Pier 1 Picked The Wrong Time To Go On A Spending Spree

According to Gadfly's Shelly Banjo, Pier 1 Imports, the struggling home-decor retailer, just handed out a cool million bucks to three top executives as a retention bonus. Perhaps they don't deserve the bonus since the company's streak of declining same-store-sales now stands at four quarters.

Pier 1 Imports adopted a "poison pill" — or, Shareholder's Rights Agreements — to prevent an activist investor Alden Global Capital from taking over the company, despite the fund's claims it wants to work with the company and merely wants representation on the board — not to take it over.

Related Link: Pier 1 Shares Up Big Thursday After Narrower-Than-Expected Q2 Loss

The activist fund has also reassured the company that current board members will keep their seats moving forward.

Meanwhile, Pier 1 Imports' stock did gain as much as 14 percent on Thursday, but Banjo cautioned investors shouldn't become optimistic as the company did lower its sales, earnings and capital spending outlook for the year ending February 2017.

Banjo added that short interest accounts for around 30 percent of the stock's float and the stock is also trading at a pricey valuation of 15 times forward earnings which is higher than its two-year average multiple of 12.5.

So instead of the company's executives going on a spending spree by "throwing cash at failing executives and clinging to entrenched board members," maybe they should "welcome the new blood."

At time of publication, Pier 1 was down 4.70 percent on the day at $4.26.

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