Why Pier 1 Imports' Shares Plunged

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 retailer Pier 1 Imports (NYSE: PIR  ) were being tossed in the bargain bin today, falling as much as 11% in intraday trading after the company announced fiscal first-quarter sales.

So what: For the first quarter, Pier 1 reported a 7.2% gain in same-store sales, which built on a 10.2% increase last year. Margins were moving in the right direction as the gross margin for the quarter is expected to finish at 41.6% versus 40.1% last year. And when the home-goods specialist announces full results on June 14, it anticipates reporting $0.16 in earnings per share -- right in line with current analyst estimates.

Now what: So what gives? Why the drop? I'll admit that I'm scratching my head on this one. The first quarter looks like it was a successful one and, more broadly, Pier 1 looks like a reasonably valued stock with a business that's moving in the right direction.

Perhaps investors were hoping for even more from the quarter or this is a case of "buy the rumor, sell the news" and the positive results were widely expected. In either case, it'd be a short-term reaction that could play into the hands of longer-term investors who can now buy in a bit cheaper.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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