Friday, March 8, 2013

Pier 1 Imports (PIR) - Surprise Earnings Guidance Wasn't a "Surprise" At All...

PIR closed yesterday at $22.28, down 4.1% with IV30™ up 4.9% on a "surprise" earnings pre-announcement. The LIVEVOL® Pro Summary is below.


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Pier 1 Imports, Inc. (Pier 1 Imports) is a specialty retailer of decorative home furnishings and gifts. The Company imports merchandise, and sells a range of decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores

I use the quotes for "surprise," b/c for someone, it certainly didn't come off as a surprise at all. Let's start with a snippet of the PIR Stats Tab, below.

We can see two very important numbers:

1. The company averages ~188 puts traded in entirety per day.
2. The average total open interest for all puts in all months on all strikes is 1,771.

OK, so what?

On 3-6-2013, someone bought 4,400 Mar 23 calls for $0.40 in one order and in total, 5,742 Mar 23 puts traded on 179 existing OI. The Options Tab from the close on 3-6-2013 is included below.

Keep in mind, that order flow is more than 30x (3,000%) of the total daily average put volume -- and that's one strike in one month. Keep in mind also that PIR has earnings due out in April. The OI has grown to 5,775 in that one line when TOTAL average OI in puts was just 1,771. And then this happened on 3-7-2013 (yesterday):

6:06AM Pier 1 Imports sees Q4 EPS below consensus; Q4 comps +7.9% (PIR) 23.23 : Co issues downside guidance for Q4 (Feb), ex items, sees EPS of $0.59-0.60 vs. $0.61 Capital IQ Consensus Estimate.

Comparable store sales increased 7.9% on top of last year's 10.3% gain; three-year cumulative comparable store sales increased 27.1%
"We are confident that fiscal 2014 will be another terrific year as we continue our evolution into a true multi-channel retailer, exploiting the growth potential in our two mutually supportive and interdependent businesses -- our wonderful Pier 1 Imports stores and our new, two quarters-old e-Commerce business."

Source: via Yahoo! Finance


The stock dropped 4.1%. Let's look to the Options Montage as of yesterday's close (3-7-2012):

Those $0.40 puts closed at fair value of $0.85, but it looks like they were actually sold @ $0.95 (5,400 in one order) for more than a 135% gain in a single day on a 3,000% volume increase on exactly the ATM strike of the front month.

Quite a... "surprise?" I say not...

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1 comment:

  1. Ophir,

    Is the average volume and open interest in the first figure computed over some number of days or for all days that options have been listed for a given underlier?

    Btw, love your work!