Pier 1 2010 Annual Report Download - page 9

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®.
In fiscal 2010, the Company closed 38 Pier 1 Imports stores. 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 have, and may continue to lead to the execution of early termination agreements for
underperforming store locations.
As of the end of fiscal 2010, the Company operates regional distribution center facilities in or near
Baltimore, Maryland; Columbus, Ohio; Fort Worth, Texas; Ontario, California; Savannah, Georgia; and Tacoma,
Washington. The Company ceased operations at its Company-owned 514,000 square foot distribution center near
Chicago, Illinois, at 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 Pier
1 Imports 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 unless extended by Grupo
Sanborns through December 31, 2017 pursuant to a renewal option. The agreement is structured in a manner
which substantially insulates the Company from currency fluctuations in the value of the Mexican peso. As of
February 27, 2010, Pier 1 Imports merchandise was offered in 34 Sears Mexico stores and one Dorian’s store.
Since Sears Mexico operates these locations, the Company has no employee or real estate obligations in Mexico.
As of October 19, 2009, the Company terminated its agreement with Sears Roebuck de Puerto Rico, Inc.
(“Sears Puerto Rico”) and ceased operations in Puerto Rico. The Company had a product distribution agreement
with Sears Puerto Rico, which allowed 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 had no employee or real estate
obligations in Puerto Rico because Sears Puerto Rico operated these locations. Pier 1 Imports merchandise was
offered in seven Sears Puerto Rico stores prior to the termination of the agreement.
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 continues to support the card through
marketing programs and receives payments over the life of the agreement for transaction level incentives,
marketing support and other program terms.
In August 2007, the Company discontinued its e-commerce business. The Company continues to use its
web site, www.pier1.com, for marketing and product information, plus investor relations purposes. The Company
has plans to invest additional capital to enhance the website as an effective sales tool and the Company may
return to on-line selling in the near future.
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