Investors see little reason to buy any stocks having to do with housing right now, and for good reason. Recent data tell us that the long-awaited upturn in housing is still over the horizon. So shares prices — especially among home furnishing retailers — fall and fall some more. In the last three months, shares of Kirkland’s (Nasdaq: KIRK) have lost almost half of their value, Haverty’s (NYSE: HVT) and Ethan Allen (NYSE: ETH) have fallen by roughly one-third, while Bed, Bath & Beyond (Nasdaq: BBBY) and Pier One Imports (NYSE: PIR) have fallen roughly -20%.

One could assume the sell-off was the result of steadily falling profit estimates, yet consensus expectations for Bed, Bath & Beyond’s profit in 2010 and 2011 have remained flat in the past three months, and Pier One’s profit outlook has actually been strengthening. (Ethan Allen and Haverty’s, which focus on more expensive bedroom and living room sets, have been the subject of downward estimate revisions).

As the table below shows, these stocks now range from reasonably priced to dirt cheap.

I am not a big fan of Haverty’s and Ethan Allen at current levels, due to their greater dependence on large transactions and their still-high P/E ratios. Yet Kirkland’s, Pier One, and Bed Bath & Beyond should hold real appeal — each for distinctive reasons.

Kirkland’s
As noted above, this stock has been a stark underperformer this summer. Shares traded near $25 in late April when investors expected to see a slow rebound in consumer spending. With that catalyst off the table, shares have plunged to just $10. The final blow came last Friday when the company noted a slowdown in consumer spending and reined in guidance for the second half of the year, pushing shares down -27% in a day.

#-ad_banner-#But Kirkland’s 287 stores should simply tread water for the next few quarters and avoid any serious trouble. Cash flow should remain solid and the company already has $66 million in net cash, which should be more than enough to stave off any concerns that further dips in consumer spending would make the company a candidate for bankruptcy, as was the case with rivals Bombay and Linen’s & Things. The demise of those firms also means that Kirkland’s will see less competition and show better earnings leverage when the economy finally rebounds. Trading at around six or seven times earnings, shares are undeniably cheap. Earnings estimates may come down a bit in coming days as last Friday’s results are digested, but the forward P/E is unlikely to rise above eight.

Bed, Bath & Beyond
Bed, Bath & Beyond is the industry’s dominant player. Thanks to savvy merchandising and cost controls, the company has developed a strong following on Wall Street and as a result, has not been hit as hard as some of its smaller peers. Management is also held in high regard due to a history of very conservative guidance, which invariably allows the retailer to top estimates every quarter. Shares trade for just 12 times next year’s profits and would likely garner a multiple in the mid to high teens in a more robust economy. I am leaving my commentary brief on this well-known name, but I am a big fan.

Pier One Imports
This has been one of the most under-appreciated turnaround stories of 2010. Just a few years removed from a flirtation with bankruptcy, Pier One has had a strong run of good news: rivals have gone out of business, the company’s team of buyers started to deliver more appealing wares, gross margins rebounded and open-ended losses turned into profits.

The rebound was in full evidence when Pier One reported fiscal first quarter (May) sales rose +9% from a year ago, even as some stores were closed. On a same-store basis, sales rose an impressive +14%. Fewer rivals also meant fewer price wars: gross margins rose a hefty 700 basis points to 37.4% from a year ago.

Pier One will release fiscal second-quarter results in mid-September. Analysts expect the company post a small profit, compared to a large loss a year ago. Shares, which had moved above $9 in the spring, are finishing up the summer below $6 and that’s put the company’s P/E ratio back into single-digit territory — a multiple far too low for a retailer that now has less competition and much better management execution.

Action to Take –> Pier One likely has the greatest upside here. Per share profits could exceed $1 once consumer spending rebounds, pushing shares up into the low teens. Bed, Bath & Beyond should be seen as a steady core holding for any investor looking for retail exposure. That may seem a counter-intuitive notion as consumer spending sags, but that is precisely the time to be researching these stocks. Kirkland looks more like a long-term play, but could double once consumer spending picks up.