Pier 1 2011 Annual Report Download - page 113

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The purpose of this Compensation Discussion and Analysis disclosure is to provide material information about
Pier 1 Imports’ compensation policies, principles, objectives and practices for its named executive officers for fiscal
2011 and to put into perspective the tabular disclosures and related narratives that follow it.
Executive Summary
The executive officers’ decisions and leadership over the past four years, even throughout the worst
recessionary business climate in recent history, positioned Pier 1 Imports to achieve significantly improved and
profitable operating performance in fiscal 2011, some highlights of which are detailed below:
• delivered a 10.9% annual comparable store sales increase resulting from increases in traffic,
conversion rate and average ticket;
• delivered a company historical high merchandise margin of 58.6% of sales for fiscal 2011;
• delivered annual operating income for the first time in six years, an improvement of $107 million
over the prior fiscal year, and which was 7.4% of sales for fiscal 2011;
• reported net income in each of the four quarters during a fiscal year for the first time in six years;
• increased sales per retail square foot to $168 at fiscal 2011 year-end, up from $152 per retail square
foot at fiscal 2010 year-end;
• repaid in full all outstanding 6.375% Convertible Senior Notes due 2036;
• maintained a strong balance sheet at year-end with $301.5 million in cash, inventory relatively flat to
fiscal 2010 year-end levels and $9.5 million in long-term debt; and
• delivered a total shareholder return of approximately 60% in fiscal 2011.
During fiscal 2011, Pier 1 Imports re-positioned from a defensive to an offensive mode and continued to plan
for its future by designing a three-year growth plan to drive sales and further improve profitability in order to
increase shareholder value. The board of directors approved the three-year growth plan and Pier 1 Imports will
implement the following initiatives in fiscal 2012 in connection with the plan:
• a clearly defined capital allocation policy in support of business priorities and objectives that have
solid and realizable returns;
• a program to invest $200 million over the next three years in initiatives such as the entry into
e-commerce, improvements to existing stores, store portfolio expansion, and technology
development; and
• a $100 million share repurchase program to return value to shareholders.
During fiscal 2011, Pier 1 Imports enhanced its compensation programs by:
• implementing voluntary stock ownership guidelines for senior management to complement existing
voluntary stock ownership guidelines for our non-employee directors;
• adopting a new deferred compensation program with variable returns versus our existing deferred
compensation arrangement which contained pre-set levels of return;
• beginning the fiscal year with a renewed and extended employment agreement for Pier 1 Imports’
chief executive officer;
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