Pier 1 Imports Downgraded: Moody’s Says ‘High Likelihood’ Of Loan Default

Amid Pier 1 Import’s (PIR) struggles to stay afloat, the home goods retailer has reportedly been downgraded by Moody’s to negative status. The news of the lowered outlook comes as the company announced it would be closing as many as 450 stores.

With lagging sales over the last year, Pier 1 also saw its credit rating drop by the analyst firm, which said the retailer has a “high likelihood” of defaulting on its loans that become mature in April 2021 as well as continuing to suffer ongoing losses, Retail Dive reported.

Pier 1 has seen its EBITDA losses reach about $230 million over the last 12 months, which Raya Sokolyanska, vice president and lead analyst at Moody’s said in a statement (via Retail Dive), "the planned store closures and cost cuts will reduce the company's cash burn, EBITDA losses will continue in the near term.”

Beyond closing half of its store portfolio, Pier 1 also said at the time of its Q3 earnings report that it would be reducing its corporate workforce. While the number of employees that will be laid off was not disclosed, Bloomberg said, about 300 workers would be let go from the company. The news outlet also said that Pier 1 has already started canceling orders, which could signal more troubling times ahead.

According to CreditRisk Monitor (via Retail Dive), Pier 1 has a 9.99% to 50% chance of filing for bankruptcy in the next 12 months, which Sokolyanska said, “would allow the company to both reduce outstanding debt and exit or renegotiate leases, which may help avoid liquidation.”

The company has also received a second warning for possible delisting from the NYSE.

Shares of Pier 1 stock were down 6.14% as of 3:32 p.m. EST on Friday.