Pier 1 2013 Annual Report Download - page 27

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A summary reconciliation of the Company’s stores open at the beginning of fiscal 2013, 2012 and 2011
to the number open at the end of each period is as follows (openings and closings include relocated stores):
United States Canada Total
Open at February 27, 2010 973 81 1,054
Openings 3 - 3
Closings (9) (2) (11)
Open at February 26, 2011 967 79 1,046
Openings 13 2 15
Closings (9) - (9)
Open at February 25, 2012 971 81 1,052
Openings 22 - 22
Closings (11) (1) (12)
Open at March 2, 2013 (1) 982 80 1,062
(1) The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, S.A. de C.V. which sells Pier 1
Imports merchandise primarily in a “store within a store” format. At the end of fiscal 2013, there were 49 of these locations in
Mexico and one in El Salvador. These locations are excluded from the table above.
Cost of Sales and Gross Profit
Cost of sales were 56.4% expressed as a percentage of sales in fiscal 2013, compared to 57.5% of sales in
fiscal 2012. Gross profit, which is calculated by deducting store occupancy costs from merchandise margin
dollars, was 43.6% expressed as a percentage of sales in fiscal 2013, compared to 42.5% a year ago. Merchandise
margins at the store level for the fiscal 2013 were 60.0% compared to 59.8% in the same period last year.
Merchandise margins, including the direct-to-consumer business, were 59.8% of sales this year. During fiscal
2013, the Company maintained strong input margins, which resulted from the Company’s continued focus on
maximizing margins through negotiating advantageous vendor costs and ensuring an efficient supply chain. In
addition, the Company also continued to execute its disciplined and analytical buying strategies in an effort to
maintain the right balance of regular, promotional, and clearance pricing.
Store occupancy costs during fiscal 2013 were $276.5 million or 16.2% of sales, compared to
$265.9 million, or 17.3% of sales during fiscal 2012. For the fiscal year, all occupancy expenses decreased as a
percentage of sales compared to last year, with the exception of property insurance which remained relatively
constant. Overall, rent expense increased in dollars primarily due to the increase in new store openings, but
decreased as a percentage of sales during fiscal 2013.
Operating Expenses and Depreciation
Selling, general and administrative expenses were $513.1 million, or 30.1% of sales in fiscal 2013,
compared to $475.2 million, or 31.0% of sales in fiscal 2012. The 90 basis point improvement was due to the
leveraging of store payroll and fixed expenses, and was slightly offset by increases in marketing expense.
Depreciation and amortization for fiscal 2013 was $31.0 million, representing an increase of $9.8 million
from last year’s depreciation and amortization expense of $21.2 million. This increase was primarily the result of
capital expenditures in fiscal 2013, partially offset by certain assets becoming fully depreciated and store closures.
In fiscal 2013, the Company recorded operating income of $199.0 million, or 11.7% of sales, compared to
$154.8 million, or 10.1% of sales, for fiscal 2012.
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