Pier 1 2009 Annual Report Download - page 5

on our investment, and concentrated our efforts on our most loyal customers. As we began to
rebuild the brand message, we tested different media and identified multiple channels that work
well for us.
We have also enhanced our point-of-sale technology to include customer data capture that
provides information about our customers that can be used to assess the reach of our marketing
efforts and to more effectively target future marketing campaigns. The revitalization of our
website, pier1.com, resulted in a detailed pre-shopping resource that provides potential
customers with everything from furniture dimensions to copies of recent retail mailers to aid in
their decision making process. Overall, we saved $58 million dollars in marketing costs from
fiscal 2007 levels. We believe that a marketing budget of about $60 million is the right level.
Our seventh business priority is to give our customers a rewarding and satisfying shopping
experience. All great shopping experiences begin and end with customer service. We strive to
ensure that every store associate has the selling skills and tools required to give our customers
great service. We have removed barriers that might otherwise reduce productivity and customer
interaction. Our commitment to providing the best experience in retail brings our brand to life
and gives our customers a reason to return to Pier 1 Imports. We are getting encouraging results
and are achieving higher conversion rates than before.
You may have noticed that we have redesigned our store layout by defining merchandise
departments and improving our in-store signage, which makes it easier for our customer to
experience our unique merchandise assortment. We continue to improve our visual
merchandising efforts to create the feel of a ‘‘trading bazaar’’ that one might find in the countries
of origin for our merchandise. We make frequent changes to the front of our stores to highlight
new merchandise and to ensure our stores are relevant and in line with the customer’s mindset.
The final business priority for our company is to develop a strong performance culture. We know
that the execution of our business priorities is dependent upon our ability to attract, motivate,
and retain quality associates in a very competitive environment. In 2008, we established a set of
values that support our business priorities and define behaviors that are expected of our
associates. To reinforce these behaviors and to align their efforts with overall company goals, we
developed incentive programs that reward our associates, in both the long and short term. These
rewards are performance based and are dependent on individual performance in effective area
management, teamwork and expense control, in addition to the company’s overall performance.
This ensures that every member of the management team understands how their individual
efforts contribute to the successful execution of our eight business priorities, and ultimately to
our return to profitability. Our overall performance management program is designed to retain
talented individuals and to develop them into the future leaders of our company.
Our efforts in executing each of these business priorities should have paved the way for fiscal
2009 to be the year that we broke even. Unfortunately, the dramatic change in the United States
economy as a result of the troubled financial markets in September 2008 had a significant impact
on our business as consumers grew fearful and cut discretionary spending. We experienced
double-digit declines in traffic from the middle of September until December 2008. The drop in
traffic was so significant that the modest gains seen in conversion rates were unable to offset the
drop in traffic and the decline in average ticket, and as a result, both our comparable store sales
and our operating profit declined compared to last year.