Will Pier 1 Earnings Help Its Stock Recover?

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Pier 1 Imports will release its quarterly report on Thursday, and investors who've watched the stock decline lately have to be frustrated with the company, given the health of the housing market and its impact on home-goods retailers. With Pier 1 earnings expected to grow, however, shareholders hope that its coming report will lead to a turnaround for the retailer.

Pier 1 has made an impressive long-term turnaround, once again becoming a relevant player in its niche of offering quirky imported home furnishings and gifts. But, as interest rates start to rise, will Pier 1 suffer the same fate as some other housing plays lately? Let's take an early look at what's been happening with Pier 1 over the past quarter, and what we're likely to see in its report.

Stats on Pier 1

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$404.64 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

When will Pier 1 earnings really start taking off?
In recent months, analysts haven't been excited about the prospects for Pier 1 earnings, having cut $0.02 per share from their August-quarter estimates, and knocking $0.01 per share from their full-year fiscal 2014 views. The stock has also languished, falling 6% since mid-June.

Pier 1 came into the quarter on a fairly impressive note, with a May-quarter report that one might have expected to generate substantial enthusiasm. Net income rose 14%, with revenue jumping more than 9% on a 5.9% increase in same-store sales. Better margins also helped the company's profitability, and Pier 1 boosted its earnings guidance by $0.01 per share for the remainder of the fiscal year, with growth in comps expected to remain in the mid-single digits.

One big way in which Pier 1 has stood out from broader-line home furnishing giant Bed Bath & Beyond is by emphasizing its online e-commerce website. Pier 1 has already seen e-commerce represent a growing part of its business, and with strategies to offer in-store pick-up and point-of-sales systems, the retailer clearly sees the potential from a greater online presence, and has been quicker to take advantage than Bed Bath & Beyond.

Pier 1 has also benefited from luxury shoppers being more willing to spend substantial amounts on its goods. Like Pier 1, Williams-Sonoma has seen greater first-time home sales and the move-up market for higher-quality homes take off lately, with correspondingly positive impacts on its sales. For Pier 1, perhaps the biggest surprise is the fact that furniture represents a large part of its business, with about 40% of overall sales coming from its furniture offerings.

Yet, Pier 1 has to be careful, given the hype that the sector has received. Rival Restoration Hardware saw shares drop substantially after its own most recent quarterly report, as higher costs from follow-on share offerings and stock awards to its top executive overwhelmed the positives of 26% growth in same-store sales and operating income that grew by more than half. Pier 1's stock isn't quite as frothy, but it, too, could be vulnerable if it disappoints.

In the Pier 1 earnings report, watch to make sure the retailer is taking full advantage of its financially healthier customer base. As long as long-term profit growth potential remains for the stock, Pier 1 should continue to attract positive attention from shoppers and investors alike.

Does Pier 1 and its peers face an insurmountable threat?
Pier 1 and the rest of the retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

Click here to add Pier 1 to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

The article Will Pier 1 Earnings Help Its Stock Recover? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Bed Bath & Beyond and Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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