Pier 1’s Fight With Activist Investors Is Escalating

The battle between Pier 1 Imports and hedge fund Alden Global Capital continues to roll forward with no immediate end in sight. Alden disclosed a 9.5 percent stake in Pier 1 last month and delivered a letter with an ultimatum: Either appoint Alden President Heath Freeman as “director to assist with CEO search” and the power to appoint board members, or the activist investor group will seek consent solicitation to replace members of the struggling home goods retailer’s board.

Pier 1 fired back late last week, noting that talks with Alden are already ongoing and that the ultimatum is “not constructive and could erode shareholder value by undermining the company’s announced CEO search and disrupting its business in the holiday selling season.”

This is the second accusation of counterproductive behavior during this fight. Last month, Pier 1 adopted what was widely considered a “poison pill” shortly after Alden’s stake disclosure, a move that analysts note would make Pier 1 much more expensive and difficult to take over. Freeman has called the poison pill “a nonsensical scare tactic.”

The squabble with its board of directors is poorly timed for Pier 1, as it scrambles to ready itself for the holiday selling season. Pier 1 cannot afford to wholesale alienate its investors at Alden, but it is clearly committed to maintaining autonomy when it comes to board appointments.

“Pier 1 Imports has a highly qualified, diverse board with significant retail experience, which was reelected with greater than 98 percent approval by our shareholders at our annual meeting less than four months ago,” it wrote. “Nonetheless, we are mindful of Alden’s significant investment and will continue to engage and attempt to work collaboratively with Alden and all our stockholders to help the company achieve success and enhance value for all stockholders.”

A short time ago, it seemed Pier 1 was on the brink of recovery, but revenue dropped 6.7 percent last quarter, weighed down by falling foot traffic and heavy discounting. Earnings guidance has been lowered from $0.32-$0.40 per share to $0.16–$0.24 per share. This is the latest in a long string of declines that began in early 2015 when CFO Cary Turner abruptly resigned.