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?)

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.