Pier 1 Imports (PIR)
In today’s Daily Alert, Argus Analyst Christopher Graja is upgrading a stock that you may know from the mall, but probably haven’t seen in the financial press lately. This under-the-radar retail stock has been choppy year to date, but a long-term chart shows that its overall trend is still up....
In today’s Daily Alert, Argus Analyst Christopher Graja is upgrading a stock that you may know from the mall, but probably haven’t seen in the financial press lately. This under-the-radar retail stock has been choppy year to date, but a long-term chart shows that its overall trend is still up. In addition, the company instituted a dividend last year, which may help attract more investors to the stock as it grows. Here’s the new recommendation from Argus:
We are upgrading Pier 1 Imports (PIR) to BUY from HOLD, and setting a target price of $27. This is consistent with our previously published bias for raising our rating.
Our research suggests that CEO Alexander Smith will continue to successfully drive sales, improve profitability, and return value to shareholders by repurchasing shares and increasing the dividend.
Based on our recent store visits and conversations with investor relations staff, we have become more optimistic that the company has merchandising, business and marketing strategies that will drive sales and profitability beyond what had been reflected in our earnings model.
Despite strong stock gains over the last year and a U.S. stock market near record levels, we believe that PIR shares are attractive and poised to benefit from additional catalysts.
CEO Smith has a unique understanding of the competitive landscape, and we believe that he has the company well positioned for growth in e-commerce. He has tripled the merchandising team over the last six years and continues to hire more merchants to further differentiate PIR’s mix of 95% exclusive products.
PIR’s new ‘Express Request’ program will give shoppers even more color and fabric choices and more reasons to buy. The program will offer timely delivery without requiring more store inventory. PIR’s product differentiation is increasingly important at a time when the Internet is leading to showrooming and price competition among retailers that don’t sell unique merchandise.
PIR is also in the very early innings of an e-commerce strategy that we expect to raise brand awareness and drive higher sales by providing shoppers with convenience and an even wider range of product choices. In its first year of operation, website traffic has increased significantly and now accounts for a much greater percentage of total company sales. Management is supporting its new initiatives by increasing broadcast and direct mail advertising.
Mr. Smith and CFO Cary Turner have earned confidence by restoring PIR to profitability and achieving a 10% operating margin ahead of schedule. They are progressing toward a 12% operating margin target that we expect to be surpassed.
Our optimism for PIR is also bolstered by a PEG ratio that is below the average for a group of peer home-products stores tracked by Bloomberg.
We are also raising our five-year rating to BUY from HOLD.