NEW YORK (TheStreet) -- Shares of Pier 1 Imports Inc. (PIR) were sinking, down 5% to $12.07 in mid-morning trading Monday, after analysts at Wedbush Securities lowered their rating on the importer of home decor and furniture this morning.
The firm downgraded the company to "neutral" from "outperform" and also cut its price target to $12 from $16.
Wedbush pointed to concerns that merchandise gross profit will continue to be pressured.
"After completing additional store checks, our view has materially shifted," the firm wrote in a note earlier today.
Fort Worth, Texas-based Pier 1 Imports sells decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores.
As of March 1, 2014 the company operated 991 Pier 1 Imports stores nationwide, 81 Pier 1 Imports stores in Canada, as well as an e-commerce website.
Separately, TheStreet Ratings team rates PIER 1 IMPORTS INC/DE as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate PIER 1 IMPORTS INC/DE (PIR) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $111.90 million or 14.10% when compared to the same quarter last year. Despite an increase in cash flow, PIER 1 IMPORTS INC/DE's cash flow growth rate is still lower than the industry average growth rate of 31.25%.
- Looking at the price performance of PIR's shares over the past 12 months, there is not much good news to report: the stock is down 26.68%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has decreased by 22.3% when compared to the same quarter one year ago, dropping from $42.59 million to $33.09 million.
- You can view the full analysis from the report here: PIR Ratings Report