Pier 1 Looks Set to Deliver Gains

With a quickly expanding omnichannel strategy and comfortable valuation, this home-goods retailer is one to watch.

Apr 14, 2014 at 3:36PM

Home-goods retailer Pier 1 Imports (NYSE:PIR) is another example of a brick-and-mortar business working fast to adapt to industry change. The company's focus throughout the last year was developing and executing its omnichannel strategy. While management remains upbeat, the market has held less favorable opinions of the stock. Not helping the situation was a weak fourth quarter, severely affected by the rough weather around the U.S. At 12 times forward earnings, this is a reasonably priced business that could benefit from wider industry trends. Should investors take a closer look?

Decent earnings
Throughout the first three quarters of fiscal 2014, Pier 1 showed investors improving sales on both the top line and store levels, and even finished the year with a net gain of 2.4% in comparable sales. The last quarter was hit by what management cites as damaging weather conditions for two-thirds of the period's trading days. Even then, adjusted sales (accounting for one fewer week in the reporting period this year as compared to last) dropped minimally and same-store sales managed to eke out a small gain of 0.6%.

What is likely the biggest opportunity for Pier 1, unsurprisingly, is e-commerce. Last year, Pier 1 sourced 4% of its total sales from its online platform. Traffic is up nearly twice as much as one year ago, though management noted it needed to work on conversion rates, which remain low. Three years from now, the company hopes to have 10% of sales coming from the Web.

One of the big ideas that most retailers are pursuing in regard to e-commerce strategy is integrating store experience with Web presence. New point-of-sale systems in the stores encourage shoppers to get on the website, and new tablets in-store allow shoppers to find even more products and place orders directly from there. Pier 1 is finding that whether shoppers buy products directly from the brick-and-mortar location is less important than allowing them to see the full product offering and generating greater interest. The shopper can then place an order in-store or online, or buy in store the old-fashioned way if they see what they like.

To understand the effectiveness of the strategy: Shoppers who use both the stores and the website spend, on average, four times as much as store-only customers.

Set to grow?
With the omnichannel strategy in full deployment, Pier 1 should be able to bump up sales, margins, and ultimately profits. Reward programs should generate more loyalty and higher per-customer sales figures -- a great trend for a retailer these days.

Management has guided for a minimum of 15% earnings growth for the current year, though some of those gains will source from the decreasing year-over-year share count -- a result of ongoing buybacks and a newly approved $200 million buyback for coming periods. Same-store sales are projected to be in the high single digits.

For a company that trades at a relatively calm 12 times forward earnings and with an EV/EBITDA of just 7.62 times, the prospects are quite good. Home-goods stores in general should benefit from the long-term housing trends, and Pier 1's position in the market is substantial. Investors interested in decent growth priced to sell should take a look.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Michael Lewis has no position in any stocks mentioned, and neither does The Motley Fool. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers