Pier 1 2012 Annual Report Download - page 3

Fellow Shareholders:
Fiscal 2012 was another outstanding year for our well-respected and admired Company, marked by a
number of milestones and successes, highlighted by strong financial results – achieving increases in both
total and comparable store sales gains, gross profit, and operating income – and enhanced value to our
shareholders through the repurchase of approximately 8% of our common stock.
You will recall that in early fiscal 2012, we announced a three-year growth plan designed to enhance
sales, further improve profitability and increase shareholder value. That plan included sales goals of $200
per retail square foot, operating margins of at least 10%, and our online business contributing at least 10%
of revenues. The three-year growth plan also provided for an investment of $200 million in capital
initiatives and a $100 million initial share repurchase program.
We are very pleased with the fiscal 2012 accomplishments, most notably achieving an operating
margin of 10.1% in the first year of our three-year plan. Strategic and operating highlights during the year
also included the initial phase of improving our store merchandise fixtures and lighting, the opening of 15
new Pier 1 Imports stores, upgrading our technology and systems to support long-term growth
opportunities, and initiating the development of our e-Commerce platform preparing us for a new phase
of growth.
The successful launching last June of our e-Commerce initiative, Pier 1 To-Go, has been a great
success contributing positively to comparable store sales in fiscal 2012 and generating average ticket and
units per transaction above Company averages. Our creative and technical teams have done an
outstanding job in bringing the “treasure hunt” store experience to the Pier 1 Imports site. We also have
established strong relationships to support the next phase of our growth in e-Commerce – the launch of
Pier 1 To-You in late July – and look forward to launching the initial rollout of our new point-of-sale
system later this fall. Continuing improvements to our planning and allocation systems are enabling us to
better manage our merchandise assortments more efficiently, leading to increased sales and reduced
markdowns. And, we recently entered into a long-term agreement with Alliance Data Systems, a leader
and innovator in loyalty and marketing solutions, to manage our Pier 1 Imports Rewards Card.
The achievements in fiscal 2012 were the result of hard work, talent and dedication throughout the
entire organization. We’ve entered fiscal 2013 in a strong position, but we’re not standing still or getting
overconfident. We know that to continue to take market share in the highly competitive landscape in
which we operate, our merchandise assortments, our stores and our website must be clearly differentiated
in the minds and hearts of our customers.
In moving forward, our teams will be focusing on the implementation of a new three-year growth
plan which we announced in April 2012. The new plan is designed to drive profitable top and bottom-line
growth, expand market share and increase shareholder value as Pier 1 Imports evolves into a full multi-
channel retailer. This new plan includes five key objectives: building a best-in-class e-Commerce
platform; further improving our store portfolio through refurbishments, remodels, new openings and
strategic relocations; strengthening our infrastructure; investing $200 million in capital over the next three
years; and returning value to you, our shareholders. We’ve also elevated our three-year financial
expectations – specifically increasing our goal for sales per retail square foot from $200 to $225 and
increasing our goal for operating margin from 10% to 12%. We believe our online opportunity is
significant for our unique and proprietary merchandise and we anticipate that our online sales should
contribute at least 10% of total revenues by fiscal year 2016. We have also expanded our efforts to drive
shareholder value and based on the strength of our balance sheet and cash position, our Board of
Directors declared a new quarterly cash dividend in April 2012.