KeyBanc Initiates Pier 1 Imports (PIR) with an Underweight
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KeyBanc initiates coverage on Pier 1 Imports (NYSE: PIR) with an Underweight rating and a $3.30 downside price target.
The firm highlighted that President and CEO Alex Smith turnaround efforts have included controlling costs, store closures, more rational use of promotions, and an effort to refine and inspire the merchandise offering.
The firm said, "At this point, with many of the cost cutting efforts complete, we believe the success of the turnaround depends on improved customer response to the merchandise (through better store traffic and sales). While we give high marks to management for its efforts, we are cautious on fundamentals. Pier 1 needs to improve its sales in what we view as a very challenging environment, especially for home-related retailers. Furthermore, the entire value-oriented home furnishings niche has been invaded by mass merchants, and we are doubtful that territory will be easily regained."
KeyBanc does not forecast an improvement in operating results in 2008 and believes that there is still a high level of macro-level risk built into their estimates. KeyBanc also highlights that the company has an estimated $180 million in cash and $184 million in debt at present, making Pier 1's financial status stable for now. However, improvement in underlying fundamentals is critical in the firm's view. Therefore, they maintain a cautious outlook.
Pier 1 Imports, Inc. operates as a specialty retailer of furniture, decorative home furnishings, dining and kitchen goods, bath and bedding accessories, and specialty items in the United States and Canada.
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