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Pier 1 Imports (PIR) rolled in again with worse results than expected. This time, the culprit is an inventory impairment charge. Margins are shrinking and promotion costs are through the roof. Investors are naturally not hearing the cash register ring the way it should. A conference call is scheduled to explain how it plans to work their way out. This explanation will probably not be important, as it will be an excuse-based look forward.

The concept of retailing is extremely simple. You must sell the product that people want to buy. If you can do this quickly and get good inventory turns, you are brilliant. The trick, of course, is in the execution. Pier 1 simply has not executed at any level. It loaded up with product that would not move and then tried to promote their way out of it: doubly bad.

Basically, the thinking is wrong as it has missed the market. This calls for an entire overhall of the retailing strategy which is usually kicked off with changes in the executive suite. Fortunately the cash position is still positive, but will not be for long without immediate changes. Debt position is also manageable; what is needed is leadership.

My advice: look for a take over. This is not the mega-buck sized deal that Wall Street normally gets excited about. The new owners will need to show up with a strategy ready to go. This will include a new management team.

Institutions have shed approximately 50% of their recent holdings as they lost faith and found better things to do. A take over would be well received and probably would not need that much of a premium to get the job done. Not only that, its relative bite size makes it more than manageable and should take only one year to turn around. Any takers?

PIR 1-yr chart
Pier 1

Source: Pier 1 Imports Has Missed the Mark(et)