Regular readers of my blog have known that i owned less then 1 share of Pier 1 (PIR). An investment I made through Sharebuilder.com sometime back, when the company was trading at better then $26 a share. Now the company is trading between $3-$4/share. Something that doesn't look good. Even a great value investor, Warren Buffett has dumped part of his investments in the company. I on the other with such a small investment, am hoping to see my stock value increase. So I began watching the company more closely.
At a point when I am not putting any new money into my investments (as I dig my way out of debt), I took the $21 sitting in my Sharebuilder account and invested another $15 into Pier 1. This simple act, increased my holdings to just over 3 shares as of yesterday (Tuesday). Today (Nov. 28, 2007) the stock closed at $4.12 (up 26 cents). This is good news for me, but what about the company's financial stability.
A quick glance at their financial statement, shows that as of September 2007, they had $184 million in long-term debt. This does not include $295 million in liabilities.
As a personal finance blogger, these are two things that I see that the company must cut right away. Over all their total liabilities are $576.33 million. The good news is that they have $838.48 million in total assets. Still, when you look at their cash flow they lost $30.15 million in the second quarter of their fiscal year. This loss is worse then the 2 previous quarters, which also were money losers. In fact they have not been profitable since the quarter ending Nov. 25, 2006. That quarter they reported a profit of $22 million.
According to the Fool.com, they are 2 years from returning to profitability.
It's hard to like Pier 1 these days. The home decor specialist is roughly two years away from returning to profitability. You can pin the blame on everything from the subprime flap to chain-specific flubs, but don't throw in its towel just yet.
One thing I do like is that the new CEO has pulled television advertising. While advertising helps brings in customers, it is very costly. Cutting this expense helps them to become profitable again faster, especially when the customer base tends to be loyal to Pier 1 already. Moving advertising dollars to direct mail pieces as they have done allows their loyal base know of the sales and at a cheaper rate.
I am eagerly awaiting the 3rd quarter financials to see if their cash flow has improved since the September reports.
my ShareBuilder Holdings
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