Pier 1 stock: Don't take a long walk off this Pier
— -- A: Rattan and wicker are having a tough time on Wall Street.
Pier 1, known for its eclectic home furnishings, is seeing a colossal destruction in share value. Shares are plunging viciously amid one of the toughest environments for retailers in a generation or two.
The stock has lost 94% of its value the past 12 months, a brutal drubbing even in a tough bear market. During the same time period, the broader Standard & Poor's 500 index is off 40%.
Certainly, the pressure all retailers are feeling is a large reason for Pier 1's pain. The S&P Retailers index is off more than 40% the past 12 months, as investors steer clear. With consumers struggling to pay their mortgages and keep their jobs, there's less consumer confidence, and less spending. And Pier 1 is hurt even more, because there are fewer home buyers looking to put new furniture into new homes.
If you want to know why Pier 1 shares are falling, look no further than the company's fundamentals. Revenue the 12 months ended Nov. 29 totaled $1.4 billion, down 9.4% from fiscal 2008 ended in March and down 15% from fiscal 2007. The company has posted a string of annual losses since fiscal 2006.
The immediate future continues to look challenging. The company's' revenue is expected to fall another 3.3% in fiscal 2010 after declining 14% in fiscal 2009, according to a report from Michael Souers of S&P.
To its credit, Pier 1 is trying to restructure. That includes cost cutting and introducing lower-priced items to lure shoppers. But with the stock at 24 cents a share last week, it might be prudent for investors to wait for improvement before assuming the restructuring will pay off. Certainly USA TODAY's Stock Meter is flashing a warning sign, rating the company's financials at 4.6 on its scale of 1 (conservative) to 5 (aggressive).
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.
