Pier 1 2010 Annual Report Download - page 17

The Company’s business is subject to seasonal variations, with a significant portion of its sales and
earnings occurring during two months of the year.
Approximately 25% of the Company’s sales generally occur during the November-December holiday
selling season. Failure to predict consumer demand correctly during these months could result in lost sales or
gross margin erosion if merchandise must be marked down significantly to clear inventory.
The Company’s business may be harmed by adverse weather conditions and natural disasters.
Extreme or undesirable weather can adversely affect customer traffic in retail stores as well as customer
shopping behavior. Natural disasters such as earthquakes, weather phenomena, and events causing infrastructure
failures could adversely affect any of the Company’s retail locations, distribution centers, administrative
facilities, ports, or locations of its suppliers domestically and in foreign countries.
Risks Associated with Dependence on Technology
The Company is heavily dependent on various kinds of technology in the operation of its business.
Failure of any critical software applications, technology infrastructure, telecommunications, data
communications, or networks could have a material adverse effect on the Company’s ability to manage the
merchandise supply chain, sell merchandise, accomplish payment functions or report financial data. Although the
Company maintains off-site data backups, a concentration of technology related risk exists in the Company’s
headquarters located in Texas.
Failure to protect the integrity and security of individually identifiable data of the Company’s customers
and employees could expose the Company to litigation and damage the Company’s reputation.
The Company receives and maintains certain personal information about its customers and employees.
The use of this information by the Company is regulated at the international, federal and state levels, as well as
by certain third party contracts. If the Company’s security and information systems are compromised or our
business associates fail to comply with these laws and regulations and this information is obtained by
unauthorized persons or used inappropriately, it could adversely affect the Company’s reputation, as well as
operations, results of operations and financial condition, and could result in litigation against the Company or the
imposition of penalties. As privacy and information security laws and regulations change, the Company may
incur additional costs to ensure it remains in compliance.
Regulatory Risks
The Company is subject to laws and regulatory requirements in many jurisdictions. Changes in these
laws and requirements may result in additional costs to the Company, including the costs of compliance as well
as potential penalties for non-compliance.
The Company operates in many taxing jurisdictions, including foreign countries. In most of these
jurisdictions, the Company is required to collect state and local sales taxes at the point of sale and remit them to
the appropriate taxing authority. The Company is also subject to income taxes, excise taxes, franchise taxes,
payroll taxes and other special taxes. The Company is also required to maintain various kinds of business and
commercial licenses to operate its stores and other facilities. Rates of taxation are beyond the Company’s control,
and increases in such rates or taxation methods and rules could have a material adverse impact on the Company’s
profitability. Failure to comply with laws concerning the collection and remittance of taxes and with licensing
requirements could also subject the Company to financial penalties or business interruptions.
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