Analyst Seth Sigman said, “Our primary concern is the uncertainty around sales and whether additional investments in price and/or marketing will be needed, potentially offsetting the cost reduction efforts and expected progress from addressing the recent operational issues.”
Reasoning Behind Downgrade
Firstly, comps are expected to be limited to the 1–2 percent range in the near term, underperforming the industry, driven by various external and internal factors.
In addition, while the Q3 estimates appear achievable, Sigman expressed concern regarding a decline in gross margin in Q4, “as inventory levels normalize.”
Sigman believes additional marketing and prices changes might be required by Pier 1 Imports, while issues still seemed to impact its supply chain.
Although Sigman believes that several of the issues from 2015 appear to be fixable, “as excess inventory was really the core issue,” it was unclear whether “it will be able to scale.”
Image Credit: By Steve Morgan (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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