Pier One Climbs As Barclays Sees 25%+ Upside

Pier One Imports (PIR) was jumping 3% Tuesday after an upgrade from Barclays.

Analysts Alan Rifkin and Sam Reid upgraded the stock to Overweight from Equal Weight, and boosted their target price by $4, to $23, writing that the stock has suffered "perfect storm" of one-time operational headwinds that has masked its potential long-term performance.

They write that this year should finally bring the payoff of years of "significant investment" in personnel and technology, and more normalized sales and margins will replace its previous high levels of capital expenditure.

Given that the stock is off more than 20% in the past year, they also write that the selloff has gone too far, and it is a "compelling buying opportunity" at current levels, which represent a meaningful discount to peers. Although the company just reported an upbeat fourth quarter last week, they expect the current first quarter to be a catalyst for the stock, as it will provide an opportunity "for management to begin to demonstrate this renewed momentum."

More from their note:

Supporting top-line growth, we note: (1) E-comm investments have likely peaked; accelerating e-comm growth (to 10% in 2015) should be highly supportive of both top-line (and EBIT). We do not believe forward valuation fully reflects this. (2) A sequential acceleration in comps is highly likely. We are looking for 5% comps for 2014 (vs. 2.4% in 2013), which should yield productivity per square foot of ~$215. (3) PIR's merchandising strategy remains on track. We think differentiation relative to peer offerings is an underappreciated positive. (4) PIR should benefit from attractive housing industry fundamentals in 2014-15. Collectively, these four growth engines should support both occupancy and SG&A leverage. We also note that (5) the accelerated buyback underscores management's conviction in an operating performance rebound. After repurchasing 5% of total shares in the first six weeks of 1Q, we conservatively estimate a total of 8-9% of shares will be bought back in 2014. Additionally, PIR's new $200M senior secured facility supports further buybacks.

Other home furnishings retailers, including Bed, Bath & Beyond (BBBY), Restoration Hardware (RH) and Kirkland's (KIRK) were trading down in afternoon trading.