Pier 1 replaced actress Kirstie Alley as the brand's celebrity spokesperson after three years. Thom Filicia of the "Queer Eye" took the baton from Alley, only to have it yanked away last month.

NEW YORK (CNN/Money) - How much bamboo furniture can a yuppie really buy? Probably not a lot -- just ask Pier I Imports.

But the good news for the company is that Warren Buffett might be into damask pillows.

Last month, the Fort Worth, Texas-based retailer of exotic furniture, tableware, candles and other specialty products posted a 15.4 percent tumble in sales at its stores open at least a year --- a key retail measure known as same-store sales.

That precipitous decline followed a dismal 10.4 percent drop in January sales and an 8.8 percent decline in December.

In fact, you'd have to go back a year -- to March 2004 -- to find the last time that Pier 1 (Research) enjoyed a sales increase.

Eroding sales is only part of the problem. Industry observers say the retailer has enough challenges on its hands to fill one of the many decorative straw baskets that it sells.

Morningstar analyst Anthony Chukumba said Pier 1's plummeting sales are due to weaker customer traffic and a lower average sale price per transaction. The company currently operates over 1,100 stores in the U.S. but believes it can support 2,000 stores, leading to some concerns of cannibalization.

"Customer traffic was hurt by the lack of national TV advertising as Pier 1 revamped its commercials after its disastrous Thom Filicia (of "Queer Eye for the Straight Guy") campaign," said Chukumba. "The drop in average sale price per transaction was due to the ongoing changes in Pier 1's merchandise assortment, which led to the stores having too little inventory on the shelves."

While shoppers may be shunning its stores, investors haven't pulled up their chair to the company either.

Pier 1 shares fell 10 percent in 2004 and trade near their 52-week low. Short interest on the stock at its highest level in 12 months, a sign that many are betting on more damage to come.

Enter the Oracle of Omaha. Industry watchers say Buffett, the legendary billionaire value investor, may be Pier 1's saving grace -- at least for now.

Chukumba suspects that a primary reason Pier 1's stock isn't yet trading even lower in the mid-single digits is because of Buffett's interest in the company.

"Wall Street is not as bothered as it should be because of Buffett. He's legendary for investing in undervalued companies for the long haul. Absent Buffett and Pier 1 would be in more trouble," Chukumba said, although he did admit to Pier 1's low-debt, significant free cash-flow generation and consistent dividend returns as a few other positives cushioning the stock.

Through his holding company Berkshire Hathaway (down $25.00 to $90,600.00, Research), Buffett acquired an 8-million share, or roughly 9 percent, stake in the furniture chain in late 2004, a move that sparked a short-lived rally in Pier 1's stock.

Craig Johnson, president of retail consulting firm Custom Growth Partners, agreed with Chukumba.

"No doubt, Pier 1 has a substantial brand equity," said Johnson. "My suspicion is that Buffett sees through the current problems and has confidence in whatever new vision and strategy the company is working on that isn't apparent yet to outsiders."

Indeed, the retailer is in the midst reworking its merchandise mix and overhauling its advertising with a new non-celebrity campaign expected to debut later this month.

Others, such as Baldwin Anthony Securities analyst William Baldwin, think investors ultimately will come back to focus on the fundamentals.

"It wouldn't surprise me if Pier 1's ongoing situation leads to some management shuffle unless things improve," Baldwin said, echoing Chukumba and Johnson. "Pier 1 has called itself a growth company, not a value company. For that it needs to grow its top line and profits."

Both Chukumba and Baldwin say that Pier 1's biggest challenge is from retailers such as Wal-Mart (Research) and Target (Research) encroaching on its turf by increasing their offerings of moderately-priced home furnishings.

Said Baldwin, "With the Thom Filicia ads, the company tried for a more upscale appeal and that failed. The younger customers are moving over to discounters and Pier 1 is struggling to draw them back. I have yet to figure out where this company's growth is going to come from or where there margins will come from when their strategy is so unclear."

Berkshire Hathaway did not return calls for comment. Pier 1 could not immediately be reached for comment.