Wal-Mart (NYSE: WMT) has been struggling to reinvent itself as something other than just "always low prices". The company's efforts at high fashion have flopped, and same-store sales have been disappointing of late. Meanwhile, Pier 1 Imports (NASDAQ: PIR) has just plain struggled to stay alive amid store closings, the shuttering of its catalog and web businesses, declining sales and the loss of profitability. The company's shares have sagged from a high of $25 in 2003 all the way down to the current price of $8.49, representing a market cap of $750 million.

The company is working hard to try to find some way to compete with lower-priced products and imitators. Wal-Mart's problem is that it lacks the brand that Pier 1 has. Rightly or wrongly, people just feel tacky shopping for home furnishings at Wal-Mart.

Remember how K-Mart scored a big hit with its line of Martha Stewart Living Products? I wonder if Wal-Mart could do the same, and possibly more, with some kind of strategic partnership with Pier 1. What if Wal-Mart signed a deal to brand its home goods department as Pier 1, and brought in some of the company's marketing and design people to give the department a chic makeover. I bet that an alliance with Pier 1 could, overnight, increase Wal-Mart's decor sales by at least 10%. While the alliance might not be great for the Pier 1 brand, the company is bleeding red ink and needs to find some way to save itself. They would have to at least consider it.

Wal-Mart needs to figure out how to Target (NYSE: TGT) the more upscale consumer its main competitor has so successfully reached, and an alliance with Pier 1 seems like it could be one way to do that.

These are tough times for retail sellers of home furnishings and decorative products. Take a look at the five-year charts for Bombay Company Inc. (NYSE:BBA) and Pier 1 Imports (NYSE:PIR), two of the leaders in the category: