Home goods retailer Pier 1 Imports wants to liquidate its U.S. and Canadian assets after failing to find a buyer since filing for Chapter 11 bankruptcy protection three months ago, going a step further than many other struggling chains with store space across the country in a sign of permanent change as a result of the pandemic.
The 58-year-old retailer is seeking approval from the U.S. Bankruptcy Court for the Eastern District of Virginia to start "an orderly liquidation" of remaining store operations "as soon as reasonably possible after operations are able to resume," according to court filings. Pier 1 temporarily closed all its 900 retail stores in March following government-mandated closings meant to help stop the spread of the coronavirus.
As part of the permanent closure of its business, Pier 1 plans to sell its inventory and remaining assets, including intellectual property and its e-commerce business, in a court-supervised process. Pier 1 has proposed an asset bid deadline of July 1, with an asset auction date of July 8. The retailer is also proposing a sale hearing date of July 15.
"This decision follows months of working to identify a buyer who would continue to operate our business going forward," Pier 1 CEO Robert Riesbeck said in a statement Tuesday. "Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down."
The coronavirus has been hitting the bottom line of retailers hard, many of which were struggling financially before the pandemic because of changing consumer habits. J.C. Penney, Neiman Marcus, Stage Stores and J. Crew are just a few of the retailers that have filed for Chapter 11 bankruptcy protection in recent weeks.
Total U.S. retail sales fell more than 16% to $403.9 billion in April from the previous month, according to the latest report from the Department of Commerce. Sales at furniture and home furnishings stores like Pier 1 fell 58.7% in April from March, and 66.5% from April 2019.
Pier 1 expects to receive at least $100 million from the Coronavirus Aid, Relief, and Economic Security Act, but the funds will not "will not change the outcome" of the Chapter 11, according to court filings. Pier 1 did not immediately respond to an emailed interview request for additional information.
In Pier 1's last quarterly report filed in January, it listed total assets of $426.6 million and total debts of $258.3 million.
Pier 1's CEO alerted workforce commissions throughout the country in April that jobs at Pier 1's corporate headquarters in Fort Worth, Texas, six distribution centers and hundreds of retail stores were at stake because of the company's dire situation.
The decision to permanently close Pier 1 was made to maximize the value of the company's assets, officials said. Riesbeck, his executive team, and the company's financial and legal advisers made the determination based off the combination of the challenging retail environment coupled with "the new reality and uncertainty of a post-COVID world," officials said.
The store closings and liquidation sales are expected to begin once stores can reopen and be in compliance with COVID-19 guidelines. Pier 1 is currently fulfilling customer orders through its website.
The company's debtor-in-possession lenders have agreed to let Pier 1 overdraw its facility by about $40 million to support its operations through the closure period. The retailer is negotiating the term sheet of the debtor-in-possession lenders and creditors' committee. Pier 1 is expected to file a Chapter 11 plan and disclosure statement to bring closure to all parties in the case.
The closing down of the company may have other unintended consequences with its corporate home in Texas being on the hook for a large office lease for the retailer through June 2027. The building was transferred to special servicing in March in preparation for default.