Pier One Imports – Turning Things Around
Pier One Imports (NYSE: PIR) reported earnings that beat expectations today. They reported a loss of -$0.17 per share vs. -$0.22 street consensus. It looks like things are finally turning around for Pier One. Sales are still weak but they have reduced SGA costs and improved operating margins significantly.
I really like Pier One for several reasons. First, as the real estate markets improve, people will need to buy furniture to furnish their homes. Stocks in this sector like Bed Bath and Beyond (NASDAQ: BBBY) and Pier One, should all benefit from a recovering economy and a recovering real estate market. Secondly, we’re heading into the holiday season and Pier One looks very prepared. They’ve managed their inventory effectively and put themselves in a good position with few clearance items in their inventory and offering more higher margin items. They’re also boosting their marketing budget which I think is a great move — last year’s Christmas sales were terrible and I think this will be a much better year for retailers of all types.
Pier One’s management team has shown me that they are able to turn things around and navigate their company through a difficult economic environment. That gets my vote anytime — I’d always place my bets on a good management team that knows what they’re doing. And so far, I think they’re doing all the right things.
Lastly, in regards to their liquidity, their management team said in the conference call that they are very comfortable with their liquidity position. That’s very important since it’s hard to raise new capital in this economic environment.
At $2.78, Pier One looks like a pretty good bet if you’re looking to take advantage of a recovering retail market. I picked up some shares of PIR today and I’m looking forward to a pretty good Christmas season this year for retailers.
