Credit Suisse is adjusting the quarterly cadence in its model for 2017, while trimming its target price to $4.00 for Pier 1 Imports Inc. (NYSE:PIR), as it updates its model for recent results and revisit valuation relative to the broader retail universe. For Q2, Credit Suisse's EPS of -$0.06 compares to guidance of -$0.08 to -$0.04 and consensus of -$0.05. The firm estimates comps of +0.8% vs. guidance of 0-2% and consensus of 1.2%. For the full year, there is no change. Credit Suisse estimates EPS of $0.43 vs. guidance of $0.46-0.52 and consensus at $0.47. The firm estimates comps of +0.6% vs. guidance of 1-2% and consensus of +0.8%.
The firm's fundamental concern on PIR is the imbalance of sales and margins that still exist in this category. Credit Suisse believes it will be increasingly difficult for the full price players in this space to compete vs. the online and off-price channels. The firm have observed more aggressive promotional activity at traditional retail, but remain concerned that these are just temporary ways to address the issue rather than taking the pain and resetting the value propositions. Credit Suisse believes that a bigger reset will be needed across this space. Credit Suisse's $4 price target equates to 10x its calendar 2017 EPS estimate, in line with retailers in similarly challenged categories.