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Wednesday, April 16, 2008

Pier 1 Imports Aims for Turnaround


Retailer has first profitable quarter in three years; Fractured Housing Market Poses Extra Challenges

While other retailers worry about the economy, Pier 1 Imports Inc. makes money- in the latest quarter, at least.

A number of chains Thursday lowered expectations for coming quarters and reported disappointing sales trends. But Pier 1 shares rose 9.4% to $7.54 after the company beat earnings estimates for the quarter ended March 1, its first profitable quarter in three years. The share-price increase continues an impressive stampede that has resulted in a 51% gain since March 17, when the shares were at $4.99.

There are caveats. Pier 1, unlike most retailers that want to stay in business, had 16 consecutive quarters of declining sales at stores open at least a year before breaking that streak of futility in the recently ended quarter. Between Jan. 1, 2006, and March 17, 2008, its shares declined 43%, catching the eye of investors, who bet on a turnaround.

Several analysts commented that sales trends and margin have improved, but the fractured housing market makes it difficult for any furniture-oriented retailer. William-Sonoma Inc., Bed Bath & Beyond Inc., and Ethan Allen Interiors Inc. have all lowered expectations because of the rough environment.

“Pier 1 is attempting to turnaround in a really intense down cycle for home furnishings,” said Laura Champine at Morgan Keegan. “I don’t think [a turnaround] is a layup.”

By: David Gaffen
Wall Street Journal; April 11, 2008