Investopedia: Pier 1 Continues To Regain Its Mojo

Not many retailers flirt with utter ruin and make it back again, but Pier 1 (NYSE:PIR) continues to offer a lesson in the merits of a good turnaround story. Instead of going the way of other failed retailers like Linens N Things or Circuit City, Pier 1 returned to its roots, listened to its customers and made changes that went beyond simply cutting prices or offering exceptional sales promotions. While the going will get tougher for this eclectic housewares retailer, investors need not be in a hurry to abandon ship. 


A Very Encouraging Fiscal First Quarter
Pier 1 simply delivered the goods this quarter. Revenue rose over 9% and the company delivered comp-store growth of over 10%. Not only does that make it three of the last four quarters where Pier 1 has produced a double-digit comp, but that is also on top of a better-than 14% comp number last year. Granted, Pier 1 did go ever so far down the rabbit hole during its declining years, but these kinds of strong-on-strong quarters amidst a so-so retail environment are encouraging all the same.

The company also continues to deliver solid operating leverage. Gross margin rose nearly three full points, with core merchandise margins up more than one point. Operating expenses were also kept in check, and the company delivered 140% higher operating income as a result and operating margin more than doubled. Better still, it would look as though the company could have still more juice in its margins - Williams-Sonoma (NYSE:WSM) and Bed, Bath and Beyond (Nasdaq:BBBY) certainly are not perfect comps to Pier 1, but both would suggest that Pier 1 has not maxed out its margin improvement possibilities. 




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