Pier 1 May Be the Saddest Story of This Bankruptcy Boom
By: Rob Walker
Tags: Retail, Business, Pier 1 Imports, Bankruptcy, Economy

Pier 1 May Be the Saddest Story of This Bankruptcy Boom

Why J. Crew and Chuck E. Cheese aren’t disappearing, but the retailer behind the papasan chair is

Somewhere around April this year, production of Pier 1 Imports’ famous papasan chairs ceased.

So did everything else in the retailer’s manufacturing supply chain, as the company discontinued all purchase orders early that month. “We didn’t want to impact our vendors by having product in production that we weren’t gonna take,” chief executive Robert Riesbeck tells Marker. Pier 1 will sell the papasan chairs and other products in its stores and distribution centers, aiming to clear every last item in by the fall. And that will be that. The retailer, a familiar presence in strip malls and shopping centers for decades, is liquidating.

A slew of household-name businesses have declared bankruptcy since pandemic-related shutdowns beginning in March gutted the American economy. It’s happened across categories. J. Crew, J.C. Penney, Lucky, Chuck E. Cheese, Hertz, Gold’s Gym, GNC, Neiman Marcus, Le Pain Quotidien, the largest Pizza Hut franchisee, and the list goes on. It’s widely assumed this is just the beginning.

The public square of social media lately has been full of nostalgic and emotional laments for their most adored (and sometimes, maligned) brands seemingly evaporating into thin air: “Well, La Pain Quotidien, I will miss you.” “JCrew bankrupt. RIP barn jackets and heather sweaters.” “Chuck E. Cheese just filed for chapter 11. The end of an era.” Others are less sentimental, but just as definitive: “The end of J. Crew was inevitable,” Jezebel declared.

But in reality, these bankruptcies do not mean that all of these brands will simply disappear. It’s not likely that we will wake up soon to a world with no J. Crew or Pizza Hut. Chapter 11 has often been misconstrued by the public as immediate and dramatic confirmation that a company is shutting down altogether — as happened in recent years with Toys R Us, Barneys, and Payless Shoes. In reality, Chapter 11 is a financial tool that can buy a distressed company a second chance: The bankruptcy process gives it the opportunity to rejigger its debt arrangements, slash costs, restructure real estate and other commitments, agree to new ownership, and carry on in some new and improved version (albeit a probably smaller one).

The end of Pier 1 as we know it is partly a classic and timeless tale of why a business — any business — rises and falls, how bankruptcy protection works, and what happens when it doesn’t.

And that, in fact, was Pier 1’s plan. But sometimes, reorganizing doesn’t work. Sometimes, nobody is willing to accept the financial risk of helping an entity try a do-over. Sometimes it’s better to just sell every last asset — from the inventory to the intellectual property to the office furniture — and use the proceeds to give creditors whatever money that process produces. Sometimes it seems better to just give up.

That’s what is now happening to Pier 1. The company was already vulnerable before the pandemic arrived. It filed for Chapter 11 protection on February 17, and its declaration to the bankruptcy court focused on the already familiar “retail apocalypse” stemming from a consumer landscape reshaped by the long rise of the internet and other factors. At that time — all the way back in February — government officials were still positioning the coronavirus as a problem playing out overseas, and the filing mentioned it only in passing, as an inventory-management issue affecting Chinese factories.

In that world, Pier 1 had a plan to survive. It would be painful — closing nearly half the chain’s existing locations and consolidating distribution centers, leading to significant layoffs — but in combination with other strategic recalibrations, it could work. “We believed we had a business that had gotten turned around, and we were headed in the right direction,” CEO Riesbeck says. “We strongly believed that Pier 1 has a place.”

But then, about a month later, Pier 1 had to close all its locations, just like most every “non-essential” business in the country. As the shutdown lingered, the company’s options evaporated. And on May 29 it announced what had slowly become inevitable: Instead of reorganizing in a new, leaner form, it would wind down operations completely. The auction of its intellectual property will conclude this month; the process of liquidating all existing merchandise — including the last of the extant papasan chairs — and closing all remaining stores should conclude by the fall.

The end of Pier 1 as we know it is partly a classic and timeless tale of why a business — any business — rises and falls, how bankruptcy protection works, and what happens when it doesn’t. But it’s also a story unique to our moment: how a singular lightning-bolt circumstance that no business leader could control rewrites a company’s destiny. Pier 1, as an example of both narratives, opens a window on the potential futures that many businesses, large and small, are staring down right now.