Why Pier 1 Imports Inc. Stock Tumbled Today

By Markets Fool.com

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What happened

Tough times continued forPier 1 Imports Inc.(NYSE: PIR) today after it lowered its second-quarter earnings guidance and said its CEO would step down. As of 11:11 a.m. EDT, the stock was down 14.5%.

So what

CEO Alex Smith, who has led Pier 1 for nearly 10 years, said he would leave the company at the end of the year in what was called a mutual decision between him and the board of directors. The board has enlisted the help of recruiting firm Korn/Ferry to find a new chief. Smith steered the company on a successful post-recession comeback, but over the last few years profits have dwindled amid heavy promotions, and the stock has crumbled.

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That pattern continued into the second quarter as overall sales fell 6.7% and comparable sales, which include e-commerce, dropped 4.3% from the year-ago period. Management estimated a loss per share of $0.06 to $0.05, worse than estimates for a per-share loss at $0.03. Smith said despite traffic challenges, the company was able to drive improvement in merchandise margin, though sales growth seems to be the overwhelming problem.

Now what

Considering the stock has fallen more than 80% since its peak in 2013, it's probably best for investors for Smith to move on. The home-furnishings industry has been competitive, with Restoration Hardwarerecently struggling as well, but after so many quarters of falling sales and profits, Pier 1 needs a new strategy.

Pier 1 will report second-quarter earnings on Sept. 28. Keep your eye out for any news on the next CEO as that will likely be the next catalyst to move the stock.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool is short Pier 1 Imports. The Motley Fool recommends Restoration Hardware. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.