Pier 1 Imports Inc PIR announced its fiscal fourth-quarter comps in line with the consensus and estimates, while raising its fourth-quarter EPS guidance to $0.32–$0.34, ahead of the consensus.
Wedbush’s Seth Basham maintains a Neutral rating on the company, with a price target of $8.
Comps Deceleration
The analyst mentioned that Pier 1 Imports’ “better than planned bottom-line results point to cost containment and more promotional effectiveness, albeit against easy comparisons.”
However, the in-line quarterly comps indicate there could have some trend deceleration in February, while the sales decline suggests higher-than-expected store closures.
“We believe that the company is making progress in stabilizing its business, but we also believe that secular pressures may constrain earnings growth over the medium-term,” Basham stated.
Comp stores sales came in at 0.2 percent, slightly above the midpoint of the company’s guidance for Q4 and in line with the consensus and estimate. However, comps decelerated 150 bps sequentially on a two-year stacked basis during the quarter.
Pier 1 Imports indicated solid merchandising execution, along with its marketing and promotional strategies drove the in-line results.
Net sales declined 2.6-percent year-on-year in Q4, missing the consensus and the estimate, driven by a 3-percent decline in average stores and an estimated 8-percent decline in in-store Point-of-Sale sales, partially offset by a 28-percent increase in e-commerce sales to 19.5 percent of the total sales mix.
The Positive
On a more positive note, the gross merchandise margins improved year on year and are expected to be in line with the guidance of 56–57 percent, driven by improvements in promotional effectiveness as well as supply chain efficiencies.
“Merchandise margins benefited from an easy comparison in 4Q 2015, when merchandise margins declined 385 bps y/y due to elevated supply chain costs from increased inventory, and clearance/promotions intensified in an effort to clear excess inventory and react to tougher competition,” the analyst added.
At last check in Tuesday's pre-market session, shares of Pier 1 were up 4.2 percent at $6.94.
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