PIER 1 IMPORTS INC/DE (Form: 10-Q, Received: 01/08/2014 12:55:28)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2013

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-07832

PIER 1 IMPORTS, INC.

(Exact name of registrant as specified in its charter)

Delaware

75-1729843

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer

Identification Number)

100 Pier 1 Place, Fort Worth, Texas 76102

(Address of principal executive offices, including zip code)

(817) 252-8000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]. No [ ].

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer X		Accelerated filer
Non-accelerated filer	(Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

As of January 3, 2014, there were outstanding 102,748,406 shares of the registrant’s common stock, all of one class.

PIER 1 IMPORTS, INC.

INDEX TO QUARTERLY FORM 10-Q


PART I. FINANCIAL INFORMATION			Page

Item 1. Financial Statements

Consolidated Statements of Operations for the Three and Nine Months Ended November 30, 2013 and November 24, 2012			3

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended November 30, 2013 and November 24, 2012			4

Consolidated Balance Sheets as of November 30, 2013, March 2, 2013 and November 24, 2012			5

Consolidated Statements of Cash Flows for the Nine Months Ended November 30, 2013 and November 24, 2012			6

Consolidated Statement of Shareholders’ Equity for the Nine Months Ended November 30, 2013			7

Notes to Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11

Item 3. Quantitative and Qualitative Disclosures about Market Risk			20

Item 4. Controls and Procedures			20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			20

Item 1A. Risk Factors			20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			21

Item 3. Defaults upon Senior Securities			21

Item 4. Mine Safety Disclosures			21

Item 5. Other Information			21

Item 6. Exhibits			22

Signatures			23

PART I

Item 1.

Financial Statements.

PIER I IMPORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)


	Three Months Ended						Nine Months Ended
	November 30,			November 24,			November 30,			November 24,
	2013			2012			2013			2012
Net sales	$	465,462		$	424,527		$	1,255,957		$	1,153,260
Cost of sales		263,232			238,268			724,830			665,179

Gross profit		202,230			186,259			531,127			488,081
Selling, general and administrative expenses		149,217			139,244			397,296			367,596
Depreciation and amortization		9,919			8,192			28,461			21,936

Operating income		43,094			38,823			105,370			98,549
Nonoperating expenses and (income):
Interest, investment income and other		(592	)		(298	)		(1,216	)		(2,169	)
Interest expense (income)		528			664			1,846			(629	)

		(64	)		366			630			(2,798	)

Income before income taxes		43,158			38,457			104,740			101,347
Income tax provision		16,400			14,772			39,801			33,607

Net income	$	26,758		$	23,685		$	64,939		$	67,740

Earnings per share:
Basic	$	0.26		$	0.22		$	0.62		$	0.64

Diluted	$	0.26		$	0.22		$	0.61		$	0.62

Dividends declared per share:	$	0.05		$	0.04		$	0.15		$	0.12

Average shares outstanding during period:
Basic		103,319			105,419			105,018			106,601

Diluted		104,716			107,308			106,942			108,502

The accompanying notes are an integral part of these financial statements.

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended						Nine Months Ended
	November 30,			November 24,			November 30,			November 24,
	2013			2012			2013			2012
Net income	$	26,758		$	23,685		$	64,939		$	67,740
Other comprehensive income (loss):
Foreign currency translation adjustments		(361	)		(21	)		(1,448	)		274
Pension adjustments		464			494			1,393			985

Other comprehensive income (loss), net of tax		103			473			(55	)		1,259

Comprehensive income	$	26,861		$	24,158		$	64,884		$	68,999

The accompanying notes are an integral part of these financial statements.

PIER 1 IMPORTS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)


	November 30,			March 2,			November 24,
	2013			2013			2012
ASSETS
Current assets:
Cash and cash equivalents, including temporary investments of $120,222, $191,568 and $97,064, respectively	$	128,205		$	231,556		$	120,788
Accounts receivable, net		36,557			22,309			34,979
Inventories		429,069			356,053			417,547
Prepaid expenses and other current assets		51,625			49,016			25,417

Total current assets		645,456			658,934			598,731
Properties, net of accumulated depreciation of $418,167, $483,067 and $476,403, respectively		176,816			150,615			136,736
Other noncurrent assets		50,043			47,666			71,963

	$	872,315		$	857,215		$	807,430


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	105,143		$	58,701		$	73,923
Gift cards and other deferred revenue		55,490			51,740			47,800
Accrued income taxes payable		18,020			25,249			16,689
Other accrued liabilities		114,455			112,437			114,628

Total current liabilities		293,108			248,127			253,040
Long-term debt		9,500			9,500			9,500
Other noncurrent liabilities		70,717			62,457			60,440

Shareholders’ equity:
Common stock, $0.001 par, 500,000,000 shares authorized, 125,232,000 issued		125			125			125
Paid-in capital		231,316			233,518			231,234
Retained earnings		623,512			574,206			517,732
Cumulative other comprehensive loss		(4,883	)		(4,828	)		(3,214	)
Less — 21,956,000, 18,906,000 and 18,861,000 common shares in treasury, at cost, respectively		(351,080	)		(265,890	)		(261,427	)

		498,990			537,131			484,450
Commitments and contingencies		-			-			-

	$	872,315		$	857,215		$	807,430

The accompanying notes are an integral part of these financial statements.

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended
	November 30, 2013			November 24, 2012
Cash flow from operating activities:
Net income	$	64,939		$	67,740
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization		33,598			27,537
Stock-based compensation expense		10,267			9,141
Deferred compensation		5,372			4,767
Amortization of deferred gains		(2,286	)		(6,198	)
Change in reserve for uncertain tax positions		860			(7,266	)
Other		(582	)		(1,495	)
Changes in cash from:
Inventories		(73,016	)		(95,065	)
Proprietary credit card receivables		(7,441	)		(7,653	)
Prepaid expenses and other assets		(14,829	)		(16,424	)
Accounts payable and accrued expenses		51,671			8,401
Accrued income taxes payable, net of payments		(7,391	)		(3,716	)

Net cash provided by (used in) operating activities		61,162			(20,231	)

Cash flow from investing activities:
Capital expenditures		(60,590	)		(57,741	)
Proceeds from disposition of properties		11,055			165
Proceeds from sale of restricted investments		507			1,238
Purchase of restricted investments		(2,566	)		(3,178	)

Net cash used in investing activities		(51,594	)		(59,516	)

Cash flow from financing activities:
Cash dividends		(15,633	)		(12,759	)
Purchases of treasury stock		(114,025	)		(89,747	)
Proceeds from stock options exercised, stock purchase plan and other, net		17,888			15,173
Debt issuance costs		(1,149	)		-

Net cash used in financing activities		(112,919	)		(87,333	)

Change in cash and cash equivalents		(103,351	)		(167,080	)
Cash and cash equivalents at beginning of period		231,556			287,868

Cash and cash equivalents at end of period	$	128,205		$	120,788

The accompanying notes are an integral part of these financial statements.

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED NOVEMBER 30, 2013

(in thousands)

(unaudited)


						Paid-in Capital			Retained Earnings			Cumulative Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders’ Equity
	Common Stock
	Outstanding Stock			Amount
	Outstanding Stock			Amount
Balance March 2, 2013		106,326		$	125	$	233,518		$	574,206		$	(4,828	)	$	(265,890	)	$	537,131
Net income		-			-		-			64,939			-			-			64,939
Other comprehensive income (loss)		-			-		-			-			(55	)		-			(55	)
Purchases of treasury stock		(5,176	)		-		-			-			-			(114,025	)		(114,025	)
Stock-based compensation		704			-		337			-			-			9,930			10,267
Exercise of stock options, stock purchase plan, and other		1,422			-		(2,539	)		-			-			18,905			16,366
Cash dividends ($0.15 per share)		-			-		-			(15,633	)		-			-			(15,633	)

Balance November 30, 2013		103,276		$	125	$	231,316		$	623,512		$	(4,883	)	$	(351,080	)	$	498,990

The accompanying notes are an integral part of these financial statements.

PIER 1 IMPORTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2013

AND NOVEMBER 24, 2012

(unaudited)

Throughout this report, references to the “Company” include Pier 1 Imports, Inc. and its consolidated subsidiaries. The accompanying unaudited financial statements should be read in conjunction with the Company’s Form 10-K for the year ended March 2, 2013. All adjustments that are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements contained in this report have been made and consist only of normal recurring adjustments, except as otherwise described herein, if any. The results of operations for the three and nine months ended November 30, 2013 and November 24, 2012 are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Historically, the strongest sales of the Company’s products have occurred during the holiday season beginning in November and continuing through December. The Company conducts business as one operating segment. As of November 30, 2013, the Company had no financial instruments with fair market values that were materially different from their carrying values.

Note 1 – Earnings per share

Basic earnings per share amounts were determined by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share amounts were similarly computed, but included the dilutive effect of the Company’s weighted average number of stock options outstanding and shares of unvested restricted stock. Stock options for which the exercise price was greater than the average market price of common shares were not included in the computation of diluted earnings per share as the effect would be antidilutive. There were 13,000 and 7,000 stock options outstanding with exercise prices greater than the average market price of the Company’s common shares for the three and nine months ended November 30, 2013, respectively. There were 328,000 and 1,067,000 stock options outstanding with exercise prices greater than the average market price of the Company’s common shares for the three and nine months ended November 24, 2012, respectively. Earnings per share for the three and nine months ended November 30, 2013 and November 24, 2012 were calculated as follows (in thousands except per share amounts):


	Three Months Ended				Nine Months Ended
	November 30, 2013		November 24, 2012		November 30, 2013		November 24, 2012
Net income, basic and diluted	$	26,758	$	23,685	$	64,939	$	67,740

Weighted average shares outstanding during period:
Basic		103,319		105,419		105,018		106,601
Effect of dilutive stock options		788		1,332		1,094		1,289
Effect of dilutive restricted stock		609		557		830		612

Diluted		104,716		107,308		106,942		108,502

Earnings per share:
Basic	$	0.26	$	0.22	$	0.62	$	0.64

Diluted	$	0.26	$	0.22	$	0.61	$	0.62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 2 – Stock-based compensation

For the three and nine months ended November 30, 2013, the Company recorded stock-based compensation expense primarily related to restricted stock expense of $2,977,000 and $10,194,000, respectively. For the three and nine months ended November 24, 2012, the Company recorded stock-based compensation expense primarily related to restricted stock expense of $3,134,000 and $8,986,000, respectively. As of November 30, 2013, there was approximately $15,615,000 of total unrecognized compensation expense related to unvested restricted stock that may be recognized over a weighted average period of 1.9 years, if certain performance targets are achieved.

Note 3 – Defined benefit plans

The Company maintains supplemental retirement plans (the “Plans”) for certain of its executive officers. The Plans provide that, upon death, disability, reaching retirement age or certain termination events, a participant will receive benefits based on highest compensation, years of service and years of plan participation. Benefit costs are determined using actuarial cost methods to estimate the total benefits ultimately payable to executive officers and this cost is allocated to the respective service periods.

The Plans are not funded and thus have no plan assets. The actuarial assumptions used to calculate benefit costs are reviewed annually, or in the event of a material change in the Plans or participation in the Plans. The components of net periodic benefit costs for the three and nine months ended November 30, 2013 and November 24, 2012 are shown in the table below (in thousands). The amortization of amounts related to unrecognized prior service costs and net actuarial loss were reclassified out of other comprehensive income as a component of net periodic benefit cost.


	Three Months Ended				Nine Months Ended
	November 30, 2013		November 24, 2012		November 30, 2013		November 24, 2012
Components of net periodic benefits cost:
Service cost	$	364	$	338	$	1,092	$	1,015
Interest cost		192		184		574		557
Amortization of unrecognized prior service costs		102		102		307		307
Amortization of net actuarial loss		348		355		1,044		1,053
Settlement		-		-		-		(488	)

Net periodic benefit cost	$	1,006	$	979	$	3,017	$	2,444

Note 4 – Secured credit facility

On June 18, 2013, the Company amended, renewed and extended its secured credit facility (“Credit Facility”). The Credit Facility was amended to extend the maturity date from April 4, 2016 to June 18, 2018 and increase the amount of the facility from $300,000,000 to $350,000,000. The Credit Facility is secured by the Company’s merchandise inventory and credit card receivables. As of November 30, 2013, the Company had no cash borrowings and approximately $37,613,000 in letters of credit and bankers’ acceptances outstanding, and $312,387,000 remained available for cash borrowings.

Credit extensions under the Credit Facility are limited to the lesser of $350,000,000 or the amount of the calculated borrowing base, which was $350,000,000 as of November 30, 2013. At the Company’s option, borrowings will bear interest at either (a) the adjusted LIBOR rate plus a spread varying from 125 to 175

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

basis points per annum, depending on the amount then borrowed under the Credit Facility, or (b) the prime rate plus a spread varying from 25 to 75 basis points per annum, depending on the amount then borrowed under the Credit Facility. Provided that there is no default and no default would occur as a result thereof, the Company may request that the Credit Facility be increased to an amount not to exceed $450,000,000. Under the terms of the Credit Facility, the Company agrees to pay a fee on the unused portion of the Credit Facility at a rate of 25 basis points per annum. In addition, the Company pays letter of credit fronting fees and fees on the amount of letters of credit outstanding. The amendment did not result in any other significant changes to the Credit Facility.

Note 5 – Income taxes

During the second quarter of fiscal 2013, the Company reversed a portion of its reserve for uncertain income tax positions for which the statute of limitations expired. This adjustment resulted in an income tax benefit of $5,857,000 during the second quarter of fiscal 2013. In addition, the Company reversed $2,757,000 of accrued interest related to these uncertain tax positions during the second quarter of fiscal 2013.

Note 6 – New accounting pronouncement

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which amends current comprehensive income guidance. This accounting update requires companies to provide information regarding the amounts reclassified out of accumulated other comprehensive income by component. This guidance was effective for the Company beginning in the first quarter of fiscal 2014 and the required disclosure is included in Note 3 – Defined benefit plans .

PART I

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources should be read in conjunction with the Company’s consolidated financial statements as of March 2, 2013, and for the year then ended, and related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, all contained in the Company’s Annual Report on Form 10-K for the year ended March 2, 2013.

Management Overview

Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the “Company”) is one of North America’s largest specialty retailers of imported decorative home furnishings and gifts. The Company directly imports merchandise from many countries and sells a wide variety of decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores and through the Company’s website, Pier1.com. The results of operations for the three and nine months ended November 30, 2013 and November 24, 2012 are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Historically, the strongest sales of the Company’s products have occurred during the holiday season beginning in November and continuing through December. The Company conducts business as one operating segment and operates stores in the United States and Canada under the name Pier 1 Imports. As of November 30, 2013, the Company operated 1,074 stores in the United States and Canada.

In April 2012, the Company announced a three-year growth plan designed to drive profitable top- and bottom-line growth, expand market share and increase shareholder value as the Company continues evolving into a omni-channel retailer. The plan includes investing $200 million in capital expenditures over a three-year period through initiatives that include building a best-in-class e-Commerce platform; strengthening the Company’s infrastructure through investments in technology, processes and systems; and improving the Company’s store portfolio through refurbishments, remodels, new store openings and strategic relocations. The plan also includes returning value to shareholders through share repurchases and quarterly cash dividends. In conjunction with the three-year growth plan, the Company established financial targets that include achieving sales per retail square foot of $225 and operating margins of at least 12% of sales by the end of fiscal 2015. The Company expects an online sales contribution of at least 10% of total revenues by the end of fiscal 2016. During the third quarter of fiscal 2014, the Company continued implementation of its plan through a number of strategic projects. The Company believes these projects provide the foundation and building blocks for long-term success.

The Company is making advancements in expanding its omni-channel strategy and executing its ‘1 Pier 1’ vision. One of the key areas of focus is an expected seamless integration of the Company’s increasingly interconnected businesses – its Pier 1 Imports stores and its website, Pier1.com. Since the launch of Pier1.com during July of fiscal 2013, traffic to the website has increased significantly, and the Company has seen progressive increases in e-Commerce sales as a percentage of total Company sales. In addition, the Company executed website upgrades during fiscal 2014, which continue to enhance the customer experience and improve back-office systems. The rollout of the Company’s new point-of-sale system was completed during the second quarter of fiscal 2014.

Net sales for the third quarter of fiscal 2014 increased 9.6% and comparable store sales for the period increased 6.9%. The difference between the total sales and comparable store sales growth is primarily attributable to stores opened during fiscal 2013 and 2014, which are excluded from the comparable store sales calculation, and direct-to-customer sales. Sales per retail square foot were $205 for the trailing twelve months ended November 30, 2013, up from $194 for the trailing twelve months ended November 24, 2012. Management believes that the Company’s sales will continue to improve as a result of its unique and special merchandise assortments, superior in-store experience and enhanced e-Commerce experience.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

For the third quarter of fiscal 2014, gross profit was 43.4% of sales, compared to 43.9% during the same period last year, a decline of 50 basis points. Operating income for the third quarter of fiscal 2014 was $43.1 million, or 9.3% of sales, compared to $38.8 million, or 9.1% of sales, for the same period in the prior year.

During the first nine months of fiscal 2014, the Company utilized $60.6 million for capital expenditures, which included approximately $36.8 million for the opening of 24 new stores, five major remodels, new merchandise fixtures and lighting in numerous existing stores, and other leasehold improvements and equipment. The remaining capital expenditures were utilized for technology and infrastructure initiatives, including e-Commerce and the new point-of-sale system. Capital expenditures for fiscal 2014 are expected to be approximately $75 million.

During the first nine months of fiscal 2014, the Company repurchased 5,175,805 shares of its common stock at a weighted average cost of $22.03 per share for a total cost of $114.0 million. Of this amount, the Company utilized $100.0 million to repurchase 4,525,805 shares of its common stock at a weighted average cost of $22.10 per share under the $100 million December 2012 Board-approved program, which was completed on September 30, 2013. On October 18, 2013, the Company announced that its Board of Directors authorized a new $200 million share repurchase program. The Company repurchased 650,000 shares of its common stock under this program during the third quarter of fiscal 2014 at a weighted average cost of $21.58 per share for a total cost of $14.0 million. From the end of the quarter through January 3, 2014, under the $200 million program the Company has utilized a total of $12.6 million to repurchase 575,000 shares of the Company’s common stock at a weighted average cost of $21.95, and $173.4 million remained available for repurchase of the Company’s stock under the October 2013 Board-approved program. During the first nine months of fiscal 2014, the Company paid quarterly cash dividends totaling approximately $15.6 million. In addition, on December 19, 2013, the Company announced that its Board of Directors declared a $0.06 per share quarterly cash dividend, which reflects a 20% increase from the previous quarterly cash dividend, payable on February 5, 2014, to shareholders of record on January 22, 2014.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Results of Operations

Management reviews a number of key performance indicators to evaluate the Company’s financial performance. The following table summarizes those key performance indicators for the three and nine months ended November 30, 2013 and November 24, 2012:


	Three Months Ended						Nine Months Ended
	November 30, 2013			November 24, 2012			November 30, 2013			November 24, 2012
Key Performance Indicators
Total sales growth		9.6	%		10.9	%		8.9	%		9.1	%
Comparable stores sales growth ⁽¹⁾		6.9	%		7.9	%		5.5	%		7.3	%
Gross profit as a % of sales		43.4	%		43.9	%		42.3	%		42.3	%
Selling, general and administrative expenses as a % of sales		32.1	%		32.8	%		31.6	%		31.9	%
EBITDA ⁽²⁾	$	53.4		$	47.2		$	134.5		$	122.1
Operating income as a % of sales		9.3	%		9.1	%		8.4	%		8.5	%
Net income as a % of sales		5.7	%		5.6	%		5.2	%		5.9	%


	For the period ended
	November 30, 2013			November 24, 2012
Sales per average retail square foot ⁽³⁾	$	205		$	194
Total retail square footage (in thousands)		8,462			8,348
Total retail square footage increase from the same period last year		1.4	%		0.8	%

⁽¹⁾	Includes orders placed online for store pick-up.

⁽²⁾	See reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) in Non-GAAP Financial Measures .

⁽³⁾	Sales per average retail square foot is calculated using a rolling 12-month total of store sales over a 13-month retail square footage weighted average (includes orders place online for store pick-up but excludes direct-to-customer sales).

Net Sales – Net sales consisted almost entirely of sales to retail customers, net of discounts and returns, but also included delivery service revenues and wholesale sales and royalties. Sales by retail concept during the period were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	November 30,		November 24,		November 30,		November 24,
	2013		2012		2013		2012
Stores	$	447,490	$	414,787	$	1,209,219	$	1,135,735
Other ⁽¹⁾		17,972		9,740		46,738		17,525

Net sales	$	465,462	$	424,527	$	1,255,957	$	1,153,260

⁽¹⁾	Other sales consisted primarily of direct-to-customer sales, wholesale sales and royalties received from Grupo Sanborns, S.A. de C.V., and gift card breakage.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Net sales for the third quarter of fiscal 2014 were $465.5 million, an increase of 9.6%, over last year’s third quarter net sales of $424.5 million. Comparable store sales for the quarter increased 6.9%, which was primarily the result of an increase in conversion and average ticket over the same period last year. Net sales during the year-to-date period increased $102.7 million, or 8.9%, to $1.256 billion when compared to the same period last year, primarily as a result of an increase in average ticket. Comparable store sales increased 5.5% for the first nine months of fiscal 2014. The Company’s e-Commerce sales accounted for 4.2% and 3.5% of net sales for the three and nine month periods ended November 30, 2013, respectively. These sales are comprised of both customer orders placed online which were shipped directly to the customer from its fulfillment center (“direct-to-customer”) and those picked up by the customer at a store location (“store pick-up”). The Company’s net sales from Canadian stores were subject to fluctuation in currency conversion rates. These fluctuations offset the increase in comparable store sales by approximately 40 basis points for the quarter and 30 basis points for the year-to-date period. The Company’s proprietary credit card program provides both economic and strategic benefits. Sales on the Pier 1 credit card comprised 29.1% of U.S. store sales for the trailing twelve months ended November 30, 2013, compared to 25.7% for fiscal 2013. Sales per retail square foot were $205 for the trailing twelve months ended November 30, 2013, up from $194 for the trailing twelve months ended November 24, 2012. Total store count as of November 30, 2013, was 1,074 compared to 1,061 stores a year ago.

The increase in sales for the nine-month period was comprised of the following incremental components (in thousands):


	Net Sales
Net sales for the nine months ended November 24, 2012	$	1,153,260
Incremental sales growth (decline) from:
New stores opened during fiscal 2014		14,809
Stores opened during fiscal 2013 ⁽¹⁾		46,746
Comparable stores ⁽²⁾		61,108
Closed stores and other		(19,966	)

Net sales for the nine months ended November 30, 2013	$	1,255,957

⁽¹⁾	Includes incremental sales of $30,808 from direct-to-customer sales.

⁽²⁾	Includes orders placed online for store pick-up.

A summary reconciliation of the Company’s stores open at the beginning of fiscal 2014 to the number open at the end of the third quarter is as follows:


	United States			Canada		Total
Open at March 2, 2013		982			80		1,062
Openings		23			1		24
Closings		(12	)		-		(12	)

Open at November 30, 2013 ⁽¹⁾		993			81		1,074

⁽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 November 30, 2013, there were 49 locations in Mexico and one in El Salvador. These locations were excluded from the table above.

Cost of Sales and Gross Profit – In the third quarter of fiscal 2014, cost of sales were 56.6% of sales, compared to 56.1% of sales for the same period last year and gross profit was 43.4% of sales, compared to 43.9% of sales for the same period a year ago. The year-over-year gross profit decline as a percentage of sales was primarily

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

due to a slightly higher promotional cadence versus last year and increased sales through the direct-to-customer channel, which have a reduced merchandise margin as compared to stores. These declines were partially offset by the leveraging of store occupancy costs during the quarter.

For the first nine months of fiscal 2014 and fiscal 2013, cost of sales as a percentage of sales remained constant at 57.7%. Year-to-date gross profit was 42.3% of sales, consistent with the same period last year.

Operating Expenses – Third quarter selling, general and administrative expenses were $149.2 million, or 32.1% of sales, compared to $139.2 million, or 32.8% of sales, for the same period in fiscal 2013. The 70 basis point decrease was primarily due to leveraging of store payroll and marketing expenses during the quarter. Fixed expenses increased primarily as a result of the investment in additional headcount to scale the e-Commerce business and expand the Company’s organizational capabilities in support of the ‘1 Pier 1’ vision while remaining flat as a percentage of sales.

Year-to-date selling, general and administrative expenses were $397.3 million, or 31.6% of sales, compared to $367.6 million, or 31.9% of sales, in the same period of fiscal 2013.

Operating income for the third quarter of fiscal 2014 was $43.1 million, or 9.3% of sales, compared to $38.8 million, or 9.1% of sales, last year. For the first nine months of fiscal 2014, operating income totaled $105.4 million, or 8.4% of sales, compared to $98.5 million, or 8.5% of sales, for the same period last year.

Nonoperating Income and Expense – During the first nine months of fiscal 2014, nonoperating expense was $0.6 million, compared to nonoperating income of $2.8 million for the same period in fiscal 2013. The decrease was the result of the completion of deferred gain recognition related to transactions with the Company’s former proprietary credit card provider during the first quarter of fiscal 2013. Additionally, in conjunction with the adjustment for uncertain income tax positions discussed below, $2.8 million of accrued interest expense was reversed during the second quarter of fiscal 2013.

Income Taxes – The Company recorded an effective tax rate of 38.0% and an income tax provision of $16.4 million during the third quarter of fiscal 2014, compared to an effective tax rate of 38.4% and an income tax provision of $14.8 million during the third quarter last year. For the first nine months of fiscal 2014, the Company recorded an effective tax rate of 38.0% and an income tax provision of $39.8 million, compared to an effective tax rate of 33.2% and an income tax provision of $33.6 million during the same period last year. During the second quarter of fiscal 2013, the Company reversed a portion of its reserve for uncertain income tax positions for which the statute of limitations expired. This adjustment resulted in an income tax benefit of $5.9 million during fiscal 2013.

Net Income – For the third quarter of fiscal 2014, the Company reported net income of $26.8 million, or $0.26 per share, compared to $23.7 million, or $0.22 per share, for the same period last year. Utilizing an estimated annual effective tax rate of 35.6%, and excluding the estimated impact of Hurricane Sandy, fiscal 2013 third quarter adjusted net income on a non-GAAP basis was $27.1 million, or $0.25 per share. See Reconciliation of Non-GAAP Financial Measures below.

For the first nine months of fiscal 2014, the Company reported net income of $64.9 million, or $0.61 per share, compared to $67.7 million, or $0.62 per share for the first nine months of fiscal 2013. For the first nine months of fiscal 2013, adjusted net income on a non-GAAP basis was $65.7 million, or $0.60 per share, and excludes the estimated impact of Hurricane Sandy, utilizes an estimated annual effective tax rate of 35.6%, and excludes the reversal of accrued interest referenced above. See Reconciliation of Non-GAAP Financial Measures below.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Reconciliation of Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). This quarterly report references non-GAAP financial measures, including adjusted net income, adjusted earnings per share and EBITDA. The Company believes that the non-GAAP financial measures included in this quarterly report allow management and investors to understand and compare the Company’s net income and earnings per share results in a more consistent manner for the periods covered by this report. The non-GAAP measures should be considered supplemental and not a substitute for the Company’s net income and earnings per share results reported in accordance with GAAP for the periods presented.

The following table reconciles net income to adjusted net income and diluted earnings per share to adjusted diluted earnings per share for the prior year periods. There were no similar items warranting reconciliation during the three and nine months ended November 30, 2013.


	Three Months Ended		Nine Months Ended
	November 24, 2012		November 24, 2012
	($ in millions, except per share amounts)
Net income (GAAP)	$	23.7	$	67.7
Add back: Income tax provision (GAAP)		14.8		33.6

Income before income taxes (GAAP)		38.5		101.3
Interest expense adjustment related to uncertain tax positions		-		(2.8	)

Adjusted income before income taxes (non-GAAP)		38.5		98.5
Less: Adjusted income tax provision at
estimated 35.6% annual effective tax rate		13.7		35.1
Estimated impact of Hurricane Sandy, net of tax		2.3		2.3

Adjusted net income (non-GAAP)	$	27.1	$	65.7

Diluted earnings per share (GAAP)	$	0.22	$	0.62
Interest expense adjustment related to
uncertain tax positions, net of tax		-		(0.02	)
Difference of income tax provision at
Estimated 35.6% annual effective tax rate		0.01		(0.02	)
Estimated impact of Hurricane Sandy, net of tax		0.02		0.02

Adjusted diluted earnings per share (non-GAAP)	$	0.25	$	0.60

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

EBITDA represents earnings before interest, taxes, depreciation and amortization. Management believes EBITDA is a meaningful indicator of the Company’s performance that provides useful information to investors regarding its financial condition and results of operations. Management uses EBITDA, together with financial measures prepared in accordance with GAAP, to assess the Company’s operating performance, to enhance its understanding of core operating performance and to compare the Company’s operating performance to other retailers. This non-GAAP financial measure should not be considered in isolation or used as an alternative to GAAP financial measures and does not purport to be an alternative to net income as a measure of operating performance. A reconciliation of net income to EBITDA is shown below for the periods indicated (in millions).


	Three Months Ended				Nine Months Ended
	November 30, 2013		November 24, 2012		November 30, 2013		November 24, 2012
Net income (GAAP)	$	26.8	$	23.7	$	64.9	$	67.7
Add back: Income tax provision		16.4		14.8		39.8		33.6
Interest expense (income), net		0.3		0.5		1.3		(1.1	)
Depreciation and amortization		9.9		8.2		28.5		21.9

EBITDA (non-GAAP)	$	53.4	$	47.2	$	134.5	$	122.1

Liquidity and Capital Resources

The Company ended the first nine months of fiscal 2014 with $128.2 million in cash and temporary investments compared to $231.6 million at the end of fiscal 2013. The decrease was primarily the result of the utilization of cash to support the Company’s three-year growth plan, including $60.6 million for capital expenditures, $114.0 million to repurchase shares of the Company’s common stock, and $15.6 million for cash dividends. These cash outflows were partially offset by an increase in cash of $61.2 million from operating activities and proceeds of $17.9 million primarily from stock options exercised.

Cash Flows from Operating Activities

Operating activities in the first nine months of fiscal 2014 provided $61.2 million of cash, primarily as a result of net income and an increase in accounts payable partially offset by an increase in inventories. Inventory levels at the end of the third quarter of fiscal 2014 were $429.1 million, an increase of $11.5 million, or 2.8%, from the third quarter of fiscal 2013 and in line with the Company’s expectations. The increase in inventories primarily resulted from the normal seasonal build of merchandise for the holidays, additional inventory to support e-Commerce sales and the broadening of assortments under the Company’s special merchandise order program known as “Express Request.” At the end of fiscal 2014, inventory is expected to increase 5% to 8% over last fiscal year end.

Cash Flows from Investing Activities

During the first nine months of fiscal 2014, investing activities used $51.6 million compared to $59.5 million during the same period last year. Total capital expenditures during the first nine months of fiscal 2014 were $60.6 million, which included approximately $36.8 million for the opening of 24 new stores, five major remodels, new merchandise fixtures and lighting in numerous existing stores, and other leasehold improvements and equipment. The remaining capital expenditures were for technology and infrastructure initiatives, including e-Commerce and the new point-of-sale system. Capital expenditures for fiscal 2014 are expected to total approximately $75 million. Dispositions of properties provided $11.1 million primarily from the sale of several company-owned store locations. All locations were subsequently leased back and the related gains will be recognized over the primary lease terms.

Cash Flows from Financing Activities

During the first nine months of fiscal 2014, financing activities used $112.9 million, primarily related to $114.0 million for repurchases of the Company’s common stock under the December 2012 and October 2013 Board-approved share repurchase programs. In addition, the Company paid $15.6 million in cash dividends. These cash outflows were partially offset by the receipt of $17.9 million in proceeds related to employee stock option exercises and the Company’s employee stock purchase plan.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Lease Obligations

At the end of the third quarter of fiscal 2014, the Company’s minimum operating lease commitments remaining for fiscal 2014 were $58.0 million. The present value of total existing minimum operating lease commitments discounted at 10% was $863.9 million at the fiscal 2014 third quarter end compared to $798.7 million at the end of fiscal 2013.

Secured Credit Facility

As of November 30, 2013, the Company had no cash borrowings and approximately $37.6 million in letters of credit and bankers’ acceptances outstanding under its secured credit facility. The calculated borrowing base was $350 million, of which approximately $312.4 million was available for additional borrowings. As of the end of the third quarter of fiscal 2014, the Company was in compliance with all required covenants stated in the agreement.

On June 18, 2013, the Company amended, renewed and extended its secured credit facility. The facility was amended to extend the maturity date from April 4, 2016 to June 18, 2018 and increase the amount of the facility from $300 million to $350 million. The amended facility includes a $100 million accordion feature, which enables the Company to request that the facility be increased to an amount not to exceed $450 million under certain circumstances. The Company expects to continue funding its working capital requirements with available cash balances and cash flow from operating activities, but may use the facility for general corporate purposes.

Share Repurchase Program

During the first nine months of fiscal 2014, the Company repurchased 5,175,805 shares of its common stock at a weighted average cost of $22.03 per share for a total cost of $114.0 million. Of this amount, the Company utilized $100.0 million to repurchase 4,525,805 shares of its common stock at a weighted average cost of $22.10 per share under the $100 million December 2012 Board-approved program which was completed on September 30, 2013. On October 18, 2013, the Company announced that its Board of Directors authorized a new $200 million share repurchase program. During the third quarter of fiscal 2014, the Company repurchased 650,000 shares of its common stock under this program at a weighted average cost of $21.58 per share for a total cost of $14.0 million. From the end of the quarter through January 3, 2014, the Company has utilized a total of $12.6 million to repurchase 575,000 shares of the Company’s common stock at a weighted average cost of $21.95, and $173.4 million remained available for repurchase of the Company’s common stock under the October 2013 Board-approved program.

Dividends Payable

On December 19, 2013, subsequent to quarter end, the Company announced that its Board of Directors declared a $0.06 per share quarterly cash dividend on the Company’s outstanding shares of common stock. The $0.06 quarterly cash dividend will be paid on February 5, 2014, to shareholders of record on January 22, 2014.

Sources of Working Capital

Working capital requirements are expected to be funded with cash from operations, available cash balances, and if required, borrowings against lines of credit. Given the Company’s cash position and the various liquidity options available, the Company believes it has sufficient liquidity to fund operational obligations, capital expenditure requirements, share repurchases and cash dividends.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. (continued)

Forward-looking Statements

Certain matters discussed in this quarterly report, except for historical information contained herein, may constitute “forward-looking statements” that are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company may also make forward-looking statements in other reports filed with the SEC and in material delivered to the Company’s shareholders. Forward-looking statements provide current expectations of future events based on management’s assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments, and other relevant factors. These statements encompass information that does not directly relate to any historical or current fact and often may be identified with the use of words such as “may,” “will,” “anticipates,” “believes,” “expects,” “estimates,” “intends,” “plans,” “projects” and other similar words and phrases. Management’s expectations and assumptions regarding planned store openings and closings, financing of Company obligations from operations, success of its marketing, merchandising and operational strategies, its planned e-Commerce and omni-channel business, and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Risks and uncertainties that may affect Company operations and performance include, among others, the effects of terrorist attacks or other acts of war, conflicts or war involving the United States or its allies or trading partners, labor strikes, weather conditions or natural disasters, volatility of fuel and utility costs, the actions taken by the United States and other countries to stimulate the economy, the general strength of the economy and levels of consumer spending, consumer confidence, suitable store sites and distribution center locations, the availability of a qualified labor force and management, the availability and proper functioning of technology and communications systems supporting the Company’s key business processes and its e-Commerce and omni-channel operations, the ability of the Company to import merchandise from foreign countries without significantly restrictive tariffs, duties or quotas, and the ability of the Company to source, ship and deliver items of acceptable quality to its U.S. distribution centers at reasonable prices and rates and in a timely fashion. The foregoing risks and uncertainties are in addition to others that may be discussed elsewhere in this report and which may also affect Company operations and performance. The Company assumes no obligation to update or otherwise revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied will not be realized. Additional information concerning these risks and uncertainties is contained in the Company’s Annual Report on Form 10-K for the year ended March 2, 2013, as filed with the Securities and Exchange Commission.

Impact of Inflation

Inflation has not had a significant impact on the operations of the Company. However, the Company’s management cannot be certain of the effect inflation may have on the Company’s operations in the future.

PART I

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

There are no material changes to the Company’s market risk as disclosed in its Annual Report on Form 10-K for the fiscal year ended March 2, 2013.

Item 4.

Controls and Procedures.

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by the Company in its reports filed or furnished under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is (b) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, an evaluation was conducted under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of November 30, 2013. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded, with reasonable assurance, that the Company’s disclosure controls and procedures were effective as of such date.

There has not been any change in the Company’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1.

Legal Proceedings.

The Company is a party to various legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.

Item 1A.

Risk Factors.

There are no material changes from risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 2, 2013.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to purchases of common stock of the Company made during the three months ended November 30, 2013, by Pier 1 Imports, Inc. or any “affiliated purchaser” of Pier 1 Imports, Inc. as defined in Rule 10b-18(a)(3) under the Exchange Act:


Period	Total Number of Shares Purchased		Average Price Paid per Share (including fees)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
Sep 1, 2013 through Oct 5, 2013		1,931,605	$	20.90		1,931,605	$	-
Oct 6, 2013 through Nov 2, 2013		175,000		21.11		175,000		196,306,323
Nov 3, 2013 through Nov 30, 2013		475,000		21.75		475,000		185,975,183

		2,581,605	$	21.07		2,581,605	$	185,975,183

⁽¹⁾

On September 30, 2013, the Company completed its $100 million share repurchased program, which was announced in December 2012. Under this program, the Company repurchased a total of 4,525,805 shares at a weighted average cost of $22.10 per share for a total cost of $100.0 million. On October 18, 2013, the Company announced that its Board of Directors authorized a new $200 million share repurchase program and $186 million remained available for repurchase of the Company’s common stock under that program at the end of the third quarter of fiscal 2014. There is no expiration date on the current authorization and during the period covered by the table, no determination was made by the Company to suspend or cancel purchases under the program.

From the end of the quarter through January 3, 2014, the Company has utilized a total of $12,618,973 to repurchase 575,000 shares of the Company’s common stock at a weighted average cost of $21.95, and $173,356,210 remained available for repurchase of the Company’s common stock under the October 2013 Board-approved program.

During the third quarter of fiscal 2014, the Company did not acquire any shares of the Company’s common stock from employees to satisfy obligations that arose through equity compensation awards pursuant to approved plans.

Item 3.

Defaults upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

The Exhibit Index following the signature page to this Quarterly Report on Form 10-Q lists the exhibits filed with this quarterly report as required by Item 601 of Regulation S-K and is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PIER 1 IMPORTS, INC.

Date: January 8, 2014	By:	/s/ Alexander W. Smith
		Alexander W. Smith, President and Chief Executive Officer

Date: January 8, 2014	By:	/s/ Charles H. Turner
		Charles H. Turner, Senior Executive Vice President and Chief Financial Officer

Date: January 8, 2014	By:	/s/ Darla D. Ramirez
		Darla D. Ramirez, Principal Accounting Officer

EXHIBIT INDEX


Exhibit No.		Description

3(i)		Restated Certificate of Incorporation of Pier 1 Imports, Inc. as filed with the Delaware Secretary of State on October 12, 2009, incorporated herein by reference to Exhibit 3(i) to the Company’s Form 10-Q for the quarter ended November 28, 2009 (File No. 001-07832).

3(ii)		Amended and Restated Bylaws of Pier 1 Imports, Inc. (as amended through October 9, 2009), incorporated herein by reference to Exhibit 3(ii) to the Company’s Form 8-K filed on October 16, 2009 (File No. 001-07832).

10.1*		Pier 1 Imports, Inc. Stock Purchase Plan restated as amended December 1, 2013.

31.1*		Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a).

31.2*		Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a).

32.1*		Section 1350 Certifications.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith

Exhibit 10.1

PIER 1 IMPORTS, INC.

STOCK PURCHASE PLAN

Restated As Amended December 1, 2013

PURPOSE OF PLAN

The purpose of the Pier 1 Imports, Inc. Stock Purchase Plan (the “Plan”), which was established in 1980 and was most recently amended and restated on June 20, 2008, is to provide Eligible Participants of Pier 1 Imports, Inc. and its employing affiliates with the opportunity to acquire an ownership interest in Pier 1 Imports, Inc. and thereby provide those who will be responsible for the continued growth of Pier 1 Imports, Inc. with a more direct concern about its welfare and a common interest with other shareholders of Pier 1 Imports, Inc. The Plan provides a voluntary method of acquiring shares of Common Stock in convenient installments by compensation deductions, supplemented by contributions from the Company. Certain terms used herein are defined in Article XII.

ARTICLE I

ELIGIBILITY

All employees of the Company who have attained the age of majority of their state or province of residence and have completed 60 days of continuous employment with the Company will be eligible to participate in the Plan at their election. Directors will also be eligible to participate in the Plan at their election; provided, however, that Directors who are also employees of the Company will be governed by all provisions of the Plan, including eligibility requirements, applicable to employees of the Company.

No amounts from an employee Participant’s Account will be used to purchase shares of Common Stock if immediately after such purchase such employee would own 5% or more of the total combined voting power or value of all classes of stock of the Company (including any stock attributable to such employee under Section 424(d) of the Code).

ARTICLE II

PARTICIPATION

An Eligible Participant may enroll as a Participant by completing and signing a compensation deduction authorization form designated by the Company from time to time, in hard copy or in electronic form. Such forms may be obtained through the Human Resources Department of the Eligible Participant’s employer, or in the case of a non-employee Director from Pier 1 Imports, Inc. Enrollment shall become effective and the Company will establish an Account for an Eligible Participant as soon as practicable after the signed compensation deduction authorization form is received by the Eligible Participant’s employer or in the case of a non-employee Director, is received by the Company. The effective date of enrollment for Eligible Participants may be subject to the Pier 1 Imports, Inc. insider trading policies and procedures which may cause the effective date of enrollment to be delayed.

ARTICLE III

METHOD OF OPERATION

Pier 1 Imports, Inc., assisted by the Administrative Committee, will administer the Plan and will establish an Account in the name of each Participant. The Company will deduct funds from each Participant’s pay as authorized and will credit monthly the Plan Account of such Participant with such deducted fund amounts plus Company contribution amounts established pursuant to Article V on behalf of Participant. Such amounts will be used as soon as administratively practicable to purchase shares of Common Stock (i) in the open market by a Broker designated by the Administrative Committee, or (ii) directly from Pier 1 Imports, Inc. No purchases of Common Stock, however, through a Broker may be made at a price which is greater than the fair market value of the Common Stock at the time of the purchase. Purchases of shares of Common Stock from Pier 1 Imports, Inc. will be at the Closing Price on the last Trading Day of each calendar month. Purchased shares will be allocated monthly to the Accounts of Participants in proportion to the funds received for each respective Account. Allocation will be made in full shares of Common Stock and fractional interests therein to the ten-thousandth of a share. Any Broker’s commissions or markups on purchases made by a Broker will be paid by Pier 1 Imports, Inc.

ARTICLE IV

COMPENSATION DEDUCTIONS

An employee Participant, including an employee Participant who is also a Director, will specify in a deduction authorization form the amount to be withheld from Compensation, with a minimum of $2.50 per week and a maximum of 20% of Compensation. A non-employee Director will specify in a deduction authorization form the amount to be withheld from cash director compensation payments. A non-employee Director may not contribute any amounts in excess of cash director compensation payments. Deductions from Compensation or deductions from a non-employee Director’s cash director compensation payments, as the case may be, will be made from each payment to a Participant, and such authorization will remain effective until revised or terminated as hereinafter provided.

Deductions from Compensation or deductions from a non-employee Director’s cash director compensation payments, as the case may be, may be increased or decreased (subject to the minimum and maximum limitations set forth above) at any time by the Participant completing a new deduction authorization form and submitting it to the Human Resources Department of the Participant’s employer, or to Pier 1 Imports, Inc. in the case of a non-employee Director. Commencement of deductions and increases or decreases of deductions will become effective as of the first day of a payroll period, provided that it is administratively practicable and subject to and in compliance with the Pier 1 Imports, Inc. insider trading policies and procedures, after a Participant’s request is received. With respect to non-employee Directors, all references to “the first day of a payroll period” herein means the date of a cash director compensation payment.

ARTICLE V

COMPANY CONTRIBUTIONS

The Company will contribute an amount equal to 25% of the Compensation deduction of each employee Participant, including an employee Participant who is also a Director, for the purchase of Common Stock under the Plan for each Participant. The Company will contribute an amount equal to 25% of the non-employee Director’s deduction from his cash director compensation payments for the purchase of Common Stock under the Plan for such non-employee Director.

ARTICLE VI

TERMINATION OF COMPENSATION DEDUCTIONS

A Participant’s compensation deduction authorization shall automatically terminate upon death, termination of employment or cessation of service as a Director, as the case may be.

Compensation deductions may also be voluntarily terminated at any time by Participant’s written notice to the Human Resources Department of the Participant’s employer, or notice to Pier 1 Imports, Inc. with respect to a non-employee Director Participant. Voluntary termination of deductions shall become effective as of the first day of a payroll period after receipt of the applicable notice as described in the preceding sentence, provided that it is administratively practicable and subject to and in compliance with the Pier 1 Imports, Inc. insider trading policies and procedures. A Participant who terminates deductions may not re-commence compensation deductions until 6 months after such termination of deductions. After that time, the Participant may re-commence compensation deductions by completing a deduction authorization form as set forth in Article IV.

ARTICLE VII

TERM; AMENDMENT OR TERMINATION OF PLAN

Unless previously terminated by the Board of Directors, the Plan will automatically terminate on the earlier of (i) June 29, 2015, or (ii) when an aggregate of 3,500,000 shares of Common Stock, plus 881,923 authorized shares of Common Stock which remained available for issuance under the Plan on March 28, 2009, have been issued after June 29, 2010. The Board of Directors reserves the right to amend, suspend or terminate the Plan at any time. Any such action will not result in the forfeiture of any funds deducted from the compensation of any Participant or contributed by the Company on behalf of any Participant, or of any Common Stock shares or fractional interest in Common Stock shares held in a Participant’s Account, or of any dividends or other distributions in respect of such shares, which occur before the effective date of the amendment, suspension or termination of the Plan.

Any amendment to the Plan will be submitted to the shareholders of Pier 1 Imports, Inc. for approval by the affirmative vote of a majority of the shares of the Common Stock present in person or represented by proxy and entitled to a vote on the matter at a meeting called therefor, if the amendment would:

(a)

materially increase the benefits accruing to Participants; or

(b)

materially increase the number of shares of Common Stock which may be issued under the Plan; or

(c)

materially modify the requirements as to eligibility for participation in the Plan.

ARTICLE VIII

PARTICIPANTS’ ACCOUNTS

Each Participant for whose Account purchases of shares of Common Stock were allocated acquires full ownership of all such allocated shares and any fractional interest therein. All shares will be registered in the name of the Plan and will remain so registered until delivery of the shares to the Participant pursuant to Article IX below or until “released” shares are sold or transferred by the Participant. All such allocated shares of Common Stock in a Participant’s Account will initially be classified under the Plan as “unreleased” and may not be sold, transferred or otherwise disposed until released. All shares in the Account of each Participant shall be automatically classified as “released” at least once each calendar year. Participants may sell or transfer released shares at any time, subject to Article X below.

No Participant may grant a security interest (or take any other action prohibited by the Pier 1 Imports, Inc. insider trading policy) in the shares allocated to a Participant’s Account and held in the name of the Plan. A Participant’s compensation deductions will terminate if the Participant grants a security interest or sells or assigns the Participant’s interest in the Plan.

A Participant’s Account will be credited with all dividends, if any, paid with respect to the full shares and any fractional interest in shares of Common Stock held in the Participant’s Account. All cash dividends will be reinvested in Common Stock at the Closing Price on the date the dividend is paid. All such shares of Common Stock will initially be classified under the Plan as “unreleased” until automatically classified as “released” as described above.

Stock dividends and/or any stock splits with respect to shares of Common Stock held in a Participant’s Account will be credited to the Account without charge. Distributions of other securities and rights to subscribe may be sold at the direction of the Administrative Committee, and the proceeds will be handled in the same manner as a cash dividend.

A Participant will receive semi-annual statements of his Account in hard copy or electronic form. The Company will send to each Participant as soon as administratively practicable, by mail or otherwise, all notices of meetings, proxy statements and other materials distributed by Pier 1 Imports, Inc. to its shareholders. Upon receipt of instructions from a

Participant, the Administrator of the Plan will vote, or exercise dissenter’s rights when applicable, all shares of Common Stock in Participant’s Account in accordance with the instructions of Participant. In addition, the Administrator of the Plan will vote, or exercise dissenter’s rights when applicable, shares of Common Stock in Participants’ Accounts for which no instructions were received in the same proportion as shares for which instructions were received are voted.

In the event of a tender offer for Common Stock, the Company will send to each Participant the tender offer documents and other materials relating to such tender offer that are received by the Plan as a holder of Common Stock, together with a form to provide instructions whether to direct the Administrator of the Plan to tender into the tender offer all shares of Common Stock in a Participant’s Account. Upon receipt of instructions from a Participant, the Administrator of the Plan will take such action as directed by Participant. In addition, the Administrator of the Plan will tender into such tender offer, from the number of shares of Common Stock for which no valid instructions were received from Participants, a number of those shares equal to the same percentage of instructed shares electing to tender into the tender offer.

ARTICLE IX

DISTRIBUTION OF SHARES AFTER TERMINATION

Upon death or termination of employment or cessation of service as a Director, as the case may be, all shares in the Account of such Participant shall be distributed to the Participant or his estate as applicable, as soon as administratively practicable after the end of the month in which the termination event occurred.

The Company may at its option make all distributions under this Article IX electronically in book-entry form which may include delivery of fractional shares. If the Company elects to distribute only full shares from the Plan, then any fractional shares shall either be valued at the Closing Price or sold at market value on the date of distribution and cash in such amount shall be distributed in conjunction with the distribution of full shares.

ARTICLE X

RESALE OF STOCK ACQUIRED FROM THE PLAN

Participants who are deemed to be “affiliates” of Pier 1 Imports, Inc. within the meaning of the Securities Act of 1933, as amended (“Act”) may sell or transfer such shares only in accordance with the provisions of Rule 144 under such Act, in a transaction otherwise exempt from registration under such Act, or pursuant to an effective registration under such Act. Additionally, all sales of Common Stock shall be subject to and in compliance with the Pier 1 Imports, Inc. insider trading policies and procedures and all applicable laws, rules and regulations.

ARTICLE XI

MISCELLANEOUS

Neither the act of establishing the Plan nor any provision hereof or action taken hereunder shall be construed as giving any Participant the right to be retained as an employee of the Company or Director, and the right of the Company to dismiss or discharge any employee, and the right of the shareholders of Pier 1 Imports, Inc. to elect Directors of Pier 1 Imports, Inc., are specifically reserved.

Pier 1 Imports, Inc. may require compliance with or satisfaction of any legal requirement which may be deemed by it necessary as a condition for participation in the Plan, release of shares, or distribution or payment of interests or benefits thereunder.

By his act of participating in the Plan, or of accepting any benefits hereunder, a Participant and any person claiming under or through him shall thereby be conclusively deemed to have accepted and consented to the application to him of the provisions of the Plan.

Neither Pier 1 Imports, Inc. nor any of its subsidiaries, both corporate and non-corporate (including, but not limited to, any statutory trust), nor any Director, officer, employee or agent of Pier 1 Imports, Inc. or any of its subsidiaries, both corporate and non-corporate (including, but not limited to, any statutory trust), warrants or represents in any way to any Participant that the value of Common Stock will increase or will not decrease or that dividends will be paid on Common Stock, either at all or at any particular level. Each Participant assumes all risks in connection with changes in value of Common Stock and all risks that dividends may not be paid, either at all or at any particular level.

Any words used herein in the masculine gender shall be construed as though they were used in the feminine gender wherever appropriate.

The Company may at its option designate an agent to administer certain functions required under the Plan, including, without limitation, the enrollment process, recordkeeping, distributions, forms for compensation deduction authorizations and terminations, and Participant statements, with such processes, forms and statements in hard copy or electronic form.

The Plan is hereby amended and restated in its entirety effective as of December 1, 2013.

ARTICLE XII

DEFINITIONS

For the purpose of the Plan, unless the context clearly or necessarily indicates the contrary, the following words and phrases shall have the meanings set forth in the definitions below:

a. “Account” shall mean the separate Account established and maintained for each Participant pursuant to Article VIII hereof.

b. “Administrative Committee” shall mean the committee which may be from time to time formed to assist Pier 1 Imports, Inc. in the administration of the Plan, the members of which shall be appointed by the Board of Directors. The Administrative Committee shall be comprised of not less than two “Non-Employee Directors” of Pier 1 Imports, Inc., as that term is defined in Rule 16b-3(b) promulgated under the Securities Exchange Act of 1934, as amended. The Administrative Committee will be the Compensation Committee of the Board of Directors provided that the above requirements are met, in which event no additional appointment shall be necessary by the Board of Directors.

c. “Administrator of the Plan” shall mean Pier 1 Imports, Inc.

d. “Board of Directors” shall mean the Board of Directors of Pier 1 Imports, Inc.

e. “Broker” shall mean the broker appointed by the Administrative Committee pursuant to Article III.

f. “Closing Price(s)” shall mean on any date the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices) on that date as reported in the composite transactions table for the principal U.S. national or regional securities exchange on which the Common Stock is listed or admitted for trading. If the Common Stock is not listed or admitted for trading on a U.S. national or regional securities exchange on the relevant date, then the “Closing Price” of the Common Stock will be the average of the bid and ask prices for the Common Stock in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or similar organization. If the Common Stock is not so quoted, the “Closing Price” of the Common Stock will be such other amount as the Administrative Committee may reasonably ascertain to represent such “Closing Price.” The Closing Price shall be determined without reference to extended or after-hours trading.

g. “Code” shall mean the Internal Revenue Code of 1986, as amended.

h. “Common Stock” shall mean shares of common stock, par value $0.001 per share, of Pier 1 Imports, Inc.

i. “Company” shall mean Pier 1 Imports, Inc., a Delaware corporation, its successors and assigns and any of its subsidiaries both corporate and non-corporate (including, but not limited to, any statutory trust) any of which has employees and which shall adopt the Plan by action of its board of directors, or other governing person or entity, if applicable.

j. “Compensation” shall mean the total of all amounts paid by an employer to or for the benefit of an employee Participant for services rendered or labor performed for the employer which are required to be reported on the Participant’s federal income tax withholding statement or statements (Form W-2, Box 1 or its subsequent equivalent), subject to the following exclusions: taxable income resulting from the exercise of stock options, non-cash compensation (i.e., non-cash awards), moving expense reimbursements, cash and non-cash

fringe benefits, expense allowances, expense reimbursements, payments of deferred compensation, welfare benefits, severance pay, supplemental disability pay, relocation pay and compensation earned before an employee was first eligible to participate in the Plan.

k. “Director” shall mean an individual who is a member of the Board of Directors of Pier 1 Imports, Inc.

l. “Eligible Participant” shall mean any employee, including any employee who is a Director, or a non-employee Director who meets the requirements stated in Article I.

m. “Participant” shall mean any employee or non-employee Director who elects in accordance with the provisions of the Plan to participate in the Plan through compensation deductions pursuant to Article II.

n. “Plan” shall mean the Pier 1 Imports, Inc. Stock Purchase Plan, as amended and restated herein.

o. “Trading Day(s)” shall mean a day on which (i) trading in the Common Stock generally occurs on the New York Stock Exchange or, if the Common Stock is not then listed on the New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock is then traded, and (ii) a Closing Price for the Common Stock is available on such securities exchange or market.

Effective as amended and restated December 1, 2013


Pier 1 Imports, Inc.,
a Delaware corporation

By:		/s/ Gregory S. Humenesky
		Gregory S. Humenesky
		Executive Vice President

Date: November 22, 2013

Exhibit 31.1

Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)

I, Alexander W. Smith, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 8, 2014

By:

/s/ Alexander W. Smith

Alexander W. Smith, President and

Chief Executive Officer

Exhibit 31.2

Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)

I, Charles H. Turner, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 8, 2014

By:

/s/ Charles H. Turner

Charles H. Turner, Senior Executive Vice President and

Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned officers of Pier 1 Imports, Inc., hereby certifies that:

The Quarterly Report on Form 10-Q of Pier 1 Imports, Inc. for the period ended November 30, 2013 fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the above-mentioned report fairly presents, in all material respects, the financial condition and results of operations of Pier 1 Imports, Inc. for the period covered by the report.


Date: January 8, 2014	By:	/s/ Alexander W. Smith
		Alexander W. Smith, President and Chief Executive Officer

Date: January 8, 2014	By:	/s/ Charles H. Turner
		Charles H. Turner, Senior Executive Vice President and Chief Financial Officer

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