07:06 Furniture stocks still look pricey - Barron's
According to Barron's, furniture makers and sellers shares have fallen through the floor this year, and for many there's no sign of a rebound on the horizon. Pier 1 (PIR) has tanked 27%, while Ethan Allen (ETH) is down 16% and Bombay (BBA) 12%. Consumer demand for home furnishings is ebbing after a years-long buying binge. Interest rates are rising, and other products, chiefly consumer electronics, have become a bigger draw. Moreover, furniture retailers are facing stiffer competition from mass merchants and dept stores, while manufacturers are seeing a flood of cheap Chinese imports, a trend that is not likely to change meaningfully. Pier 1 shares have been hardest hit, on weakening sales and profits. UBS analyst Brian Nagel says there still is a "significant disconnect" between the fundamental performance of the co and its shares. "We expect weaker sales and gross margins to continue to limit the potential for an earnings recovery at the co for the foreseeable future," he says. At more than 40x '06 estd EPS, Pier 1 represents "one of the most expensive stocks in retail," says Nagel, whose tgt price of $12 implies a P/E multiple of 14x his '06 earnings est. |
