Pier 1 Imports Inc. (NYSE: PIR) gave a business update after the markets closed on Wednesday, revising its preliminary results and guidance and announcing a transition in management. Anytime there is an update in either of these regards, we can expect the stock to be on the move shortly thereafter. However in this case, when guidance is adjusted down and the CEO of 10 years is leaving as well, we can expect the move to be a negative one.
In the release, the company detailed that preliminary net sales for the second quarter decreased by roughly 6.7% compared to the same period a year ago. E-commerce sales represented 20% of net sales in this time. Company comparable sales, which include e-commerce, decreased 4.3% year over year.
The second-quarter loss per share is expected to be in the range of $0.06 to $0.05, related to the planned departure of Pier 1’s CEO. Consensus estimates from Thomson Reuters call for a net loss of $0.03 per share and $422.19 million in revenue for the second quarter.
Alex W. Smith, president and CEO, commented on the preliminary results and guidance:
Although ongoing store traffic challenges impacted our top line results, we were able to drive year-over-year improvement in our merchandise margin rate through a more balanced promotional strategy and improved operational execution in our distribution centers. We continue to focus on closely managing inventories and ended the quarter with inventory levels down approximately 10% from a year ago.
In a separate release, Smith in conjunction with the board of directors, agreed that he will step down at the end of December 2016.
One of the most notable aspects of his tenure was the turnaround that Smith headed up between 2009 and 2013. During this time the stock went from a low of $0.10 to highs of over $23 per share over the course of just five years. One has to wonder if the company is shooting itself in the foot parting with such an instrumental leader.
Terry London, chairman of Pier 1 Imports, commented on the departure:
Alex spearheaded the transformation of Pier 1 Imports from a pure brick-and-mortar business to establish the competitive omni-channel platform we have in place today. The Company is now well positioned with the infrastructure, capabilities and brand equity to effectively compete in the changing retail environment. On behalf of the Board of Directors, we all wish Alex the best going forward.
Excluding this move, Pier 1 has underperformed the broad markets, with the stock down about 2% year to date. Over the past 52 weeks, the stock is down over 50%.
Shares of Pier 1 closed Wednesday up 3% at $4.80, with a consensus analyst price target of $5.41 and a 52-week trading range of $3.76 to $10.36. Following the business update, the stock was down about 15% at $4.07 in early trading indications Thursday.