NEW YORK (Dow Jones) -- Pier 1 Imports Inc.'s (NYSE:PIR) shares lost more than a fifth of their value Thursday after the home furnishing retailer's quarterly loss was much wider than analysts had expected.

The company reported first-quarter net loss narrowed to $32.8 million, or 37 cents a share, from $56.4 million, or 64 cents a share, a year earlier.

Revenue for the period fell 13% to $310 million.

Excluding items, Pier 1 (PIR) would have lost 34 cents a share, according to Colin McGranahan of Sanford C. Bernstein & Co. On that basis, analysts had been expecting an average loss of 15 cents a share on sales of $338 million, according to estimates compiled by FactSet Research.

Pier 1 shares dropped 23% to $4.82 in midday trading. Shares of Cost Plus ( CPWM) fell 6% to $3.29.

While merchandise margin improved to 51.3% from 45.5%, it also missed analysts' expectations.

Pier 1, hurt by the declining housing market, has sold its headquarters and sought to lower costs and minimize discounts to help shore up results. It offered to buy Cost Plus in part because it said the combination would help yield cost savings. It said Monday it would take its offer directly to shareholders of Cost Plus, which rejected its unsolicited proposal.

"While [Pier 1] has shifted aggressively toward more full-priced selling, the challenging macro environment and still less than perfect execution likely weighed on margins," said Bernstein's McGranahan. "More work remains to be done. [Cost Plus is] still an overhang. [Pier 1] will need to provide a more thorough explanation."

Same-store sales for the quarter fell 5.4%, reflecting aggressive liquidation in March and April that was included in the previous year's results, Pier 1 said. For the second quarter, the retailer is expecting same-store sales that are "slightly negative to modestly positive."

While Pier 1's offer to swap three-fifths of its common stock for each Cost Plus share was valued at $4 a share based on its closing price on June 6, its sharp share drop valued its offer at $3 a share based on its most recent trading price.

Analysts said that throws more doubt into whether a potential deal could be completed as both companies struggle in the face of the slowing economy.

"We believe that our proposal is full and fair," said Pier 1 Chief Executive Alex Smith on a conference call with analysts. "We remain committed to working directly with Cost Plus shareholders to make this transaction a reality."

    (END) Dow Jones Newswires   06-19-08 1228   Copyright (c) 2008 Dow Jones & Company, Inc.