Pier 1 2008 Annual Report Download - page 20

The Company redirected its marketing dollars in an effort to drive traffic using more cost effective
methods. External marketing efforts have been structured to reach new and existing customers through the use
of periodic in-home mailers, newspaper inserts, email notifications and web site advertisements. In addition to
these efforts, the Company continues to operate its website as a marketing tool with copies of the in-home
mailers and product information available to site visitors. The Company is also continuing to leverage its
partnership with Chase Bank USA, N.A. (“Chase”) through the Pier 1 Imports preferred credit card to reach
existing and identify and target potential new customers. The Company anticipates that marketing expenditures
will approximate 4% to 5% of sales for fiscal 2009.
The following discussion and analysis of financial condition, results of operations, liquidity and capital
resources relates to continuing operations, unless otherwise stated, and should be read in conjunction with the
accompanying audited Consolidated Financial Statements and notes thereto which can be found in Item 8 of
this report. Fiscal 2008 and fiscal 2006 were 52-week years while fiscal 2007 was a 53-week year.
Overview of Business
The Company’s key financial and operational indicators used by management to evaluate the performance
of the business include the following (trends for these indicators are explained in the comparative discussions
of this section):
Key Performance Indicators 2008 2007 2006
Continuing operations:
Total sales decline .................................... (6.9)% (8.6)% (2.7)%
Comparable stores sales decline .......................... (1.7)% (11.3)% (7.1)%
Sales per average retail square foot ....................... $ 164 $ 168 $ 187
Merchandise margins as a % of sales ...................... 48.5% 47.9% 50.2%
Gross profit as a % of sales ............................. 29.1% 29.2% 33.9%
Selling, general and administrative expenses as a % of sales ..... 32.3% 40.0% 33.1%
Operating loss from continuing operations as a % of sales ...... (5.8)% (13.9)% (2.4)%
Loss from continuing operations as a % of sales .............. (6.4)% (14.0)% (1.5)%
Inventory per retail square foot........................... $ 46.71 $ 38.84 $ 39.07
Total retail square footage (in thousands) ................... 8,782 9,230 9,407
Total retail square footage growth (decline) ................. (4.9)% (1.9)% 3.2%
Stores included in the comparable store sales calculation are those stores that were opened prior to the
beginning of the preceding fiscal year and are still open. Also included are stores that were relocated during
the year within a specified distance serving the same market, where there is not a significant change in store
size and where there is not a significant overlap or gap in timing between the opening of the new store and
the closing of the existing store. Stores that are expanded or renovated are excluded from the comparable store
sales calculation during the period they are closed for such remodeling. When these stores re-open for
business, they are included in the comparable store sales calculation in the first full month after the re-opening
if there is no significant change in store size. If there is a significant change in store size, the store continues
to be excluded from the calculation until it meets the Company’s established definition of a comparable store.
Comparable store sales in fiscal 2009 are anticipated to include all stores with the exception of the four
locations opened during fiscal 2008. Stores closed during fiscal 2009 will be excluded after they are closed.
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