Analyst: Pier 1 Imports Weakness Appears 'More Structural In Nature'

Pier 1 Imports Inc (NYSE: PIR)'s third-quarter earnings report after the close Wednesday disappointed many investors, as it came at a time when the consumer backdrop appears healthy — which has some on the Street wondering if Pier 1's problems are its own. 

The Analyst

Gordon Haskett's Chuck Grom downgraded Pier 1 Imports from Hold to Sell with an established $3.50 price target.

The Thesis

Pier 1 Imports' Q3 report is "concerning" because it comes at a time when the consumer backdrop is "strong" and the housing environment is "good," Grom said in the downgrade report. (See Grom's track record here.) 

Perhaps more alarming is the fact that the company named Alasdair James as CEO in May, who brought in a "new perspective" on how to run the business, the analyst said. The weakness seen in the quarter appears to be "more structural in nature" given Pier 1's poor brand perception issues and  heightened competition, Grom said. 

Pier 1 Imports faces headwinds in both the near- and long-term, the analyst said. In the near-term, the first half of December is off to a poor start, making it hard to imagine a scenario where same-store sales meaningfully improve before late 2018, Grom said. Over the longer term, any pathway toward improved top-line performance "looks opaque" and could come at the expense of significant cost pressures, he said. 

"All told, we want to root for new CEO Alasdair James, but he has been dealt a very difficult hand." 

Price Action

Shares of Pier 1 Imports were trading lower by 30 percent at $4.09 at the time of publication. 

Related Links:

Benzinga's Top Upgrades, Downgrades For December 14, 2017

A Peek Into The Markets: U.S. Stock Futures Up Ahead Of Economic Reports

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