Cost Plus (Nasdaq:CPWM) took another hit recently when Zacks Investment Research reiterated its 'sell' rating on the stock, reducing the target price from $2 to $1.

This latest kick in the groin came just days after the Oakland-based retailer posted a greater-than-expected $26.6 million second quarter loss and shares reached a (then) all-time low of $1.50. (Proving that records are made to be broken, Cost Plus shares have since dipped below $1.30.)

What's interesting, however, is that overall opinion on CPWM remains relatively neutral, as, according to The Financial Times, all 11 analysts that cover the stock currently recommend holding.

Failing to See the Iceberg
In fact, before the company's ill-fated earnings announcement on Aug. 22, Claire Gallacher, an analyst with Caris & Co., actually rated Cost Plus 'Above Average', despite an equity decline of better than 60% since Jan 2.

What's more, in the past year, analyst expectations for Cost Plus have, on the whole, improved. This is an amazing show of optimism given that the stock price has plummeted by almost 96% since 2005. (For more on analyst expectations, read our related article Analyst Recommendations: Do Sell Ratings Exist?)

Impact
How empty is the Cost Plus glass right now? When competitor Pier 1 Imports (NYSE:PIR) made an $88 million bid for the company back on June 9, Pier 1 shares dropped by 21% on the news, recovering only slightly a week later when that offer was rejected by the Cost Plus board of directors.

True, the continuing problems in the real estate market have produced choppy seas for all those in the housewares retail sector. KeyBanc Capital Markets initiated coverage on Bed Bath & Beyond (Nasdaq:BBBY) on August 5 and immediately assigned it a rating of 'underweight', noting that, "macro headwinds are expected to have a negative impact on its earnings and comps going forward." Pier One shares reached a 14-year low on July 15. And Williams-Sonoma (NYSE:WSM) has seen its share price regress by more than 25% this year as well.

But at what point do Cost Plus analysts begin noticing the rising water levels and make for the lifeboats?

Rescue at Sea?
That said, Cost Plus does have its bright spots. Net sales for the second quarter of fiscal year 2008 were up 5.6% from the second quarter of FY 2007 and same store sales improved by 1.2%, thanks in large part to a 3.8% increase in customer traffic during that period. Barry Feld, Cost Plus president and CEO, said the company has scaled back its expansion plans and will, instead, continue to tightly control capital spending.

In January, Cost Plus approved a plan to exit eight underperforming markets, close 18 existing stores and reduce its corporate workforce by approximately 10%.

Better yet, recent evidence seems to suggest that, perhaps, the worst of the storm is over for household retailers.

Despite reporting a 223% decline in fourth quarter profits on Aug. 26, Tuesday Morning Corp. (Nasdaq:TUES) nonetheless beat analyst expectations, resulting in a 4.0% rise in share price. Imagine what would have happened had Tuesday Morning's profits been down a mere 123%? Why, the euphoria may have reached dotcom mania proportions.

Journey's End
Still, while it is certainly desirable to buy a stock at its low, get married just once and floss after every meal, the reality is that such things are often easier said than done. Has Cost Plus reached its low? Maybe so, but investors would be wise to wait for signs of life before investing a lot of time and money in its resuscitation - no matter what the analysts think.

To learn more about picking investments in this sector, read Analyzing Retail Stocks.

Related Articles
  1. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  2. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  3. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  4. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  5. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  6. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  7. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  8. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  9. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  10. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center