Although I do believe Pier One Imports (PIR) is a great company, with great products, great management, that will continue to grow into 2013, now is a time to be bearish, not bullish, ahead of earnings. If I were looking to take a position in PIR, I would at least wait until the earnings report December 13 and remain bearish for now.
Here are 5 reasons to be bearish on Pier One Imports now:
(1) Its CEO already pre-announced detailed sales and earnings information and gave an optimistic outlook for the holiday season stating:
"We have had a terrific start to the holiday season, including a very strong Thanksgiving weekend, and believe the business is ideally positioned with a compelling merchandise assortment and multiple ways to shop the Pier 1 Imports brand, including both in-store and online. We look forward to discussing our third quarter results and providing an update on holiday business during our upcoming conference call"
Expect no positive surprises. The sales, earnings, margins, and even holiday season are already known and "baked into the cake." There's no urgency to jump into PIR ahead of earnings that will surprise nobody.
(2) Every earnings report this year from PIR has been followed by dips over the next 2 weeks. If you wanted to buy into PIR, every single time you would have gotten a much cheaper entry just patiently waiting 2 weeks for the excitement to cool off.
Sep 13 report: within two weeks, PIR traded 6.8% cheaper
Jun 14 report: within two weeks, PIR traded 1.9% cheaper
Apr 5 report: within two week, PIR traded 4.6% cheaper
(3) The commerce department is scheduled to release November Retail sales figures the day of PIR earnings. Why rush into PIR blind ahead of that? This single economic report could make or break the entire stock market for the day as it will be the most important clue as to how the holiday season is shaping up. Surprise weakness in the report could crush the market indices which in turn could cause a dip in PIR.
(4) Investors are very weary of furniture stocks right now. Any even hint of weakness anywhere in the report could spark a sell off. Furniture Brands (FBN) reported very disappointing results as I detailed about here, and the stock crashed hard. Same thing happened with La-Z-Boy (LZB) with their report causing a hard sell off.
(5) There simply are no valuation metrics that scream "buy immediately" so patience should pay off. The dividend yield is so low at 0.8% it is almost immaterial. PIR trades at roughly 4-5 times book value, PE of 16-17 times guidance, and expected sales growth next year of 6%. These numbers aren't bad at all, but they lack buy urgency. PIR should once again trade cheaper within 2 weeks after the report.