Pier 1 2010 Annual Report Download - page 33

Operating Expenses, Depreciation and Income Taxes
Selling, general and administrative expenses, including marketing, were $453.5 million or 34.3% of sales
in fiscal 2009, a decrease of $34.4 million and an increase 200 basis points from $487.9 million or 32.3% of sales
in fiscal 2008. Selling, general and administrative expenses for fiscal 2009 and 2008 included charges
summarized in the table below (in thousands):
February 28, 2009 March 1, 2008 Increase /
(Decrease)Expense % Sales Expense % Sales
Store payroll $ 217,774 16.5% $ 229,573 15.2% $ (11,799)
Marketing 58,989 4.5% 63,970 4.2% (4,981)
Store supplies, services and other 32,473 2.5% 38,341 2.5% (5,868)
Variable costs 309,236 23.4% 331,884 22.0% (22,648)
Administrative payroll (excluding severance) 70,118 5.3% 82,244 5.4% (12,126)
Lease termination costs and impairments 15,727 1.2% 15,470 1.0% 257
Severance and other 5,501 0.4% 7,646 0.5% (2,145)
Acquistion costs 1,660 0.1% - 0.0% 1,660
Loss (gain) on sale of fixed assets 41 0.0% (2,137) -0.1% 2,178
Other relatively fixed expenses 51,188 3.9% 52,791 3.5% (1,603)
144,235 10.9% 156,014 10.3% (11,779)
$ 453,471 34.3% $ 487,898 32.3% $ (34,427)
Expenses that tend to fluctuate proportionately with sales and number of stores, such as store payroll,
marketing, store supplies, and equipment rental, decreased $22.6 million and increased 140 basis points as a
percentage of sales from fiscal 2008. Store payroll, including bonus, decreased $11.8 million partly as a result of
planned staffing reductions at the stores and as a result of store closures. Marketing expense decreased $5.0
million and increased 25 basis points as a percentage of sales as a result of the absence of television advertising
for most of fiscal 2009, offset slightly by the introduction of a seasonal national cable television advertising
campaign introduced late in the third quarter of fiscal 2009 running through the early part of the fourth quarter.
The timing of marketing expenditures was shifted in order to utilize more of the budget in the all important
holiday selling period. Other variable expenses such as store supplies and equipment rental decreased $5.9
million primarily due to efforts to reduce costs.
Other selling, general and administrative expenses decreased $11.8 million compared to last year.
Administrative payroll including bonus decreased $12.1 million resulting primarily from a decrease in home
office management bonus, stock option expense and home office payroll expense. Severance, outplacement and
other costs decreased $2.1 million primarily as a result of expenses incurred in the prior year related to larger
reductions in work force compared to a slightly smaller reduction in the current year. Other relatively fixed
selling, general and administrative expenses decreased $1.6 million primarily as a result of the Company’s
continued initiative to manage and control expenses. These decreases were partially offset by $1.7 million in
expenses related to the Company’s withdrawn proposal to acquire all of the outstanding common stock shares of
Cost Plus, Inc. and a $2.2 million gain recorded on the sale of fixed assets in fiscal 2008.
Depreciation and amortization for fiscal 2009 was $30.6 million, representing a decrease of
approximately $9.2 million from $39.8 million in fiscal 2008. This decrease was primarily the result of the sale
of the home office building and related assets during fiscal 2009, lower net book values on certain store-level
long-lived assets because of impairment charges taken during and since the end of fiscal 2008, certain assets
becoming fully depreciated, store closures, and reduced capital spending in recent years.
27