Pier 1 Plunges Most in Almost Three Years on Slow Holiday Sales

(Bloomberg) -- Pier 1 Imports Inc., battered by storms and an industrywide discounting binge, declined the most in almost three years after skidding sales forced the furnishings retailer to rethink how it does business.

The company’s shares dropped as much as 30 percent after it reported a disappointing earnings forecast and a slow start to the holiday season. Amid weak sales, the company is testing out new ideas across operations, from supply chain to real estate. A new three-year plan will be unveiled early next year.

The stock rout shows investors may not have much patience, however. Pier 1’s problems include ambivalence from younger consumers, high costs and a reliance on discounts to attract shoppers. Results in the third quarter were also hurt by the hurricanes that devastated parts of Texas and Florida. Chief Executive Officer Alasdair James, who took over in May, said the company lowered its forecast “to reflect the current tone and volatility of business.”

“Sales have been volatile, with a mixed response to promotions in recent weeks, which in turn has led to a guidance reset,” Dan Binder of Jefferies Group LLC said in a note. Any turnaround at Pier 1 “will be based on things that have yet to be implemented (or shared in detail yet) by the company’s new CEO. While we await that plan, shares could continue to be volatile as sales and margins weaken,” he said.

The shares dropped to as low as $4.11 on Thursday, the biggest intraday decline since February 2015. The stock had already lost about 32 percent of its value this year through Wednesday’s close.

Pier 1’s comparable sales fell 0.7 percent in the third quarter, better than the 1.2 percent drop forecast by analysts, according to Consensus Metrix. Net sales, meanwhile, declined 1.4 percent to $469.2 million. Earnings were 9 cents a share when excluding some items, compared with analysts’ estimate of 11 cents.

Next quarter, the company sees adjusted profit of 16 cents to 24 cents a share -- well short of the estimate of 38 cents.

Pier 1 sees opportunities to re-balance its stores and e-commerce operations and “substantially improve our operating margins,” according to a statement released Wednesday.

“We are building a three-year strategic plan to transform the business, and are beginning to set things in motion,” James said.

To contact the reporter on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson

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