Why Pier 1 Stock Shed 20% in January

What happened

Home furnishings retailer Pier 1 (NYSE: PIR) trailed the market by a wide margin last month, falling 20% compared to a 6% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts

The plunge follows a brutal 2017 for shareholders, who saw their stock price fall by more than 50%.

So what

January's decline came as investors prepared for the anticipated news that this past holiday season was a tough one for the struggling retailer. Comparable-store sales declined in the fiscal third quarter, but the more worrying trend was that Pier 1 noticed a considerable drop in customer traffic during the first two weeks of December.

Inside a decorated home living room.

Image source: Getty Images.

Now what

That traffic slump makes it likely Pier 1 will report weak sales and deteriorating profit margins when it announces fiscal fourth-quarter results in the coming weeks. That poor performance should add a sense of urgency to the strategic review that new CEO Alasdair James is taking right now.

Together with a freshly appointed chief financial officer, Nancy Walsh, James is working out options for keeping the business healthy as it adjusts to a rapidly shifting consumer landscape. While the stock might look cheap today, given its 80% decline over the past five years, investors might want to wait for the results of that strategic review before buying into shares.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.