Pier 1 Imports: Zacks’ Bull of the Day Play

The consumer retail environment is extremely cutthroat, and has been facing competitive headwinds (think Amazon), deterioration store traffic trends, and higher costs correlated with the growth of e-commerce adaptations.  But one retail company has seen a positive turnaround from their investments in e-commerce, inventory control, and improved marketing.  This company is Pier 1 Imports (PIRFree Report) , and they are the Zacks Bull of the Day.

This Zacks Rank #2 (Buy) company consists of a chain of retail stores operating under the names Pier 1 Imports and The Pier, selling a wide variety of furniture, decorative home furnishings, dining and kitchen goods, accessories and other specialty items for the home. Additionally, the company, through certain subsidiaries, operates stores in the United Kingdom under the name The Pier. The company supplies merchandise and licenses the Pier 1 name to Sears Mexico and Sears Puerto Rico.

Recent Earnings Data

In the middle of December, management posted Q3 16 results where they easily beat both the Zacks consensus earnings and revenue estimates.  The company saw year over year gains in the following; comparable sales +1.8%, e-commerce sales +28% (now accounting for about 20% of net sales), gross profit +6.7%, and EPS +30.7%.

Management’s Take

According to Alex W. Smith, President and CEO, “Sales trends rebounded in the second half of November, following the election, which enabled us to deliver third quarter results well ahead of our forecast. Specifically, we had positive company comparable sales and higher than planned profits in the third quarter. We are making progress on our strategies to deliver shareholder value through our merchandising, marketing, supply chain and real estate initiatives. Our seasonal assortments are resonating with customers and we’re seeing strength across nearly all our product categories. As always, we’re pleased with how our teams and associates are executing against our holiday plans.  We have a great deal of confidence in our brand positioning and long-term financial outlook.  Pier 1 Imports has always been known for inspirational merchandise, great value and outstanding customer service. Layering our omni-channel capabilities on top of that foundation makes Pier 1 Imports a formidable force in the home furnishings space. Our teams are focused on continually enhancing our business model to ensure that we thrive in today’s era of retailing and well into the future.”

Price and Earnings Consensus Graph

As you can see from the graph below, Pier 1’s stock price and earnings estimates had been falling since the middle of 2013, but the recent earnings report and positive sales trends have caused the stock price and future earnings estimates to rise as of late.

Pier 1 Imports, Inc. Price and Consensus

Pier 1 Imports, Inc. Price and Consensus | Pier 1 Imports, Inc. Quote

Increasing Earnings Estimates

Over the past 30 days earnings estimates for Q4 16, Q1 17, FY 16, and FY 17 have all seen significant upgrades; Q4 16 rose from $0.27 to $0.30, Q1 17 improved from -$0.03 to -$0.01, FY 16 jumped up from $0.25 to $0.38, and FY 17 advanced from $0.32 to $0.45.

Bottom Line

Going into 2017, as part of their cost containment strategy, management announced that they will close about 15 stores.  Further, due to their strong cash flows, the Board of Directors recently declared a $0.07 per share cash dividend to shareholders as of January 18, 2017, and PIR has $36.6 million remaining in their stock repurchase program.

Lastly, December trends remained strong enough that after the impressive Q3 results management increased guidance for Q4 16 adjusted EPS and company comps; adjusted EPS range improved from $0.24-$0.32 to $0.37-$0.41, and total company comps are now expected to be down 2% to flat, above the previous expectation of a decline between 4-2%.

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, they should be removed immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>.

In-Depth Zacks Research for the Tickers Above

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