Pier 1 2007 Annual Report Download - page 22

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included 100 home office and 75 field administration positions. Changes in the field organization included
the elimination of the visual merchandising functions and a reduction of divisional director positions. The
Company expects these changes to result in approximately $17 million in annualized savings. In addition,
the Company anticipates related one-time charges of less than $5 million to be recorded in the first
quarter of fiscal 2008. The Company has identified other cost savings opportunities throughout the
organization and will implement changes during the next 12 months in an effort to capitalize on these
opportunities.
2) Develop real estate strategies that protect the short-term and long-term future of the Company.
The Company will continue to review the individual contributions of its existing store portfolio, and will
make decisions about the future of individual store locations in accordance with the Company’s overall
turnaround strategy. The Company may decide to exit certain locations through natural expirations,
economic terminations, lease buyouts, sublease opportunities or sale of the properties. At the same time,
the Company will strategically seek out new and growing markets in which new store locations or the
relocation of an existing store will fit within the long-term growth plans of the Company. During fiscal
2008, the Company plans to open five new store locations and close approximately 60 stores.
3) Provide a compelling merchandise selection. To regain its competitive edge, the Company must
provide a merchandise assortment that evolves and adapts to the changing needs and preferences of its
customer base. The Company’s buying department is responsible for purchasing, developing, testing and
creating the merchandise assortments offered. Historically, this department has been responsible for
processes that are not part of product development and procurement and has been greatly under-resourced.
Reassigning administrative tasks to other areas of the Company and increasing the number of buyers will
provide the buying team more time to spend visiting new and existing vendors, and more time to identify
and correct gaps and omissions in the Company’s product mix.
4) Create an effective planning and allocations team. Historically, the Company’s merchandise
planning group was part of the buying department, and the allocations team was part of the logistics
department. In the reorganization of the home office, the Company combined these two groups into one
unit. This newly combined team will oversee, among other things, inventory levels, markdowns, and
purchase order management, and will absorb the administrative tasks that historically burdened the buying
team. This change will ensure everything from assortment planning to store allocation is carefully and
thoughtfully planned.
5) Improve supply chain efficiency. The Company will review every operational practice including,
but not limited to, freight costs, vendor payment terms, the use of outside storage facilities, and
transportation and delivery contracts in an effort to find ways to simplify the process, improve supply
chain visibility, reduce costs and increase inventory turns.
6) Create a cost-effective marketing plan. In fiscal 2007, the Company experimented with changes
in its marketing strategy and spent significant dollars on television and direct mail advertising efforts. The
changes did not provide the desired increase in traffic or comparable store sales. Recognizing that a
change is needed, the Company plans to make adjustments to its strategy for the second half of fiscal
2008, and will decrease its marketing expenditures this coming fiscal year. As its customer base is very
diverse demographically, the Company will continue to research the ideal marketing mix to effectively
communicate with its entire customer base while reaching groups of new customers as well. The
Company’s goal is to strike a healthy balance between driving traffic, increasing comparable store sales
and revitalizing the Pier 1 brand.
The Company’s management presently believes that if it effectively and efficiently executes these business
priorities as part of its turnaround strategy, the Company should, over time, return to profitability.
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