Pier 1 Imports Inc (PIR), Target Corporation (TGT): One of the Few Remaining Bargains in Retail

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Alternatives: Big or Small

As an alternative to Bed Bath & Beyond Inc. (NASDAQ:BBBY), investors have the choice of comparable small home goods retailers, such as Pier 1 Imports Inc (NYSE:PIR) or large, more diverse retailers such as Target Corporation (NYSE:TGT), which is known for its low-cost but high-quality home furnishings and accessories.

Pier 1 Imports Inc (NYSE:PIR)

I have written about Pier 1 Imports Inc (NYSE:PIR) a few times, and the company is the largest retailer of imported furnishings and home accessories in the U.S. Pier 1 Imports Inc (NYSE:PIR) is also one of the best rebound stories of the financial crisis, with shares currently trading for 250 times what they were at the lows. While I believe that Pier 1 Imports Inc (NYSE:PIR) has more growth potential over the long run than Bed Bath & Beyond Inc. (NASDAQ:BBBY) simply because they have saturated the market less, I think shares are a bit overvalued at their current levels.

At about 20.2 times TTM earnings, Pier 1 Imports Inc (NYSE:PIR) trades at a pretty high valuation for a company with a 12% forward growth rate. While the company does have a positive net cash position as well (more cash than debt), I would need Pier 1’s shares to pull back a bit before jumping in.

Target Corporation (NYSE:TGT)

Target Corporation (NYSE:TGT) has been one of my favorite retailers for some time now, and their home furnishing and accessories offerings are hard to beat in terms of value for the money. Just take a look at how many college dorms are furnished with Target Corporation (NYSE:TGT) accessories! In addition, an investment in Target Corporation (NYSE:TGT) buys you exposure to their very diverse product line, so if home furnishing sales go sour, there are still many other revenue sources for the company.

Target Corporation (NYSE:TGT) trades at 16.5 times earnings, with 15% growth projected as Target aggressively pursues the expansion of its grocery business as well as its growth into Canada, where it expects to open at least 125 new stores this year. Target is also the only dividend payer of the three, and their 2.1% dividend yield is certainly worthy of consideration if income is a factor.

Conclusion

While I believe that many, if not most, of the retail stocks in the market have gotten a little bit ahead of themselves, Bed Bath & Beyond Inc. (NASDAQ:BBBY) is still very cheap and offers incredible growth potential for the money. The company is definitely worth a look for those who may want to rethink the retail portion of their profile.


Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond.
Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article One of the Few Remaining Bargains in Retail originally appeared on Fool.com is written by Matthew Frankel.

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