Investopedia: Can Pier 1 Rekindle The Fire?

By any reasonable standard, Pier 1 Imports (NYSE:PIR) has delivered an exceptional turnaround. It wasn't really that long ago when people were writing this company off as hopeless and pointing to Warren Buffett's investment in the retailer as a sure sign (yet again) that he had lost his touch. Since then, the stock has delivered exceptional returns to those brave enough to buy during the dark times.

Now Pier 1 has a new problem - that of Wall Street's bottomless appetite for growth. Good enough is no longer good enough, and investors may be in for a few more difficult quarters before the shareholder base has turned over to a more a conventional retail growth crowd.

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Investopedia: Has Pier 1's Recovery Overshot The Mark?

What management at Pier 1 Imports (NYSE:PIR) has done over the last couple years is nothing short of remarkable. The U.S. retail market preys on weakness and routinely chews up companies that lose touch with their shoppers, never to be seen again. Not only has Pier 1 found a way to survive, but in many respects it's stronger than it has ever been.

Another Strong Quarter to Finish the Fiscal Year
Given that Pier 1 announced top-line results earlier, there weren't too many surprises with this quarter. Revenue rose nearly 12% this quarter, with comp-store growth of over 10%. Not only is that a pretty exceptional result for a large, established company, but it is also better than the 8.9% comp it delivered last year.

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Investopedia: Pier 1 Now A Productivity Story

There is no agreed-upon point where a company is no longer a turnaround story, but there are plenty of anecdotal reasons to believe that Pier 1 (NYSE:PIR) has moved on to become a productivity improvement story. The company has logged several quarters of impressive same-store sales growth, completed a share buyback and begun to talk again about store count expansion and new selling concepts. Still, even if Pier 1 is no longer a true turnaround, investors may well be able to expect quite a bit more fundamental upside as the company couples better merchandising with improved efficiency.

Solid Fiscal Q2 Results   
For the company's fiscal second quarter, Pier 1 reported that total sales rose nearly 10% to just under $340 million. On a comparable basis, sales grew 10.8% (against a difficult 11.2% growth comp last year). On a per-square-foot basis, sales grew about 10%. Unfortunately, management did not give a detailed breakdown of traffic and ticket trends other than to say that both were positive.


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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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Pier 1 No Longer A Recovery Story

There really is no handbook for corporate turnarounds or recoveries. With that in mind, there is also no hard-and-fast rule about when a company moves from "recovering" to "recovered". Nevertheless, when it comes to successfully annualizing difficult comps and regaining industry-normal valuations, it seems fair to say that Pier 1 Imports (NYSE:PIR) is no longer an intriguing retail recovery play - it's just a retailer with growing sales and profitability. (For background reading, see Analyzing Retail Stocks.) 



A Solid Third Quarter 
Like many retailers, Pier 1 reports a little off-center from the regular calendar quarter - an industry convention that may have something to do with capturing post-Thanksgiving Day sales and Christmas sales in two separate quarters. In any event, PIR reported revenue growth of over 8% this period, topping the average estimate, but not quite reaching the high end of the range. Growth was fueled by comp-store growth of more than 10%, down from the year-ago level of 13.7% but an excellent result in what should be the most difficult comp quarter for the company.

While retailers can slash prices to fuel some top-line growth, that is not what Pier 1 is doing. Instead, the company is taking the shockingly novel approach of stocking what customers actually want to buy. As a result, profitability is improving significantly. Gross margin improved by more than four full points this quarter (to almost 41%), while operating margin increased by more than five points as operating income jumped considerably from last year's low level. At this point, then, Pier 1 is back in line with many of its peers from a gross margin perspective, although there is work yet to be done on the operating line. (For further reading, check out Retailers To Watch This Holiday Season.)

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Constellation Brands Not Going Nova Yet

People may drink through good times and bad, but that is no guarantee that they will remain loyal to the same brands. Not only have overall economic conditions hurt Constellation Brands (NYSE:STZ) since the beginning of the recession, but ongoing turbulence in consumer preference has made for unstable results.

The Quarter that Was
All things considered, this leading wine maker actually had a pretty solid fiscal second quarter. Reported sales dropped 2%, but this was due in part to the sale of the company's U.K. cider business. On an organic basis, sales were actually up 2%. Going a little further, wine sales grew 4% in the U.S., Europe and Australia, while spirit sales were down 15%. 


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4 Companies That Should Have Sold Out

Mergers and buyouts are part and parcel of the investing experience. While a buyout bid can give a nice return to a short-term investor, longer-term investors often fret that a bid may entice management to sell a company for less than its true long-term value. What is also true, though, is that sometimes managers are unreasonably and unproductively stubborn - refusing to hand over the reins (and their large executive salaries) and allow shareholders to book a profit or own shares in a larger enterprise. (For related reading, take a look at Mergers: The Sign Of Economic Recovery?)

With news swirling around 3Par's (NYSE:PAR) willingness to sell to either Dell (Nasdaq:DELL) or Hewlett-Packard (NYSE:HPQ), there is the sharp contrast of Genzyme's (Nasdaq:GENZ) resistance to a bid from Sanofi-aventis. Let us take a look at examples where shareholders really would have been better-served if their managers had signed on the dotted line and taken the deal. (Find out how you can cash in, read Trade Takeover Stocks With Merger Arbitrage.)

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