Pier 1 Imports Inc (PIR), Wells Fargo & Co (WFC): Where Are These Housing Plays Headed?

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Some Concerns

So Pier 1 Imports Inc (NYSE:PIR) is not alone here, and there is evidence that its e-commerce sales tend to attract sales of higher ticket price items. All of which sounds great, but I confess I have my longer term concerns.

If e-commerce is the future then investors have to recognize that the likes of Amazon.com, Inc. (NASDAQ:AMZN) are also stepping up their own home goods offerings. Not only does Amazon.com, Inc. (NASDAQ:AMZN) have its own operations, but it also owns the parent company that runs casa.com. Moreover, Amazon’s strength is in its scale offering of commodity type products. Consumers are happy to buy such items online because they do not have to make the kind of decisions that they do with a more individual product. Ultimately an expansion in overall e-commerce home goods sales could cause a situation where copycat offerings are commonplace, and Pier 1 could lose its distinctive identity or ability to generate sales via the in-store retail experience. The result is an ongoing race to the lowest price. Not good for margins.

The Bottom Line

In conclusion I think the housing market recovery will eventually broaden, and Pier 1 Imports Inc (NYSE:PIR) is a legitimate way for investors to play this theme. Its initiatives make sense, and the stock does not look expensively priced at the moment. Longer term, there are concerns, and the fears I’ve discussed above need to be monitored closely. It’s not a stock I’d want to hold for the next five years but for now things look okay.

Lee Samaha has a position in Wells Fargo & Co (NYSE:WFC). The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN) and Wells Fargo. The Motley Fool owns shares of Amazon.com and Wells Fargo.

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