Pier 1 2011 Annual Report Download - page 29

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Operating Expenses, Depreciation and Income Taxes
Selling, general and administrative expenses were $431.9 million, or 30.9% of sales in fiscal 2011,
compared to $421.2 million, or 32.6% of sales in fiscal 2010, an increase of $10.7 million, and a decrease of 170
basis points as a percentage of sales. Selling, general and administrative expenses for fiscal years 2011 and 2010
included charges summarized in the table below (in thousands):
February 26, 2011 February 27, 2010 Increase /
Expense % Sales Expense % Sales (Decrease)
Store payroll $ 218,924 15.7% $ 209,815 16.3% $ 9,109
Marketing 65,840 4.7% 60,945 4.7% 4,895
Store supplies, services and other 24,669 1.8% 28,661 2.2% (3,992)
Variable costs 309,433 22.2% 299,421 23.2% 10,012
Administrative payroll 84,900 6.1% 74,734 5.8% 10,166
Other relatively fixed expenses 35,768 2.6% 34,449 2.7% 1,319
Relatively fixed costs 120,668 8.6% 109,183 8.5% 11,485
Lease termination costs and other 1,799 0.1% 12,575 1.0% (10,776)
$ 431,900 30.9% $ 421,179 32.6% $ 10,721
Expenses that tend to fluctuate proportionately with sales and number of stores, such as store payroll,
marketing, store supplies, and equipment rental, increased $10.0 million, but decreased 100 basis points as a
percentage of sales from last year. Store payroll, including bonus, increased $9.1 million and decreased 60 basis
points as a percentage of sales. Marketing expense increased $4.9 million and remained flat as a percentage of
sales as a result of an increase in television, radio, and internet advertising, partially offset by a reduction of retail
event mailers and catalogs and advertising in newspapers. Other variable expenses, primarily store supplies, store
services and equipment rental, decreased $4.0 million, or 40 basis points as a percentage of sales.
Relatively fixed selling, general and administrative expenses increased $11.5 million to 8.6% of sales, or
10 basis points, from 8.5% of sales during fiscal 2010, primarily as result of increases in accrued management
bonuses and in salaries and benefits. In addition, general insurance costs and foreign currency revaluation
increased as a result of favorable trends in the prior year.
Lease termination and other costs decreased $10.8 million compared to the same period a year ago. Lease
termination costs decreased by $9.1 million, or 80 basis points as a percentage of sales, which was primarily the
result of decreased activity with lease terminations and buyout agreements along with the closing of fewer stores
this year compared to the same period last year. In addition, the Company had a gain of $1.6 million on the sale
of its distribution center near Chicago during the first quarter of fiscal 2011.
Depreciation and amortization for fiscal 2011 was $19.7 million, representing a decrease of
approximately $2.8 million from last year’s depreciation and amortization expense of $22.5 million. This
decrease was primarily the result of certain assets becoming fully depreciated and store closures.
In fiscal 2011, the Company recorded operating income of $103.7 million compared to an operating loss
of $3.3 million for fiscal 2010.
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