Why Pier 1 Imports Inc Shares Plunged Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of home furnishings retailer Pier 1 Imports Inc sank 10% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has slumped over the past year on lackluster growth, and today's Q1 results -- EPS of $0.16 missed the consensus by $0.04 on a revenue increase of just 6% -- coupled with downbeat guidance only reinforce that worrisome trend. While same-store sales rose 6.3% on higher traffic, gross margin narrowed 240 basis points to 40%, suggesting Pier 1's competitive position isn't strong enough to combat the highly intense pricing environment lately. 

Now what: Management now sees full-year EPS in the range of $1.14 to $1.22, down $0.02 from its previous view. "[T]he retail environment remains highly promotional and is pressuring gross profit in the near-term," said president and CEO Alex Smith. "As a result, we are adjusting our full-year earnings forecast accordingly."

When you couple that severe short-term pressure with Pier 1's still-questionable competitive moat, I'd wait for a much wider margin of safety before buying into management's long-term turnaround plans. 

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The article Why Pier 1 Imports Inc Shares Plunged Today originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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