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Pier 1 revamps marketing strategy

DSN Retailing Today, April 25, 2005 by Debbie Howell

FORT WORTH, TEXAS -- Not wishing to repeat one of its worst fourth quarters in history, Pier 1 Imports recently launched new merchandising and advertising initiatives to revive comparable-store sales and combat weakness in the casual home furnishings market.

Pier 1 kicked off a multimedia advertising campaign in late March unveiling a new tag line, "Life More Interesting" that is broader in scope than previous campaigns. The new campaign is intended to drive store traffic, which dropped off sharply last year when Pier 1 pulled television commercials deemed ineffective. The retailer has also cut SKUs by 15%, revamped assortments and improved store signage.

"The challenges we faced the past two years were some of the most difficult in our company's history, but based on recent changes we have implemented, I assure you we are working hard to get back to being our best," chairman and ceo Marvin Girouard said during a fourth-quarter conference call on April 7.

Although Pier 1 was profitable for its fiscal year ended Feb. 26, 2005, net income declined 49% and comps dropped 5.8%. The drop in annual same-store sales was the second in a row for Pier 1, coming off a 2.2% decline last year. Especially troubling were the 10.7% comp drop in the fourth quarter and 18.2% decline in March. Consequently, Pier I is forecasting another comp decline of 8% to 12% for its first quarter that ends in May.

The company largely blamed its failed television advertising campaign of 2004 for declines in customer traffic, but also pointed to weakness in the home furnishings market and a pullback in shoppers' discretionary spending due to economic factors such as higher oil and gas prices. Heightened competition in casual home furnishings from retailers such as Target with its Global Bazaar program also impacted Pier 1, Girouard said.

"Shoppers continue to be better educated on fashion trends and they cross-shop the competition more than ever," the ceo said. "We have a good, established brand and we need to market it more appropriately."

While the ratio of advertising spending to sales will be similar to last year, the retailer is expanding its focus to a wider array of media versus previous reliance on television. The new campaign includes TV, radio, newspaper inserts, direct mail, public relations and Web content. Pier 1 is also launching its first national catalog integrated with e-commerce sales this fall, following a successful test last year.

In stores, the mix has been revamped to broaden price points and merchandise ranges in key categories, with an emphasis on more distinctive styles of furniture. Greater use of vignettes is a key strategy, showing groupings of home furnishings. New signs and graphics will reinforce distinctive product found in stores.

"Customers will see a cleaner, crisper shopping environment with just the right touch of Pier 1 spice that has always been our hallmark," said Girouard in initiatives.

Some analysts are not convinced, however, that Pier I can effectively execute a turnaround of its business. Analyst Charles Grom of JP Morgan, issued a report on April 8 suggesting that the retailer's results could get worse and gave the stock an underweight rating.

COPYRIGHT 2005 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2005 Gale Group
 

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