Beleaguered Pier 1's Q3 A Step In The Right Direction

Following the better-than-expected Q3 results reported by Pier 1 Imports Inc PIR, Oppenheimer’s Brian Nagel stated that it was “a potential step in the right direction for the beleaguered chain.”

Nagel maintains a Perform rating on the company.

The analyst noted, however, headwinds continue for Pier 1 Imports, such as looking for a replacement for CEO Alex Smith and intense competition in the home fashion segment.

Solid Results

For Q3, the company reported a 1.8 percent rise in comp sales, including 28 percent growth in online sales.

The Q3 results beat the pre-announcement, with the EPS coming in above the increased pre-announcement of $0.22, ahead of the consensus.

“A strong top-line bounce back toward the end of the quarter and tighter cost controls fueled earnings upside at the chain,” Nagel stated.

In addition, gross margins expanded 280 bps to 41.3 percent, from 38.5 percent a year ago, while merchandise margins saw significant improvement to 60.2 percent, from 56.2 percent a year ago, driven by “a more balanced promotional strategy and overall supply chain efficiencies.”

Pier 1 Imports announced that its non-executive chairman, Terry London, would fill in the role of interim president and CEO, effective January 1.

Management also raised its FY 2016 EPS guidance from $0.24–$0.32 to $0.37–$0.41.

At last check, shares of Pier 1 were up 30.86 percent at $8.48.