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Why Pier 1 Imports Inc. Stock Dropped (Again) Today

By Steve Symington – Apr 23, 2018 at 2:31PM

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Already down 23% on a disappointing earnings report, the specialty retailer is falling again as Wall Street turns its back.

What happened

Shares of Pier 1 Imports Inc. (PIRRQ) were down 9.3% as of 1:30 p.m. EDT Monday as an analyst recommended selling the stock despite its recent decline.

More specifically, shares were already down more than 23% since last Thursday after the home-goods retailer posted mixed quarterly results and a disappointing outlook. But early today, Raymond James analyst Budd Bugatch reduced his rating to "underperform" from "market perform."

Stock market prices with red and green arrows indicating direction on an LED display

Image source: Getty Images.

So what

When Pier 1 Imports announced its fiscal fourth-quarter 2018 results last week, the company told shareholders that it would turn the company around with a new three-year strategic plan, including investments in sourcing and supply chain improvements, stores, merchandising marketing, and promotions. But it also revealed that this would mean incurring a net loss in fiscal 2019, followed by a transition year in 2020, and a return to sustained growth and profits in fiscal 2021.

According to Bugatch this morning, however, the turnaround plan lacks anything "revolutionary," leaving him no choice but to "recommend clients exit the shares now."

Now what

That's not to say Pier 1 absolutely requires some novel approach to right its wrongs. In the proposed turnaround, the company says it will be able to lean on its strong brand, loyal customer base, and a competitive e-commerce platform. But just over a year into his post, CEO Alasdair James also claims the company has "identified certain weaknesses" that need to be addressed in order to return to a "sustainable growth trajectory."

In any case, Pier 1's long-term plan might well be exactly what it needs to succeed. But given the near-term uncertainty involved to that end, it's no surprise that the market isn't willing to take a long-term approach.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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