Pier 1 Imports

Hand across the water
Heads across the sky
--Paul McCartney & Wings

Have been buying a bit of Pier 1 Imports (PIR) recently. Owned it a long time ago. The stock has gone through several major up/down cycles since then and, as indicated by the chart, is on the 'down' side of things after having retraced most of the move since the 2009 lows that made it a $20+ stock a couple years ago.

I see this as a 'special situation/value play. PIR's $340 million market cap, or about $400 million enterprise value when net debt is considered, puts the stock in the smaller market cap bucket that I'm interested in. The company seems more than capable of generating at least that much in free cash flow currently. It also sports a dividend yield near 7%.

Fundamentally, have always loved the stores and their eclectic specialty merchandise mix. Current issues such as recent CEO resignation and concerns with declining bricks and mortar traffic (something all retail is coping with) seems largely factored into the price.

Can price go lower? Oh yeah. And given my view of the world, upcoming environmental forces should prove a wind in the face of PIR and other retailers. I wish the company had maintained its nearly debt free balance sheet of two years ago, but its current cash:debt of $128/$200 million suggests a manageable degree of leverage given its cash flow dynamics.

If/when prices do head lower, I plan to increase my position here to something more meaningful--assuming of course that my analysis remains bullish.

position in PIR