Retail

Pier 1 Imports' stock craters on disappointing earnings report

Key Points
  • Pier 1 Imports' stock plummeted Thursday morning after the company reported sales that missed analysts' expectations.
  • The company also said it will no longer pay a dividend.
  • Pier 1 has laid out a three-year plan to turn the business around, but it will "pressure profitability" in the near term.
A Pier 1 Imports store in New York.
Craig Warga | Bloomberg | Getty Images

Pier 1 Imports' stock plummeted more than 20 percent Thursday morning after the company reported sales that missed analysts' expectations, also ceasing its dividend payouts.

The home furnishings retailer said halting its dividend payments to investors "will enable the company to allocate greater resources toward implementing its three-year strategic plan to drive sales and earnings growth and increase shareholder value."

The company on Thursday morning laid out a plan, running through 2021, where Pier 1 focuses on targeting niche groups of shoppers, refining the merchandise in stores and creating new ads. According to CEO Alasdair James, the plan will also "pressure profitability" in the near term.

"However, these investments are expected to drive sales growth and profitability in fiscal 2020 and 2021 and are necessary to help us return the business to a sustainable growth trajectory," James said.

Pier 1 on Wednesday said it had net income of $15.1 million, or 19 cents a share, for the fiscal fourth quarter, compared with $26.6 million, or 33 cents per share, a year ago.

Excluding one-time charges, Pier 1 earned 21 cents a share, a penny above analysts' expectations, according to a Thomson Reuters survey.

Net sales dropped roughly 3 percent to $512.2 million, falling short of estimates for $537.5 million. Same-store sales were down 7.5 percent for the period, which included one more week than in 2017.

For the current quarter, Pier 1 expects same-store sales to drop as much as 8 percent, with a net loss as large as $33 million. By 2021, the company said net sales should grow by closer to 6 percent.

"It is now absolutely imperative that Pier 1 improves its profile and attractiveness among consumers," GlobalData Retail Managing Director Neil Saunders said. "While the market is growing, so too is competition."

Not only is Pier 1 competing with Amazon.com, Walmart and Target for home decor, but specialty shops such as Restoration Hardware, Wayfair, Crate and Barrel and Pottery Barn are increasingly crowding the market.

"While Pier 1 does not have a sub-optimal fleet, there is no doubt that some stores are in locations suffering from weak customer traffic," Saunders said.

The company ended fiscal 2017 with roughly 1,020 locations, having closed 21 stores during the year and opened seven. It said it plans to close roughly 20 to 25 stores per year moving forward.

Including Thursday's losses, Pier 1 shares have fallen more than 60 percent from a year ago.