Time to Export Pier 1 Imports

By Eric Jackson
RealMoney Contributor
6/28/2010 5:30 PM EDT
Click here for more stories by Eric Jackson

Pier 1 Imports (PIR - commentary - Trade Now) was left for dead five quarters ago. Due to high debt, dwindling sales and a fear that it would go out of business, this well-known provider of cheap home furnishings and knick-knacks saw its stock price drop to $0.10.

By April 21 this year, the stock had rebounded to almost $10 -- a remarkable turnaround. But the stock had come too far, too fast, and in the face of a shaky U.S. consumer, Pier 1 dropped 32% to its current price of $6.56.

The management team and board deserve a lot of credit for persevering and making some smart moves in the company's darkest hours. But is Pier 1 worth $0.10 or $10? Let's review what it did right last year.

Part of the fear surrounding Pier 1 last year was its high debt load. In response, the company cut capital expenditures to $5 million last year from $51 million in 2006. It stopped selling online in 2007, because it hadn't done a good job at it. Marketing spending was cut from $117 million in 2007 to $61 million in 2009. The company closed 250 stores from peak levels (about a 25% decrease) and negotiated lower leases for another 350 stores.

Most importantly, though, the company has reduced its debt to $35 million. Management achieved this by buying it back and renegotiating with lenders. Last year's debt was almost $200 million. At the same time, the company has stockpiled cash, which is up to over $200 million. In 2007, cash on hand had fallen to $6 million.

Pier 1 executives were very proud when they presented their most recent quarterly results a couple of weeks ago. Analysts had expected a quarterly loss, but Pier 1 delivered earnings of $8 million and top-line revenue growth of 14% to $306 million. This was the first Q1 profit for the company in six years.

....

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

Sphere: Related Content

As Restaurants Stay Hot, Watch MRT and RUTH

Two months ago, the only restaurant investors were talking about was McDonalds (MCD). Within the last month, many other restaurant chains have outperformed the market handily, such as Darden (DRI) and Panera Bread (PNRA).

Yesterday, we saw stand-out numbers for casual diner PF Chang's China Bistro (PFCB) and a great move for Buffalo Wild Wings (BWLD).

So, which restaurants might be next to join the party? More business-oriented ones such as Mortons (MRT) and Ruth's Chris (RUTH). Both cater to the business exec entertaining clients. They've suffered with the general downturn even more than the consumer-oriented chains. Turns out the business execs (or at least their CFOs) are more frugal about their steaks than families are about going out for a sit-down at their local Olive Garden in tough times.

Looking at MRT and RUTH, you can see both have lagged other chains over the last 6 - 12 months. If things continue to stabilize in the broader economy, look for these two to make a comeback relative to their consumer-oriented peers. RUTH has already made a good move in the last month (but beware its debt levels).

Position: None.

Originally published in RealMoney.com on 4/23/2009 3:35 PM EDT

Sphere: Related Content

Panera Bread (PNRA) is Upscale McDonalds

Panera Bread (PNRA) has looked like a champ through the last 6 months -- up 50% while the S&P has slumped 8% over that same period. Conventional wisdom has been that only McDonalds (MCD) was supposed to do well in the downturn, as people bought "value meals" en masse. Darden's (DRI) results a few weeks ago showed that, even in tough times, people do still want to go out and eat at restaurants other than the golden arches. So, what's going on at Panera? I hadn't been to one until a few months ago. I noticed that the number of stores in Naples, FL, went up from 2 to 5 almost overnight -- and they were always packed. Once you go in, you understand the formula: Upscale McDonalds. It's good healthy food that's fast and cheap. People are going there instead of a more expensive sit-down restaurant for dinner -- although lunches are the busiest time of day. With the number of new Panera stores opening in recent months (Management has said they like opening franchises in this environment because they lock-in low leases for many years out), revenue growth should continue to move upwards for the coming quarters.

Originally published in RealMoney.com on 4/16/2009 3:04 PM EDT

Sphere: Related Content