Pier 1's E-Commerce Channel Is Cannabalizing Stores
The assault on brick-and-mortar retail continues.
Pier 1 Imports Inc (NYSE: PIR) shares are plummeting, down over 9 percent despite delivering a slight second-quarter earnings and sales beat.
The home retail store saw comps up 1.8 percent in the second quarter but forecasts sales to decline 1–3 percent in the third quarter.
Pier 1 management has noted that it is expecting recent natural disasters — including hurricanes Harvey, Irma and Maria and the earthquakes in Mexico — to hurt results in the upcoming quarter. Around 125 Pier 1 stores including Texas and Florida locations experienced closures in the past month.
While Pier 1 is growing its e-commerce channel rapidly, it likely comes at its brick-and-mortar business’ expense.
“It’s essentially cannibalizing customers from its stores with added delivery and fulfillment expenses. As such, its top-line growth has stagnated and its profitability has declined. We just don’t see this reversing any time soon,” said UBS analyst Michael Lasser.
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UBS rates Pier 1 with a Sell rating and lowered its price target from $4 to $3.50.
Pier 1 has announced they are working with outside consultants to construct a new strategic plan for the company, which is expected to be unveiled in early 2018.
Loop Capital has downgraded Pier 1 to a Hold from a Buy rating and lowered its price target from $8 to $4 as it waits for the turnaround plan to be announced.
“We believe near-term visibility will remain low as investors await management’s new turnaround plan- which we note Mr. James will be forced largely formulate without the benefit of a CFO,” said Loop Capital analyst Anthony Chukumba.
“Finally, we believe marketing costs will rise as the company communicates its forthcoming new value proposition and attempts to regain ‘mind share’ with consumers,” the analyst concluded.
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Latest Ratings for PIR
Sep 2017 | Credit Suisse | Maintains | Underperform | |
Sep 2017 | Morgan Stanley | Maintains | Underweight | |
Sep 2017 | Loop Capital | Downgrades | Buy | Hold |
View More Analyst Ratings for PIR
View the Latest Analyst Ratings
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