Pier 1 2009 Annual Report Download - page 16

Factors that may or may not be controllable by the Company may adversely affect the Company’s
financial performance.
Increases in the Company’s expenses that are beyond the Company’s control including items such
as increases in fuel and transportation costs, higher interest rates, increases in losses from damaged
merchandise, inflation, fluctuations in foreign currency rates, higher costs of labor, insurance and
healthcare, increases in postage and media costs, higher tax rates and changes in laws and regulations,
including accounting standards, may negatively impact the Company’s operating results.
Failure to successfully manage and execute the Company’s marketing initiatives could have a negative
impact on the business.
The success and growth of the Company is partially dependent on generating customer traffic in
order to gain sales momentum in its stores. Successful marketing efforts require the ability to reach
customers through their desired mode of communication utilizing various media outlets. Media
placement decisions are generally made months in advance of the scheduled release date. The
Company’s inability to accurately predict its consumers’ preferences or to utilize the desired mode of
communication may negatively impact the business and operating results.
Changes to estimates related to the Company’s property and equipment, or operating results that are
lower than its current estimates at certain store locations, may cause the Company to incur impairment
charges on certain long-lived assets.
The Company makes certain estimates and projections with regards to individual store operations
as well as overall Company performance in connection with its impairment analyses for long-lived
assets in accordance with Statement of Financial Accounting Standards No. 144, ‘‘Accounting for the
Impairment or Disposal of Long-Lived Assets.’’ An impairment charge is required when the carrying
value of the asset exceeds the estimated fair value or undiscounted future cash flows of the asset. The
projection of future cash flows used in this analysis requires the use of judgment and a number of
estimates and projections of future operating results. If actual results differ from the Company’s
estimates, additional charges for asset impairments may be required in the future. If impairment
charges are significant, the Company’s results of operations could be adversely affected.
Risks Related to Store Profitability
The Company’s success depends, in part, on its ability to operate in desirable locations at reasonable
rental rates and to close underperforming stores at or before the conclusion of their lease terms.
The profitability of the business is dependent on operating the current store base at a reasonable
profit, opening and operating new stores at a reasonable profit, and identifying and closing
underperforming stores. For a majority of the Company’s current store base, a large portion of a stores’
operating expense is the cost associated with leasing the location. Management actively monitors
individual store performance and attempts to negotiate rent reductions to ensure stores can remain
profitable or have the ability to rebound to a profitable state. Current locations may not continue to be
desirable as demographics change, and the Company may choose to close an underperforming store
before its lease expires and incur lease termination costs associated with that closing. The Company
cannot give assurance that opening new stores or an increase in closings will result in greater profits.
Failure to attract and retain an effective management team or changes in the costs or availability of a
suitable workforce to manage and support the Company’s stores and distribution facilities could adversely
affect the business.
The Company’s success is dependent, in a large part, on being able to successfully attract, motivate
and retain a qualified management team and employees. Sourcing qualified candidates to fill important
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