Pier 1 2011 Annual Report Download - page 15

A disruption in the operation of the domestic portion of the Company’s supply chain could impact its
ability to deliver merchandise to its stores and customers, which could impact its sales and results of operations.
The Company maintains regional distribution centers in Maryland, Ohio, Texas, California, Georgia and
Washington. At these distribution centers, merchandise is received, allocated, and shipped to the Company’s
stores. Major catastrophic events such as fire or flooding, malfunction or disruption of the information systems,
or shipping problems could result in distribution delays of merchandise to the Company’s stores and customers.
Such disruptions could have a negative impact on the Company’s sales and results of operations.
The Company outsources certain business processes to third-party vendors and has certain business
relationships that subject the Company to risks, including disruptions in business and increased costs.
The Company outsources some business processes to third parties including gift card tracking and
authorization, credit card authorization and processing, store scheduling and time and attendance, insurance
claims processing, U.S. customs filings and reporting, ocean freight processing, certain payroll processing and
tax filings, and record keeping for retirement plans. In addition, the Company has business relationships with
third parties to provide essential services such as the extension of credit to its customers and maintenance of the
Company’s rewards program. The Company makes a diligent effort to ensure that all providers of these services
are observing proper internal control practices, such as redundant processing facilities; however, there are no
guarantees that failures will not occur. Failure of third parties to provide adequate services or the Company’s
inability to arrange for alternative providers on favorable terms in a timely manner could have an adverse effect
on the Company’s results of operations, financial condition, or ability to accomplish its financial and
management reporting.
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, labor disputes around the world, increases
in 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 financial 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, to utilize the desired mode of communication, or to ensure availability of advertised
products may negatively impact the business and operating results.
Changes to estimates related to the Company’s property and equipment, or financial 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 applicable accounting guidance. An impairment charge is required when the carrying value of the asset
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