Thom Filicia, Design Doctor to the Fab Five on runaway hit show Queer Eye for the Straight Guy, is replacing Kirstie Alley as spokesperson for Pier 1 Imports' (NYSE:PIR). No offence, Kirstie, but this makes sense -- and some strong medicine is in order.

Shares of Pier 1 plunged nearly 10.4% to $20.40 this morning on third-quarter results that struck investors as something short of fabulous. Sales were up 10%, but earnings disappointed with a 3.5% bump. Same-store sales inched 1.6% higher for the quarter, beating prior guidance, but for the last nine months, earnings are down 7.5%.

The news isn't all bad, however. Merchandise margins increased reflecting a decline in clearance activity -- a sign the company is getting the merchandise customers want into the stores. And Pier 1 is run conservatively, with $178 million in cash or equivalents, $1.94 for each diluted share, vs. total debt of just $25 million.

In a quarter that is seasonally hard on cash (the company spends heavily to build inventories ahead of the holidays), net cash provided by operating activities soared almost 100% to $61.9 million. Keep in mind, much like drugstore chain Walgreen (NYSE:WAG), Pier 1 funds expansion from operating cash flow.

And for the record, Sears (NYSE:S), Federated (NYSE:FD), and J.C. Penny (NYSE:JCP) suffered same-store sales declines in November. Pier 1 eked out a 1.1% gain. Going forward, the company expects comparable same-store sales to decline 4% to 8% in December and to be flat to down 5% for the fourth quarter. Too bad the Doctor cannot make a marketing call.

Even so, at 15 times earnings, Pier 1 trades at half the multiple afforded rival yuppie retailer Williams-Sonoma (NYSE:WSM), and yields 1.4%. The doctor is on his way, and his attention could be good medicine for a company that manages to increase free cash flow year over year, and boosts its dividend annually.

If the Design Doctor can deliver the customers, Pier 1's results could be fabulous.

W.D. Crotty does not own stock in any of the companies mentioned -- although he envies the strong free cash flow at Pier 1. Come to the Motley Fool discussion boards to converse with other investors interested in retail, Pier 1, or thousands of other companies. For a 30-day free trial to the discussion boards, click here.

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