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Pier 1 looks abroad with a cautious eye

When it comes to overseas expansion, few American retailers have been as successful as Fort Worth, Texas-based Pier 1 -- and few are as cautious.

Even when Pier 1 runs out of places to grow at home -- Marvin Girouard, Pier 1's president and COO sees the chain growing eventually to 1,300 locations in North America -- its overseas expansion will remain under a tight rein, amounting to, at most, 10% of its size at home, he said.

"I think international will never be the dog that wags the tail," he said. "We want to go very slowly, very carefully."

By the beginning of this year, Pier 1 was operating stores in Puerto Rico (four), Mexico (nine), Britain (16) and Japan (five).

The chain plans eventually to double the number of British stores, which operate under the name The Pier, and is looking to expand the number of its franchise stores in Japan to 100 by 2002. The retailer also is looking at South Africa, Chile and possibly Taiwan, he said.

But uncertainty over the single European currency and other economic issues is forestalling any plan to go into Germany and France, Mr. Girouard said.

Despite Mr. Girouard's caution about exporting Pier 1 -- or perhaps because of it -- the company is doing well overseas, analysts say. Its success is partly due to Pier 1's selection of experienced partners in the host country, according to retail analyst Dana L. Telsey, a managing director at Bear, Stearns & Co. Inc., New York.

This began in Mexico in 1993, when Pier 1 forged an agreement with the Mexican subsidiary of Sears, Roebuck and Co. This provided a model in the firm's strategy to expand internationally through joint venture partnerships that would overcome language, legal and business obstacles. Under these agreements, Pier 1 supplies the merchandise and operational expertise, while its international partners develop and operate the stores.

In October 1996, Pier 1 linked up with Akatsuki Printing Co. Ltd. and Skylark Group to open six stores in Japan.

"Pier 1 has provided a store that I think is just a little bit on the cutting edge of consumer retailing in Japan, with a very high-quality product, housewares, and at prices that the Japanese are not used to seeing," said analyst Kevin E. Silverman, managing director at Everen Securities Inc., Chicago.

This is not Pier 1's first experience with overseas retailing. Between 1971-1973 it opened stores in Australia, England, France, West Germany, the Netherlands and Belgium. But in the mid-1970s it shut them all down after worldwide inflation and a deregulated exchange rate for the dollar drastically increased the cost of foreign-manufactured goods.

Now the retailer is proving to be a much happier traveler. Nevertheless, the company remains anything but complacent.

"I don't know of any real successful American retailers that went abroad and succeeded. Toys 'R' Us is still trying it, along with Disney and Warner Bros., and I think the jury's still out on Gap," Mr. Girouard said. "It's something that Americans all get caught up in, saying, 'You've got to have a global plan,' but I'm more focused on the bottom line. That's more important than having stores all over the globe."