Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Don’t Take a Long Walk off a Short Pier 1 Imports, Inc. (PIR)

Page 1 of 2

Pier 1 Imports, Inc. (NYSE:PIR) has seen stock appreciation of approximately 240% over the past three years. It has outperformed both Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Williams-Sonoma, Inc. (NYSE:WSM) over the same period, which have seen gains of approximately 99% and 137%, respectively. However, this doesn’t mean Pier 1 Imports is likely to be the best investment option going forward.

The housing market

Pier 1 Imports, Inc.Obviously, all these companies perform better when the housing market is improving. And while mortgage rates had been increasing, they have now declined two weeks in a row. Still, this is generally bullish for all involved.

The 30-year fixed rate currently stands at 4.20%. This is excellent news for the housing market and it should help to maintain demand. While its impossible to predict how long rates will stay low, based on recent trends, it looks as though they should remain below 6% for the remainder of this year. Research shows, as long as rates are below 6%, demand will be high.

According to National Association of Realtors, existing home sales declined 1.2% year over year in June, but this trend has the potential to reverse itself thanks to the recent decline in rates.

Online presence

According to Alexa.com, Pier1.com ranks No. 1,983 in the United States for online traffic. Page-views per user have declined 4.79% over the past three months, but this stat may be related to an anticipated decline in the housing market. Now that rates have dropped, this decline should be postponed.

Regardless of trends, Pier 1 Imports, Inc. (NYSE:PIR) doesn’t have as much online exposure as peers. For instance, Bedbathandbeyond.com has an online traffic rank of No. 350 in the United States, and Williams-sonoma.com has a rank of No. 1,407. Which makes sense because Pier 1 Imports is much smaller than its competition.

Company culture

According to Glassdoor.com, Pier 1 Imports, Inc. (NYSE:PIR) employees have rated their employer a 2.9 of 5, which is subpar. An unimpressive 49% of employees would recommend the company to a friend, and only 63% of employees approve of CEO Alex W. Smith. The most common complaints from employees include: a high turnover rate, not enough hours, low pay, and being trained to push the company’s credit card, which annoys customers.

These are all negatives, but if you’re looking at it from an investing standpoint, then you want labor costs to be low and you want that credit card to be pushed. However, happy employees make for happy customers, and if the credit-card pushing is extreme, then it will annoy some customers enough that they won’t return.

Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Williams-Sonoma, Inc. (NYSE:WSM) also score low on Glassdoor.com, coming in with employee ratings of 2.8 and 2.9, respectively. The negative comments for Bed Bath & Beyond are all over the map, while consistent positives include; quality training and product knowledge. For Williams-Sonoma, employees widely agree that the products are of very high quality, but often complain about old technology, bullying managers, credit-card pushing, and a lack of support from the corporate level.

Pier 1 vs. peers

All three companies saw revenue and earnings improvements over the past three years. Additionally, all three companies are similar in many areas.

Pier 1Imports Bed Bath & Beyond Williams-Sonoma
Trailing P/E 19 16 22
ROE 26.23% 26.23% 21.25%
Profit Margin 7.59% 9.14% 6.46%

All three companies also own stellar balance sheets. But, the dividend story is different in each case. Pier 1 Imports, Inc. (NYSE:PIR) currently yields 0.80%, Williams-Sonoma yields 2.10%, and Bed Bath & Beyond doesn’t offer any dividend. Based on Pier 1 Imports, Inc. (NYSE:PIR) current growth trends and ability to control debt, dividend increases are possible.

Page 1 of 2
Loading Comments...