Pier 1 In Freefall After Rocky Q3 Print

Pier 1 Imports Inc PIR shares are in disaster mode after suffering through another disappointing earnings release Wednesday that saw CEO Alasdair James step down.

Third-quarter earnings came in at a 36-cent-per-share-loss, missing estimates by 30 cents. At $413.232 million, sales fell short of estimates by $38.748 million.

The Analyst 

UBS analyst Michael Lasser maintains a Sell rating on Pier 1 and lowered the price target from $1 to 50 cents. 

The Thesis

Pier 1’s weak results in a strong consumer spending environment reflect the depth of the company's challenges, Lasser said in a Wednesday note. (See his track record here.)

Same-store sales were down 10.5 percent in the quarter, and the decline would have been 600 basis points steeper if not for a holiday shift, the analyst said. 

“The shortfall was driven in part by in-stock challenges and price reductions to reframe PIR’s value proposition."

Pier 1 lowered its price points before it could fully adjust its sourcing strategy, Lasser said, adding that the retailer faces further hurdles as it enacts a new sourcing plan.

With board member Cheryl Bachelder taking over as interim CEO, Pier 1 is exploring strategic alternatives, but Lasser is skeptical that any bold actions will lead to a favorable outcome.

"The company will narrow its focus on merchandise that drives its sales. Also, it will re-engineer its cost structure. We agree a more aggressive turnaround approach is needed. But at this point, it's unclear how much benefit it can generate," the analyst said. 

Pier 1 has captured $20 million of annualized SG&A savings for fiscal 2020, but UBS said reinvigorating traffic in a competitive environment will be tough and the company’s performance will remain challenged well into 2019.

Price Action

Pier 1 Imports shares were down 61.74 percent at 44 cents at the time of publication Thursday. 

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