Ordinarily, the ship ties itself to the pier in order to protect itself from rough seas. Tomorrow morning, the natural order of things reverses itself. When Pier 1 (NYSE:PIR) reports its fiscal Q4 and full-year 2006 earnings, a tugboat may be needed to keep the company from sinking.
What analysts say:
- Buy, Sell, or Waffle? Twenty analysts track Pier 1. Of these, four rate the stock a buy, three a sell, and 13 a hold.
- Revenues. Analysts expect Pier 1 to report a 2% rise in quarterly sales tomorrow, to $535.6 million.
- Earnings. Profits-wise, however, they expect Pier 1 will only barely make it into the black, if at all. The consensus target is $0.01 per share.
What management says:
In early March, Pier 1 reported that its February sales came in 6.5% lighter than last year, with same-store sales down a whopping 10.8%. For the quarter, however, total sales were up 0.9% (although comps still dropped, down 3.2%). Management explained the divergent results thusly: January experienced a "solid clearance event," draining February sales by dragging them forward into January. On the plus side, although foot traffic in Pier 1 stores was lower than last year's February, average sales per customer were higher. To this Fool, that suggests that margins may have risen a bit. In that same update, Pier 1 announced that, beginning in March, the company would begin selling more contemporary merchandise. With luck, tomorrow's earnings release will contain some news on how the new goods are selling.
What management does:
You can see the reason for Pier 1's strategic change in the chart below. Over the past 18 months, its gross, operating and net margins have all collapsed -- and the culmination of this collapse is contained in the analysts' prediction of just a penny's worth of profits for tomorrow.
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
40.9 |
39.9 |
38.3 |
37.2 |
35.8 |
35.1 |
|
Op. |
8.6 |
7.6 |
5 |
3 |
1.2 |
(0.6) |
|
Net |
5.3 |
4.7 |
3.2 |
1.9 |
0.8 |
(0.6) |
One Fool says:
Pier 1 termed its inventories "lean" in February, stating that it was getting space ready for the new contemporary line of goods. Let's hope that's true. Over the past two quarters, Pier 1's inventories were anything but lean -- rising 18% and 15% against year-over-year sales declines in both quarters. The unfortunate flip side to any inventory sell-down we see, however, is that the firm will almost certainly have to have slashed its margins to move the goods. So expect them to fall even further on the morrow.
Competitors:
- Bed Bath & Beyond (NASDAQ:BBBY)
- Williams-Sonoma (NYSE:WSM)
- Cost Plus (NASDAQ:CPWM)
Bed Bath & Beyond is a Motley Fool Stock Advisor pick.
Fool contributor Rich Smith does not own shares of any company named above.
