Eclectic home furnisher Pier 1 Imports (NYSE:PIR) closes out yet another miserable year on Thursday. After three more quarters of disappointment, about the only question remaining is: When the Q4 and full-year numbers come out, how bad will they be?

What analysts say:

  • Buy, sell, or waffle? Twenty analysts still follow Pier 1. Only one of them thinks the company is still a buy, however. For the rest, it's 16 holds and a trio of sells.
  • Revenues. Quarterly sales are expected to be off 10% at $456.2 million.
  • Earnings. Losses are predicted to quadruple to $0.32 per share.

What management says:
Like its eclectic retailing twin, Cost Plus (NASDAQ:CPWM), Pier 1 has already given us a peek behind Thursday's earnings news curtain. In early March, management revealed its Q4 and full-year 2006 sales numbers, saying that quarterly sales were down a whopping 6.4% from last year's Q4, with same-store sales falling 11%. If that sounds bad, then wait until you hear how the year went: sales down 8.6%, and comps down 11.3%.

The good news? This means that at least the slide in overall sales decelerated toward the end of the year. Moreover, sales for February actually increased -- almost unheard of at Pier 1. Nor are we talking an insignificant blip, but rather an honest-to-goodness double-digit increase of 14.3% versus fiscal 2005's February numbers.

What management does:
Now, none of this changes the fact that Pier 1 is going to report a loss for the quarter and the year, both. You don't turn around a trend of five straight quarters of negative trailing-12-month net margins in a month -- even a month as good as February appears to have been. Pier 1 may be ready to rebound, but as the table below shows, it's got a long way to go before it reaches even the level of profitability it had 18 months ago.

Margins

8/05

11/05

2/06

5/06

8/06

11/06

Gross

36.2%

35.5%

33.9%

33.6%

32.9%

31.4%

Operating

1.9%

(0.0%)

(2.0%)

(2.9%)

(5.1%)

(7.9%)

Net

0.9%

(0.6%)

(2.2%)

(2.9%)

(6.6%)

(10.8%)
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:
Management does seem committed to making a turnaround happen, however. Witness the announcement late last month that the firm is cutting 175 jobs from its payroll. And unlike misguided Circuit City (NYSE:CC), which a couple of weeks ago decided it could best turn its business around by cutting the heart out of its front-line sales force, Pier 1 is wielding the ax against just the fat of its own middle management.

Of course, I'd never praise a company for firing people indiscriminately. But if cuts truly needed to be made (and Pier 1's negative operating margins tell us they did), then by focusing its cost-cutting on "field administrators" and "home office" staff, I expect Pier 1 will be getting the most bang for its pink slips. Time will tell whether these layoffs succeed in moving Pier 1 back toward the friendly shores of black ink. In the meantime, expect $5 million in severance costs to show up next quarter, followed by $17 million in annual savings on wages and benefits.

In other depressing Pier 1 news ...

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Fool contributor Rich Smith does not own shares of any company named above.