Why Pier 1 Imports, Inc. Stock Plunged Today

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What happened

Shares of Pier 1 Imports Inc. (NYSE: PIR) were down 20.7% as of 12:15 p.m EDT Thursday after the home-goods retailer announced mixed fiscal fourth-quarter 2018 results and a disappointing outlook.

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On the former, Pier 1's quarterly revenue declined 3.1% year over year to $512.2 million -- and this despite an extra week in the quarter as compared to the same year-ago period. On a comparable 13-week basis, Pier 1's comparable sales declined 7.5%. That translated to adjusted earnings of $16.6 million, or $0.21 per share.

Analysts on average were expecting lower adjusted earnings of $0.19 per share on higher revenue of $537.6 million.

So what

Pier 1 Imports CEO Alasdair James stated that the company's financial performance "underscores the urgent need for change" -- something the company hopes it can address through a new three-year strategic plan. But that will also mean forsaking some near-term profits in order to follow through with that plan.

James added:

Now what

In the meantime, Pier 1 Imports expects comparable sales will decline in the range of 8% to 7% in the current quarter, which will translate to a GAAP net loss of $0.41 to $0.37 per share. For the full year of fiscal 2019, Pier 1 expects comparable sales to improve to growth of 1.5% to 2.5%, which should result in a loss per share in the range of $0.36 to $0.17.

By the end of fiscal 2021 -- and assuming all goes well as Pier 1 implements its new strategic plan -- the company also told investors that it's targeting sustainable net sales growth in the range of 4% to 6%, EBITDA margin of 6% to 8%, and earnings per share of $0.60 to $0.70.

But success is hardly guaranteed. So even though our market is a forward-looking machine, it's hard to blame investors for taking a step back from Pier 1 Imports stock today given the near-term pain it's about to endure.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.