UPDATE: Deutsche Bank Downgrades Pier 1 On Multiple Concerns


In a report published Friday, Deutsche Bank analyst Adam Sindler downgraded Pier 1 Imports (NYSE: PIR) from Buy to Hold and lowered the price target from $24.00 to $18.00 on numerous concerns.

Although shares of Pier 1 are currently valued low, Deutsche Bank noted four main concerns including “1) management is losing visibility into the business, sometimes on the top line and sometimes on the promotional environment, 2) updated guidance assumes an acceleration in gross margin trends in 2H15 despite a worsening promotional environment, 3) brick and mortar comps have slowed to almost zero and 4) investments in ecommerce continue apace, virtually offsetting all of the benefit from improving scale as the channel ramps.”

Sindler's conservative model for Pier 1 is based on seven percent EBITDA growth, nine percent increase in fixed expense and 70 bps o total expense leverage. The analyst remarked on the “cloudy” visibility of the business writing, “we are moving to the sidelines after sticking with the name over several choppy quarters until visibility in the base business improves and returns to stability.”

Deutsche Bank lowered FY15 and FY16 EPS estimates after the company lowered guidance. The analyst now forecasts FY15 and FY16 EPS of $1.12 and $1.50, respectively.

Share of Pier 1 Imports closed at $15.86 on Thursday. The stock is currently trading at $15.18, down 4.29 percent.

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