Pier 1 2015 Annual Report Download - page 28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FISCAL YEARS ENDED FEBRUARY 28, 2015 AND MARCH 1, 2014
Net Sales
Net sales consisted almost entirely of sales to retail customers, net of discounts and returns, but also included delivery revenues
and wholesale sales and royalties. Net sales by retail concept during fiscal years 2015 and 2014 were as follows (in thousands):
2015 2014
Retail Sales $1,847,420 $1,755,077
Other (1) 18,362 16,666
Net sales $1,865,782 $1,771,743
(1) The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, which sells Pier 1 Imports merchandise primarily in a “store within a store” format. Other sales
consisted primarily of these wholesale sales and royalties received from Grupo Sanborns and gift card breakage. Other sales in fiscal 2015 also included a reduction of credit card fees based
upon a settlement agreement ($2.2 million net of related expenses).
Net sales during fiscal 2015 were $1.866 billion, an increase of 5.3%, from $1.772 billion for the prior fiscal year. Company
comparable sales increased 4.7% for the year which was the result of an increase in total brand traffic, store and online
conversion, and average ticket compared to the prior year. The Company’s e-Commerce sales accounted for 11.0% of net sales
for fiscal 2015 compared to 4.0% for fiscal 2014. E-Commerce sales are comprised of both customer orders placed online
which were shipped directly to the customer (“direct-to-customer”) and those picked up by the customer at a store location
(“store pick-up”).
The Company’s sales from Canadian stores are subject to fluctuations in currency conversion rates. These fluctuations offset the
increase in company comparable sales by approximately 50 basis points in fiscal 2015. Sales on the Pier 1 rewards credit card
comprised 32.4% of U.S. sales compared to 30.4% last year. The Company’s proprietary credit card program provides both
economic and strategic benefits to the Company.
The increase in net sales for the fiscal year was comprised of the following components (in thousands):
Net Sales
Net sales for fiscal 2014 $1,771,743
Incremental sales growth (decline) from:
New stores opened during fiscal 2015 25,891
Stores opened during fiscal 2014 18,179
Company comparable sales 79,874
Other, including closed stores (29,905)
Net sales for fiscal 2015 $1,865,782
A summary reconciliation of the Company’s stores open at the beginning of fiscal 2015 and 2014 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 March 2, 2013 982 80 1,062
Openings 26 1 27
Closings (17) — (17)
Open at March 1, 2014 991 81 1,072
Openings 29 1 30
Closings (36) (1) (37)
Open at February 28, 2015 (1) 984 81 1,065
(1) The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, which sells Pier 1 Imports merchandise primarily in a “store within a store” format. At the end
of fiscal 2015, there were 68 of these locations in Mexico and one in El Salvador. These locations are excluded from the table above.
Merchandise Margin and Gross Profit
Gross profit for fiscal 2015 was $749.7 million, or 40.2% of sales compared to $745.6 million, or 42.1% of sales, in the same
period last year, a decline of 190 basis points. Merchandise margin (the result of adding back delivery, fulfillment and store
occupancy costs to gross profit — see “Reconciliation of Non-GAAP Financial Measures”) was $1.081 billion for fiscal 2015, or
22 PIER 1 IMPORTS, INC. 2015 Form 10-K