Eclectic home furnisher Pier 1 (NYSE:PIR) is gearing up to report yet another quarter's worth of bad news Thursday morning. Want to know what Wall Street expects to see for Q3? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Eighteen analysts still track Pier 1. An eponymous one rates it a buy; 15 more say hold, and two vote sell.
  • Revenues. Sales are expected to be off 14% year over year, at $408.5 million.
  • Earnings. Losses are expected to more than quadruple to $0.34 per share.

What management says:
Think the analysts might be too pessimistic? Unfortunately, they've already been proved the opposite. On Nov. 30, Pier 1 released its sales numbers for that month and the third quarter, and the results were even worse than feared. Sales declined 12% to $402.7 million, with same-store sales leading the way down with a 13% decline. To put those numbers in context, year to date, Pier 1's total sales are down somewhat less at 10%, and comps 12% -- so the sales slide worsened in Q3. And the trend continued in November, with both firmwide sales and comps falling about 15%.

What management does:
As you might expect, fewer sales meant fewer opportunities to spread the firm's fixed costs among a large volume of goods -- capturing efficiencies of scale. Given that, it's not at all surprising to see the table below show us that rolling gross, operating, and net margins continue to decline. On a rolling basis, Pier 1 has now been firmly mired in the red for one full year.

Margins %

5/05

8/05

11/05

2/06

5/06

8/06

Gross

37.5

36.2

35.4

33.9

33.6

32.9

Op.

3.6

1.9

(0.0)

(2.0)

(2.9)

(5.1)

Net

2.0

0.9

(0.6)

(2.2)

(2.9)

(6.6)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The one bright light at Pier 1 -- or should I say, the one straw remaining for an investor to grasp at -- is what CEO Marvin Girouard had to say about inventories in the sales report -- specifically, that although "sales results in the home furnishings categories remain weak . we expect to successfully manage overall inventories to insure that levels stay on plan."

Investors could be forgiven for wishing that Girouard had actually promised to "reduce" inventories, rather than just keep them "on plan." But in Pier 1's defense, the two phraseologies appear to mean the same thing. In the last earnings report, inventories did indeed fall, and in fact fell faster than sales (15% vs. 13%). As something to be happy about, it's pretty weak, but at Pier 1, we're learning to take good news where we can find it.

Competitors:

  • Bed Bath & Beyond (NASDAQ:BBBY)
  • Cost Plus (NASDAQ:CPWM)
  • Restoration Hardware (NASDAQ:RSTO)
  • Williams-Sonoma (NYSE:WSM)

In other miserable Pier 1 news .

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Fool contributorRich Smithdoes not own shares of any company named above. The Fool's disclosure policy is sittin' on the dock of the bay.