Credit Suisse Downgrades Pier 1 To Neutral, Cuts Target To $7

The share price of Pier 1 Imports Inc PIR has declined 58.31 percent year-to-date, trading a mere $0.07 above its 53-week low on December 8.

Seth Sigman of Credit Suisse downgraded the rating on the company from Outperform to Neutral, while lowering the price target from $9.50 to $7.00.

Sigman explained that the downgrade was not associated with Q3, but was based on key topline risks that are expected to constrain outperformance going forward.

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.”

Related Link: Pier 1 Imports' Downgrades To Neutral Ahead Of Expected Uphill Sales Battle In 2016

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

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