Another month, another same-store sales decline at Pier 1
The retailer reported that its same-store sales fell in May by 7.7% -- worse than Wall Street analysts expected, and the 14th consecutive month of negative same-store comparisons. Even worse, with same-store sales down 1.8% last May, the comparisons should have been a bit easier.
Granted, the market for home furnishings has gotten tougher of late, but Pier 1 seems to be floundering a bit worse than most in this industry.
For me, the proof is in the stores. I used to be a big fan of Pier 1, and even though the store's merchandise has never exactly been value-priced, I used to buy a fair bit of it. Fast-forward a bit, though, and not only have I not purchased anything there in about two years, but I also haven't been able to find a single thing in the stores that I'd want to own.
Of course, ongoing weakness in same-store sales starts a nasty spiral. When sales don't meet expectations (particularly internal-management expectations), inventory builds up. That sucks up working capital and puts companies in a position where they often must mark down merchandise more aggressively than planned, and that hurts margins. In some cases, it even hurts the image of the store.
All that said, I am still watching this stock carefully. Though I don't own it today, I've made money from this stock on two separate occasions in the past. I really don't think Pier 1 is doomed, and if management can rediscover its knack for locating and stocking interesting and attractive merchandise, the stock could recover.
What's more, other value investors whom I respect are involved with these shares. BerkshireHathaway
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
