The management team and board deserve a lot of credit for persevering and making some smart moves in the company's darkest hours. But is Pier 1 worth $0.10 or $10? Let's review what it did right last year.
Part of the fear surrounding Pier 1 last year was its high debt load. In response, the company cut capital expenditures to $5 million last year from $51 million in 2006. It stopped selling online in 2007, because it hadn't done a good job at it. Marketing spending was cut from $117 million in 2007 to $61 million in 2009. The company closed 250 stores from peak levels (about a 25% decrease) and negotiated lower leases for another 350 stores.
Most importantly, though, the company has reduced its debt to $35 million. Management achieved this by buying it back and renegotiating with lenders. Last year's debt was almost $200 million. At the same time, the company has stockpiled cash, which is up to over $200 million. In 2007, cash on hand had fallen to $6 million.
Pier 1 executives were very proud when they presented their most recent quarterly results a couple of weeks ago. Analysts had expected a quarterly loss, but Pier 1 delivered earnings of $8 million and top-line revenue growth of 14% to $306 million. This was the first Q1 profit for the company in six years.