What happened

Pier 1 (PIRRQ) stock dropped 52% last year compared to the 19% increase in the broader market, according to data provided by S&P Global Market Intelligence.

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The decline was steady through most of the year, with the biggest short-term drops occurring in response to the retailer's quarterly business updates.

So what

Pier 1's operating trends began the year weak and just deteriorated from there. Comparable-store sales were flat in the fiscal first quarter, which led incoming CEO Alasdair James and his executive team to forecast minor comps gains for the full year as they worked on their review of the company's big-picture growth strategy.

A modern style living room.

Image source: Getty Images.

But weak customer traffic added urgency to that strategic assessment. Comps fell into negative territory in the second quarter and decreased again during the weeks leading up to the critical holiday shopping season.

Now what

Executives said in mid-December that demand trends "dropped considerably" during the first two weeks of the month, even as other retailers reported healthier traffic growth. In response, Pier 1 was forced to engage in deep discounting, which means profits should now come in at about $0.14 per share for the full year rather than the $0.36 per share that management had been forecasting as recently as late September.

Pier 1 will announce major operating changes in the coming months that will likely speed up the retailer's transition into a more digitally focused business. Until that strategic-transformation plan is announced and the final results of the holiday season are out, investors should be cautious about buying this stock in hopes of a price rebound.