PETITION

And then there is the “ghastly” sh*tshow that is Pier 1 Imports Inc. ($PIR). Back in January, we asked “Is Pier 1 on the Ropes? (Short “Iconic” Brands)” — a question that a lot of retail analysts now seem to be asking in the wake of a horrendous earnings report. How horrendous was it? Comp sales decreased 13.7% YOY, net sales decreased 19.5% YOY, and the company had a net loss of $68.8mm (or $0.85/share). And apropos to the discussion above, the company indicated that it’s considering closing 45 stores in fiscal 2020 due to lease expirations — a number that could rise by upwards of 15% if the company’s new cost-cutting action plan (to the tune of $110mm) doesn’t bear fruit. The company hired A&G Realty to help with this initiative.

So, about that action plan. Here’s what the company has to say about it:

Pier 1 is implementing an action plan designed to drive benefits in fiscal 2020 of approximately $100-$110 million by resetting its gross margin and cost structure. Approximately one-third of the benefits are expected to be realized in gross margin, with the remaining two-thirds coming from cost reduction. After reinvesting in the business, the Company believes it will be positioned to recapture approximately $30-$40 million of net income and $45-$55 million of EBITDA in fiscal year 2020. The Company expects to capture efficiencies and drive improvement in the following areas: 1) Revenue and Margin; 2) Marketing and Promotional Effectiveness; 3) Sourcing and Supply Chain; 4) Cost Cutting; and 5) Store Optimization.
As part of the $100-$110 million of benefits discussed above, the Company has identified approximately $70-$80 million of selling, general and administrative (“SG&A”) savings opportunity for fiscal 2020, the majority of which is expected to be realized in the second half of the year. This SG&A savings opportunity for fiscal 2020 reflects an expected annual run-rate of approximately $95-$105 million.

The subsequent earnings call was…uh…interesting. Led off by an outside investor relations firm, the company’s interim CEO then took over the call by sharing, in the first instance, that an AlixPartners’ restructuring MD is now serving the company as interim CFO. Awesome start. Recent retail quals include Bon-Ton Stores and Gymboree. The team then went on at length about all of the various improvements they hope to instill in the business.

The analysts on the call were…shall we say…NOT EVEN REMOTELY convinced.

Beryl Bugatch, an analyst from Raymond James & Associates pounded the team with questions…

What is the guidance? The company declined to guide.

Where is the delta between the $100mm in cost savings and the $55mm in EBITDA improvement going? The company abstractly answered “we are reinvesting a portion of the savings back in the business.”

Where though? Marketing? The company responded, “assortment strategy, our talent and capability and efficiencies and things to drive efficiency in the plan.” READ: HIGH PRICED ADVISORS.

What’s liquidity look like? The company said it had $55mm in cash, $50mm in the FILO tranche and an undrawn revolver — enough to get through fiscal 2020.

But how clean is the inventory?

By this point the company was like:

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