Pier One Imports Inc. - Value

Pier One Imports Inc. (PIR) has returned to profitability from the brink of retail death after same store sales grew by 14.3% in the first quarter of 2010. The company is trading at just 11x forward estimates, which is cheaper than its industry average of 14.8x.

Pier One started as 1 store in California in 1962 but has grown to a 1000 stores in 49 states, Canada and Mexico. The retailer specializes in home goods, including furniture.

I must confess, I did own a green Papasan chair from Pier One throughout college (but won't say when that was). The company began importing the Papasan chair 27 years ago. It is one of their signature pieces. It certainly got a lot of use in the dorm and my apartments.

Pier One Beat by 450% in the Fiscal First Quarter

It has been a tough road for Pier One as the retailer found itself struggling to survive even before the retail recession of 2009 dealt it another blow.

But on June 17, the company reported better than expected earnings results for the fiscal first quarter which surprised on the Zacks Consensus by 9 cents. Analysts were expecting a loss of 2 cents but the company reported a profit of 7 cents per share.

Total sales rose 8.9% to $306.3 million from $281.1 million in the year-ago quarter. Same store sales jumped 14.3% compared to a decline of 7.5% in the year ago quarter. The gains were the result of an increase in store traffic, conversion rates and average tickets.

Merchandise margins also improved to 58.6% from 54.2% in the first quarter of 2009.

Pier One continued to focus on controlling its inventory, which has been key for the retailers during the recession. Inventory stood at $303.2 million at the end of the first quarter compared to $294.2 million in the year ago quarter.

Zacks Consensus Estimates Rise

Given the big first quarter beat and the optimism of the company, analysts revised estimates higher in June.

The second quarter Zacks Consensus Estimate rose 4 cents to 8 cents per share over the last 60 days. It doesn't report second quarter results until Sep 9.

The full year consensus also jumped by 18 cents to 63 cents in that same period.

That is a huge turnaround from 2009 where the company made only 1 cent for the year.

Analysts are also bullish about fiscal 2011, expecting earnings to rise another 11.5%.

Value Fundamentals

Pier One has some attractive value characteristics in addition to a low P/E ratio. It sports a PEG ratio of just 0.9, which definitely categorizes it as an undervalued stock because it is under 1.0 and it is also under the industry average of 1.07.

The price-to-book ratio is 2.6, also within the value parameters as it's under 3.0.

Pier One Imports is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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