Option Trade 
Pier 1 Imports Inc (NYSE:PIR) Puts
Tuesday, 12th April, 2016

**OPTION TRADE: Buy the PIR Sep 2016 6.000 put at approximately $0.75. Place a pre-determined sell at $1.50.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

by Ian Harvey

April 12, 2016

Pier 1 Imports Inc (NYSE: PIR), a global importer of imported decorative home furnishings and gifts, will announce its Q416 earnings results tomorrow, Wednesday, April 13th. Analysts expect the company to announce earnings of $0.21 per share and revenue of $524.13 million for the quarter.

The stock is up 30% so far in 2016 as investors have turned less pessimistic about its struggling retail operations. The home furnishings specialist announced last month that its comparable-store sales likely declined by less than 1% in the fiscal fourth quarter, beating management's prior guidance for a 3% drop. CEO Alex Smith and his team also affirmed their earnings forecast that calls for $0.20 per share of profit, down from $0.37 per share a year ago.

However, profitability showed a slump to 38% of sales from 42% in the third quarter as management worked through excess inventory in an intensely promotional environment. It's hard to see Pier 1's stock rally continuing while its gross margin keeps declining, despite the optimism and increase in price so far this year.

The company has a market capitalization of $527.58 million and a price-to-earnings ratio of 10.08. The firm’s 50-day moving average price is $6.11 and its 200-day moving average price is $6.04. Pier 1 Imports has a 52 week low of $3.76 and a 52 week high of $14.18.

Pier 1's revenue fell 1.3% in the quarter that ended Feb. 27, but that was better than the company's guidance of a 2%-4% decline and analyst expectations of a 3.9% decrease. On the bottom line, management said it expected earnings per share to come in at $0.18-$0.22, in line with estimates of $0.20. CEO Alex Smith noted "positive customer response to our holiday and seasonal assortments" and said the company was able to reduce inventory levels by 15% from a year ago, a move that should help lower costs and boost efficiency.

Comparable sales, which include e-commerce, were down 0.7%, better than the company's guidance of a 2%-4% drop.

Shares of Pier 1 spiked 33% on the day of the earnings report, capping a rally that began when the broad market bottomed out in February. Since Feb. 11, the stock has gained 75%. After two disappointing quarters, the preliminary earnings seemed to restore the market's faith in the home furnishings specialist -- but with revenue still falling, the stock's ability to keep climbing is questionable.

Pier 1 Imports Inc‘s stock had its “neutral” rating reissued by equities researchers at Wedbush in a research note issued to investors on Monday. They currently have a $6.00 target price on the stock. Wedbush’s price objective would suggest a potential downside of 4.61% from the stock’s current price.

Also, Vetr lowered shares of Pier 1 Imports Inc from a strong-buy rating to a strong sell rating in a research note released last Tuesday.

Also, several other equities research analysts have recently commented on the company.

• 03/15/2016 – Guggenheim began new coverage on Pier 1 Imports, Inc. giving the company a “neutral” rating.

• 02/26/2016 – Wolfe Research began new coverage on Pier 1 Imports, Inc. giving the company a “underperform” rating. They now have a USD 4 price target on the stock.

• 01/27/2016 – Pier 1 Imports, Inc. was downgraded to “sector weight” by analysts at KeyBanc.

Recently some investment brokers have made changes to their outstanding price targets on shares of Pier 1 Imports, Inc.. According to data from Reuters, 2 analysts have a rating of “buy”, 1 analyst “outperform”, 11 analysts “hold”, 2 analysts “underperform” and 3 analysts “sell”.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the PIR Sep 2016 6.000 put at approximately $0.75. Place a pre-determined sell at $1.50.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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