Analysts led by Budd Bugatch withdrew their old price target of $8.00 on the shares of the company. They pointed out CEO Alex Smith would remain at the helm until the end of the current year only. Raymond James' tendency is to remain on the sidelines whenever such an event happens.
Aside from the management changes, the brokerage pointed out 6.7 percent year-over-year drop in net sales. Comparable sales fell 4.3 in the second quarter as well. As a result, Pier 1 expects a loss of $0.06–$0.05 a share. This is wider than the Street expectations of $0.03 loss per share on net sales drop of 1.8 percent.
"Pier 1's preliminary results reinforce the sentiment that the furniture and home furnishing retail environment remains challenged. As noted, despite our long-term favorable outlook on shares of Pier 1, we cannot maintain a more constructive rating in the midst of a CEO transition," the analysts told clients in a research note.
The brokerage highlighted the current intrinsic value is 50 percent greater than the trading prices, despite conservative assumptions. Aside from that, store traffic remained challenging and impacted revenue. On the positive side, merchandise margins advanced for the first time in 10 quarters.
At time of writing, the stock was seen trading at $4.05, down 15.52 percent.
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