Pier 1 Imports (NYSE: PIR) has been dodging bankruptcy rumors recently, and said earlier this month that it intends to close 450 locations—nearly half of its 942 stores—this year as sales have been continually declining.
After a disappointing fiscal Q3 report earlier this month, CEO Robert Riesbeck said in a statement, “We believe that we will deliver improved financial results over time as we realize the benefits of our business transformation and cost-reduction initiatives.”
Despite Riesbeck’s optimism, there are doubts that the home decor business can be successfully turned around.
“If I were a betting person, I would bet they will continue to sink,” Steve Dennis, president and founder of SageBerry Consulting, a retail strategy firm, said. “The fundamental problem is the value proposition. That’s the thing that’s broken.”
But as Pier 1 begins to shutter stores, there are four stocks that stand to benefit. According to an analysis by Telsey Advisory Group, At Home (NYSE: HOME), TJX-owned HomeGoods (NYSE: TJX), Target (NYSE: TGT), and Wayfair (NYSE: W) all could see a bump in sales as customers search elsewhere for home decor products.
According to Telsey, 60% of At Home stores, 59% of HomeGoods stores, and 35% of Target stores have a Pier 1 location within three miles. The firm also notes that the home furnishings market in the U.S. totals about $200 billion in sales.
Telsey analyst Cristina Fernandez estimates that if Pier 1 shuttered all of its stores, At Home, Wayfair, and HomeGoods would likely see a 100-basis-point lift in sales, while Target would see a 20-basis-point lift in sales.
One store that isn’t on Telsey’s list of stores that stand to benefit from Pier 1’s closures is Bed Bath & Beyond (NASDAQ: BBBY).
While the firm said that Bed Bath & Beyond has the most geographic overlap with Pier 1, with 47% of its stores within one mile of a Pier 1 location and 59% of them within three miles, the company hasn’t been able to “capitalize on Pier 1’s displaced sales… given its own struggles.”
Bed Bath & Beyond is in the midst of its own turnaround. New CEO Mark Tritton, who was poached from Target, is working to turn the retailer’s ship around, but the benefit Bed Bath & Beyond could see from Pier 1’s struggles could be lost to Wayfair or one of the other four if it doesn’t act quickly.