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Two analysts and top management from five sector firms examine the Home Improvement sector in this 31 - page Home Improvement Issue from The Wall Street Transcript available at (212/952-7433) or http://www.twst.com/info/info601.htm

TWST: Would you begin today by telling us what you include in your coverage universe?

Mr. Tangun: We cover two primary groups: home furnishings/gifts and apparel. In the home furnishing group we have Michaels (MIK), Pier 1 (PIR), Bombay (NYSE:BBA), Tuesday Morning (TUES), and I guess you could put Sharper Image (SHRP) in there as a substantial part of their product mix is home related.

TWST: Talking about recent news on corporate scandals, to what extent, if any, has the news revolving around Martha Stewart had any impact on the home decor group?

Mr. Tangun: I think that Martha Stewart had a very positive impact prior to all these things on home decor retailers, especially with the craft retailers. I don’t think that you can deny that. In terms of some of her recent problems, my guess is that it didn’t have a big negative impact, but there’s really no way to tell, other than speculating.

TWST: Just to look to Pier One and Bombay for a minute, what are your ratings on both of them and what is the rationale behind them?

Mr. Tangun: We have a Neutral rating on Pier 1 and we have a Strong Buy rating on Bombay. We see Bombay as a turnaround story. They’ve been primarily a mall-based retailer. Now they have an initiative to open more non-mall based stores. Those stores have much better store-level economics. They are much bigger stores, so it makes it easier to present the products. Over the next 12 months they’ll be closing the smallest group of their stores, which are around 1,800 square feet. They have reset all the stores to present products by category (bedroom, dining, office and living room), which makes it an easier and better shopping experience for customers. On top of all that, they actually opened their first BombayKIDS Store. They had a catalog and were selling kids’ products over the Internet. They had pretty solid results, so they opened the first concept store in Dallas and it’s performing well. That’s a big opportunity in our opinion. So as they can successfully open more BombayKIDS Stores, that’s a nice growth opportunity for them. They also have Bailey Street initiative, which is a wholesale division with about 2,000 customers. They’re utilizing the same sourcing and the same factories, and we believe there’s upside potential there. We have a 0.27 estimate for next year. So the stock is trading at about 10 or 11 times next year’s earnings. If they can successfully implement all these things, they can grow their operating margins. It’s less than 2% and it can double or even go higher than that. So we think they have upside if execution happens. The other thing is that in the second half of the year they’re going to increase their advertising spending substantially and they’re also making some changes in the way they advertise. Being a mall-based company, they have been depending on mall traffic. But now, as they go to non-mall locations, they need to come up with effective ways of advertising for that and also improve the productivity of mall-based stores. But we think there’s upside potential and opportunity. However, execution-wise, Pier 1 has done much better than Bombay.

1) Specialty Retail Niche Stocks - In an in-depth (2,500 words) Analyst Interview, Anthony Lebiedzinski, an Equity Analyst at Sidoti & Company, examines the outlook for the sector and shares specific stock recommendations.

2) Home Improvement & Home Furnishings - In an in-depth (4,200 words) Analyst Interview, Ozarslan Tangun, a Senior VP at SWS Securities, examines the outlook for the sector and shares specific stock recommendations.

3) CEO interviews (average 2,500 words). Top management of Five - sector firms examine the outlook for their firm and the sector.