Pier 1 2009 Annual Report Download - page 3

FELLOW SHAREHOLDERS:
Returning our well-loved company to profitability and restoring shareholder value is what we
think about all day every day. This recession has made it tougher, but our confidence in our
ability and resolve to get the job done has not wavered. If anything, it has made us more
determined. We know that every aspect of our business is in better shape than it was two years
ago and that the improvements we have made, and continue to make, will allow us to come out of
this recession strong.
It is frustrating for all of us that in this retail climate, our turnaround will take longer than we
previously expected, but the foundation on which our turnaround is built remains the same. We
have clear strategies which speak to great merchandise, great stores, and a lean and efficient
infrastructure. These strategies are encapsulated in our business priorities. Staying focused on
these priorities has allowed us to accomplish many things despite the recession and we would like
to share some of these successes with you.
Merchandise is where it all starts and therefore our number one priority is to develop a
best-in-class buying organization that has a clear understanding of Pier 1 Imports’ brand
positioning and what excites our customers. Our buyers’ job is to travel, source, buy, develop,
test, and ultimately create compelling merchandise assortments that exceed our customers’
expectations. To do this, we needed a bigger team. By September 2007 we had added an
additional 11 buyers to the team, bringing our total number to 22. Enlarging our team has
created smaller spans of control with greater specialization, and allowed our buying team more
time to source and develop new products. Over the past two years, our team of buyers has begun
to reconnect with our customers, as evidenced by the increases in conversion rate that we have
been experiencing over the past year and a half. They have re-captured the brand essence of
Pier 1 Imports and we are pleased with the ongoing improvements to our merchandise. As each
season goes by, the accuracy of our buying is improving.
During fiscal 2008 and 2009, we brought back old favorites, created new favorites, and tested new
categories and departments. We have focused on rebuilding the ‘‘treasure hunt’’ that our
customers enjoy. Fortunately for us, before the decline in the economy took hold, we had already
moved away from our over-reliance on large, high-ticket furniture pieces and began to develop
stronger assortments of more affordable furniture and strengthened considerably our
non-furniture assortments. You can now find in our store, jewelry, girls’ gifts, stationary,
epicurean offerings, and kitchen gadgets. Although this shift in our merchandise assortment
decreased our average ticket, it helped to lessen the impact that the economic crisis had on our
business by driving increases in units per transaction and conversion rate.
Our second business priority is to support the buying team with an equally best-in-class planning
and allocation department. The planning and allocations team ensures that everything from
assortment planning to store allocation is carefully and thoughtfully planned and executed. We
have made improvements to the timing of our purchases to better align with our selling periods.
We have made technological advances in our allocations system that allows greater flexibility in
allocating SKUs and setting parameters by SKU at the store level.
Our efforts to date have enabled us to make significant reductions in the inventory in our
distribution centers—decreasing our inventory by $95 million this year without compromising our
customers’ in-store experience. Further, this reduction allowed us to vacate outside warehouse