Pier 1 2011 Annual Report Download - page 32

Operating Expenses, Depreciation and Income Taxes
Selling, general and administrative expenses, including marketing, were $421.2 million, or 32.6% of sales
in fiscal 2010, a decrease of $32.3 million and 170 basis points from fiscal 2009’s $453.5 million or 34.3% of
sales. Selling, general and administrative expenses for fiscal years 2010 and 2009 included charges summarized
in the table below (in thousands):
February 27, 2010 February 28, 2009 Increase /
Expense % Sales Expense % Sales (Decrease)
Store payroll $ 209,815 16.3% $ 217,774 16.5% $ (7,959)
Marketing 60,945 4.7% 58,989 4.5% 1,956
Store supplies, services and other 28,661 2.2% 32,473 2.5% (3,812)
Variable costs 299,421 23.2% 309,236 23.4% (9,815)
Administrative payroll (excluding severance) 74,734 5.8% 70,118 5.3% 4,616
Other relatively fixed expenses 34,449 2.7% 51,188 3.9% (16,739)
Relatively fixed costs 109,183 8.5% 121,306 9.2% (12,123)
Subtotal 408,604 31.7% 430,542 32.6% (21,938)
Lease termination costs and impairments 11,246 0.9% 15,727 1.2% (4,481)
Acquisition costs - 0.0% 1,660 0.1% (1,660)
Severance and other 1,329 0.1% 5,542 0.4% (4,213)
Special charges 12,575 1.0% 22,929 1.7% (10,354)
$ 421,179 32.6% $ 453,471 34.3% $ (32,292)
Expenses that tend to fluctuate proportionately with sales and number of stores, such as store payroll,
marketing, store supplies, and equipment rental, decreased $9.8 million and 20 basis points as a percentage of
sales from the previous year. Store payroll, including bonus, decreased $8.0 million primarily as a result of a
decrease in total number of stores as well as planned efficiencies in store staffing compared to fiscal 2009.
Marketing expense increased $2.0 million and 20 basis points as a percentage of sales as a result of an increase in
the number of newspaper inserts, radio advertising and internet media in fiscal 2010, partially offset by a
decrease in cable television advertising. Other variable expenses such as store supplies and equipment rental
decreased $3.8 million or 30 basis points as a percentage of sales.
Other selling, general and administrative expenses that do not typically vary with sales decreased
$12.1 million to 8.5% of sales, or 70 basis points from 9.2% of sales during fiscal 2009, primarily as a result of
the Company’s continued initiative to manage and control expenses. During fiscal 2010, general insurance costs
and foreign currency revaluation also contributed to this improvement. These decreases were partially offset by
an increase in administrative payroll resulting primarily from an increase in home office management bonuses
stemming from the improved performance.
Lease termination costs and impairments decreased $4.5 million, primarily as a result of no impairment
charges taken in fiscal 2010, compared to $9.7 million in fiscal 2009. This decrease was partially offset by an
increase in lease termination costs of $5.2 million related to the closure of stores where favorable rent reductions
were not reached with landlords. Severance, outplacement and other costs decreased $4.2 million primarily as a
result of expenses incurred in the prior year related to a reduction in the Company’s work force. Acquisition
costs decreased $1.7 million as a result of expenses related to the Company’s withdrawn proposal to acquire all
of the outstanding common stock shares of Cost Plus, Inc. in fiscal 2009, with no similar expenditure in fiscal
2010.
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