Pier 1 2009 Annual Report Download - page 10

PART I
Item 1. Business.
(a) General Development of Business.
Pier 1 Imports, Inc. was incorporated as a Delaware corporation in 1986. Throughout this report,
references to the ‘‘Company’’ include Pier 1 Imports, Inc. and its consolidated subsidiaries. References
to ‘‘Pier 1 Imports’’ relate to the Company’s retail locations operating under the name Pier 1 Imports↧.
References to ‘‘Pier 1 Kids’’ relate to the Company’s retail locations that operated under the name Pier
1 Kids↧.
On March 20, 2006, the Company announced the sale of its subsidiary based in the United
Kingdom, The Pier Retail Group Limited (‘‘The Pier’’). The Pier has been included in discontinued
operations in the Company’s financial statements for fiscal 2007 and prior years. All discussions in this
report relate to continuing operations, unless stated otherwise.
In fiscal 2009, the Company closed 26 stores and opened one new Pier 1 Imports store, a
relocation of an existing store in Flushing, New York. During the fourth quarter of fiscal 2009, the
Company began negotiating with landlords to achieve rental reductions across its store portfolio.
Unsuccessful rental reduction negotiations may lead to the execution of early termination agreements
for underperforming store locations. The Company expects these negotiations to be on-going
throughout the upcoming fiscal year.
As of the end of fiscal 2009, the Company maintained regional distribution center facilities in or
near Baltimore, Maryland; Chicago, Illinois; Columbus, Ohio; Fort Worth, Texas; Ontario, California;
Savannah, Georgia; and Tacoma, Washington. The Company plans to cease operations at its Company-
owned 514,000 square foot distribution center near Chicago, Illinois, by the end of the first quarter of
fiscal 2010.
The Company has an arrangement to supply Grupo Sanborns, S.A. de C.V. (‘‘Grupo Sanborns’’)
with merchandise to be sold primarily in a ‘‘store within a store’’ format in certain stores operated by
Grupo Sanborns’ subsidiaries, Sears Roebuck de Mexico, S.A. de C.V. (‘‘Sears Mexico’’) and Dorian’s
Tijuana, S.A. de C.V. (‘‘Dorian’s’’). The agreement with Grupo Sanborns will expire January 1, 2012.
The agreement is structured in a manner which substantially insulates the Company from currency
fluctuations in the value of the Mexican peso. In fiscal 2009, Grupo Sanborns opened three new ‘‘store
within a store’’ locations and one free-standing location offering Pier 1 Imports merchandise. As of
February 28, 2009, Pier 1 Imports merchandise was offered in 34 Sears Mexico stores and one Dorian’s
store. Grupo Sanborns has no plans for new ‘‘store within a store’’ or ‘‘free-standing’’ locations in
Mexico during fiscal 2010. Since Sears Mexico operates these locations, the Company has no employee
or real estate obligations in Mexico.
The Company has a product distribution agreement with Sears Roebuck de Puerto Rico, Inc.
(‘‘Sears Puerto Rico’’), which allows Sears Puerto Rico to market and sell Pier 1 Imports merchandise
in a ‘‘store within a store’’ format in certain Sears Puerto Rico stores. The Company has no employee
or real estate obligations in Puerto Rico because Sears Puerto Rico operates these locations. As of
February 28, 2009, Pier 1 Imports merchandise was offered in seven Sears Puerto Rico stores. Sears
Puerto Rico has no plans for new ‘‘store within a store’’ locations in Puerto Rico during fiscal 2010.
During fiscal 2007, the Company sold its credit card operations, which included its credit card
bank located in Omaha, Nebraska, that operated under the name Pier 1 National Bank, N.A. (the
‘‘Bank’’) to Chase Bank USA, N.A. (‘‘Chase’’). The sale was comprised of the Company’s proprietary
credit card receivables, certain charged-off accounts and the common stock of the Bank. The Company
and Chase have entered into a long-term program agreement. Under this agreement, the Company
3