on Wednesday reported that second quarter net sales rose less than half a percent, to $407.6 million from $405.8 million in the same period last year. Same-store sales rose 1.8% year over year, according to a company press release. The retailer’s net loss for the quarter nearly doubled at $7.8 million, or 10 cents per share, compared to net loss of $4.1 million, or 5 cents per share, in the year-ago quarter.
E-commerce sales were 27% of net sales in the quarter, up from about 20% of net sales in the same period last year. Taking into account e-commerce orders placed in or picked up in-store, some 90% of the furnishings retailer’s second quarter net sales directly touched a store, the company said.
Year to date, net sales for the six months ended Aug. 26 fell 0.9% to $817.1 million compared to the year-ago period, and same-store sales rose 0.7%. In the first half of 2017, e-commerce represented 26% of net sales, compared to about 20% for the same period last year, the company said.

Dive Insight:

In a statement Wednesday, newcomer CEO Alasdair James noted "solid top-line performance and year-over-year improvement in merchandise margin in a challenging retail environment." But he also added that the retailer’s Q2 performance remains below expectations. "We believe there is far greater potential ahead to optimize the Pier 1 Imports brand and improve our long-term profitability," he said.

James, who arrived in May, said that the company is about halfway through an extensive analysis of the retailer’s brand strengths and operational capabilities. "As I expected, there are strategic and tactical opportunities to enhance our brand positioning and refine our operations within key areas of the business, including sourcing, supply chain and promotional effectiveness," he said.

Any turnaround efforts will have to be fairly drastic, suggests Gordon Haskett analyst Chuck Grom. "While the company’s new CEO is beginning to make changes, we believe a complete re-base is forthcoming in order for the Pier 1 brand to stay relevant," he said in an email to Retail Dive.

The retailer is "caught between a rock and a hard place," according to Grom — the retailer is seeing more sales online, but margins are suffering.

That's partly the nature of the beast. Because of the major bulk and weight of most merchandise, fulfillment costs for furniture retailers are daunting. Even so, online furniture sales have emerged as a major growth area in e-commerce, rising 18% in 2015, second only to grocery.

Some 15% of the $70 billion U.S. furniture market is now online, according to IBISWorld data. In this environment, Amazon and Target are each reportedly looking to boost their furniture sales in a challenge to online retailer Wayfair, which does offer free shipping for all orders over $49.