PIER 1 IMPORTS INC/DE - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

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

For the fiscal year ended MARCH 2, 2002.

OR

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

For the transition period from _____ to _____

Commission File No. 1-7832

PIER 1 IMPORTS, INC.
(Exact name of Company as specified in its charter)

DELAWARE 75-1729843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

301 COMMERCE STREET, SUITE 600
FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)

Company's telephone number, including area code: (817) 252-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the Company (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 Company
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

As of May 28, 2002, the approximate aggregate market value of voting
stock held by non-affiliates of the Registrant was $1,875,400,000 using the
closing sales price on this day of $20.70. It is assumed for purposes of this
computation an affiliate includes all persons registered as Registrant insiders
with the Securities and Exchange Commission.

As of May 28, 2002, 93,651,706 shares of the Registrant's Common Stock,
$1.00 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents have been incorporated herein by
reference:

(1) Registrant's Annual Report to Shareholders for the fiscal year
ended March 2, 2002 in Parts I and II hereof and;

(2) Registrant's Proxy Statement for the 2002 Annual Meeting in
Part III hereof.

PART I

Item 1. Business.

(a) General Development of Business.

Throughout this document, references to the "Company" include Pier 1
Imports, Inc. and its consolidated subsidiaries. References to "Pier 1" relate
to the Company's retail locations operating under the name Pier 1 Imports.
References to "The Pier" relate to the Company's retail locations in the United
Kingdom operating under the name The Pier. References to "Cargo" relate to the
Company's retail locations operating under the names Cargo, "Cargo Furniture &
Home" and "Cargokids!".

From fiscal 1997 through fiscal 2002, the Company expanded its
specialty retail operations from 720 to 974 worldwide retail stores. In fiscal
2002, the Company continued to execute its expansion plan in North America by
opening a net 84 new Pier 1 stores. Subject to changes in the retail
environment, availability of suitable store sites, lease renewal negotiations
and availability of adequate financing, Pier 1 plans to open approximately 115
to 120 new stores and close approximately 30 stores in North America in fiscal
2003. Almost all of the stores expected to close in fiscal 2003 are anticipated
to be replaced with a more favorable location within the same market.

Set forth below is a list by city of Pier 1 stores opened in North
America in fiscal 2002:

Abbotsford, BC Harvey, LA Petoskey, MI
Aiken, SC Heath, OH Pittsburgh, PA (2 locations)
Bloomingdale, IL Hendersonville, NC Rehoboth Beach, DE
Bolingbrook, IL Holmdel, NJ Richmond, BC
Braintree, MA Homestead, PA Rocky Point, NY
Broomfield, CO Indiana, PA Rogers, AR
Burlington, ON Indianapolis, IN (2 locations) Rosemere, QC
Burlington, WA Jefferson City, MO Roseville, CA
California, MD Kamloops, BC Rossford, OH
Cedar Hill, TX Kerrville, TX Rotterdam, NY
Christiansburg, VA Kingston, ON Salisbury, NC
Clarksburg, WV La Jolla, CA San Antonio, TX
Cookeville, TN Lake Ozark, MO Selma, TX
Covington, WA Las Vegas, NV Shrewsbury, MA
Dallas, TX Leominster, MA South Elgin, IL
Daphne, AL Lisbon, CT St. Cloud, MN
Dekalb, IL Lithonia, GA St. Clairsville, OH
Decatur, AL Littleton, CO St. George, UT
Deer Park, IL Louisville, KY St. Louis, MO
Dubois, PA Lynchburg, VA Surprise, AZ
Durham, NC Marshfield, WI Surrey, BC
Edmonton, AB McMinnville, OR Tampa, FL
El Cerrito, CA Miami, FL Tracy, CA
Elk Grove, CA Midlothian, VA Watchung, NJ
Encino, CA Milford, CT Wausau, WI
Everett, MA Monaca, PA Webster, NY
Flemington, NJ Montreal, QC (3 locations) Wellington, FL
Folsom, CA Morehead City, NC West Hartford, CT
Fullerton, CA Naples, FL Westport, CT
Glastonbury, CT Oro Valley, AZ Wichita, KS
Glen Allen, VA Oshkosh, WI Williamsville, NY
Glen Mills, PA Paoli, PA Winnipeg, MB
Goldsboro, NC Pasadena, TX Woodcliff Lake, NJ
Greenville, SC

Presently, Pier 1 maintains regional distribution center facilities in
or near Baltimore, Maryland; Chicago, Illinois; Columbus, Ohio; Fort Worth,
Texas; Ontario, California and Savannah, Georgia.

The Pier, a subsidiary of the Company located in the United Kingdom,
operates 23 retail stores offering decorative home furnishings and related items
in a setting similar to Pier 1 stores. Additionally, The Pier has established an
online store at pier.co.uk. The Pier does not expect to open any new stores in
fiscal 2003; however, the Company will be reviewing specific opportunities for
new stores throughout the year. Also, upgrades are expected to several existing
locations in the U.K. during fiscal 2003. The Pier operates two distribution
facilities near London, England.

The Company has an arrangement to supply Sears de Mexico S.A. ("Sears
Mexico") with Pier 1 merchandise to be sold in a "store within a store" format
in certain Sears Mexico stores. In fiscal 1998, the Company amended its
agreement with Sears Mexico to an arrangement that substantially insulates the
Company from currency fluctuations in the

value of the Mexican peso, which had reduced its profitability in the past. In
fiscal 2002, Sears Mexico opened three new stores offering Pier 1 merchandise.
As of March 2, 2002, Pier 1 merchandise was offered in 16 Sears Mexico stores.
Expansion plans for fiscal 2003 include one new store, one relocated store and
one remodeled store in Mexico.

The Company has a product distribution agreement with Sears Roebuck de
Puerto Rico, Inc. ("Sears Puerto Rico") which allows Sears Puerto Rico to market
and sell Pier 1 merchandise in a "store within a store" format in certain Sears
Puerto Rico stores. Sears Puerto Rico operates a total of ten stores, and as of
March 2, 2002, seven of these stores offered Pier 1 merchandise. The Company has
no immediate plans for further expansion in Puerto Rico but would consider
future sites.

In fiscal 1996, a wholly-owned subsidiary of the Company entered into a
franchise agreement with Akatsuki Printing Co., Ltd. and Skylark Co., Ltd.
(collectively "Akatsuki") to develop Pier 1 retail stores in Japan. Early in
fiscal 2002, Akatsuki informed the Company that it would not seek to renew its
current franchise agreement. Prior to the close of fiscal year 2002, the
remaining nine stores were closed and the franchise agreement with Akatsuki
expired without any additional costs or further obligations required of the
Company.

The Company owns a credit card bank in Omaha, Nebraska, operating under
the name Pier 1 National Bank (the "Bank"). The Bank holds the credit card
accounts for both the Pier 1 proprietary credit card and Cargo's new proprietary
credit card initiated in September 2001. As of March 2, 2002, the Company,
through the Bank, had over 5,100,000 proprietary cardholders with approximately
1,205,000 active accounts (accounts with a purchase within the previous 12
months). Sales on the Company's proprietary credit card accounted for 28.9% of
total U.S. store sales in fiscal 2002. The Company continues to expand its
proprietary credit card business by attracting new accounts with a discounted
first-time purchase, periodic deferred payment options and enhanced customer
loyalty through targeted promotions.

Pier 1 has an e-commerce website at pier1.com. More than 1,500
merchandise items are offered for sale to customers, along with gift cards, an
online clearance store and a Bridal & Gift Registry program. Pier 1's web site
allows customers to shop online, make changes or additions to gift registries
and easily return internet purchases to their neighborhood Pier 1 store. This
website is also being utilized as a marketing channel to reach new customers.

In February 2001, the Company acquired certain assets and assumed
certain liabilities of Cargo Furniture, Inc. and formed New Cargo Furniture,
Inc. Cargo is an 18-store retailer and wholesaler of youth and casual lifestyle
furniture, gifts and home decor. Cargo utilizes a website at cargohome.com to
attract customers and provide information regarding placing orders and store
locations. The Company will begin its expansion plans for Cargo in fiscal 2003
by opening eight to twelve new stores.

(b) Financial Information about Industry Segments.

In fiscal 2002, the Company operated in one business segment consisting
of the retail sale of imported decorative home furnishings, gifts and related
items.

Financial information with respect to the Company's business is found
in the Company's Consolidated Financial Statements, which are incorporated by
reference into Item 8 herein.

(c) Narrative Description of Business.

The specialty retail operations of the Company consist of three chains
of retail stores operating under the names "Pier 1 Imports", "The Pier", and
"Cargo" selling a wide variety of furniture, decorative home furnishings, dining
and kitchen goods, bath and bedding accessories and other specialty items for
the home.

On March 2, 2002, the Company operated 866 Pier 1 stores in 48 states
of the United States and 44 Pier 1 stores in five Canadian provinces, and
supported eight franchised stores in eight states of the U.S. Additionally, the
Company operated 23 stores in the United Kingdom under the name The Pier and 18
Cargo stores located in five states of the United States. The Company supplies
merchandise and licenses the Pier 1 Imports name to Sears Mexico and Sears
Puerto Rico, which sell Pier 1 merchandise in a "store within a store" format in
16 Sears Mexico stores and in seven Sears Puerto Rico stores. Company-operated
Pier 1 stores in the United States and Canada average approximately 7,500 square
feet of retail selling space. The stores are generally freestanding units
located near shopping centers or malls in all major U.S. metropolitan areas and
many of the primary smaller markets. In fiscal 2002, net sales of the Company
totaled $1,548.6 million. Pier 1 stores generally have their highest sales
volumes during November and December as a result of the holiday selling season.

Pier 1's growth strategy is to expand its North American store base to
more than 1,500 locations. Immediate plans to achieve this expansion include,
for fiscal 2003, the opening of 115 to 120 new stores while closing
approximately 30 stores, the majority of which will be relocated to more
favorable locations within the same markets. In the next few years, the Company
expects Cargo to begin to expand nationally as a value-oriented retailer of home
furnishings for children and families. The Company plans to grow Cargo to a 200-
to 300-store concept over the next ten years. The Company currently has no plans
to expand outside of the United States, Canada and Mexico.

Pier 1 offers a diverse selection of products consisting of nearly
5,000 items imported from over 40 countries around the world. While the broad
categories of Pier 1's merchandise remain constant, individual items within
these product groupings change frequently in order to meet the demands of
customers. The principal categories of merchandise include the following:

FURNITURE - This product group consists of furniture, furniture pads
and pillows to be used on patios and in living, dining, kitchen and bedroom
areas, and in sun rooms. The product group constituted approximately 39% of Pier
1's total North American retail sales in fiscal year 2002, 40% in fiscal 2001
and 38% in fiscal 2000. These goods are imported from a variety of countries
such as Italy, Malaysia, Brazil, Mexico, China, the Philippines and Indonesia,
and are also obtained from domestic sources. The furniture is made of metal or
handcrafted natural materials, including rattan, pine, beech, rubberwood and
selected hardwoods with either natural, stained or painted finishes. Pier 1 also
sells upholstered furniture.

DECORATIVE ACCESSORIES - This product group constituted the broadest
category of merchandise in Pier 1's sales mix and contributed approximately 23%
to Pier 1's total North American retail sales in fiscal year 2002, and 22% in
fiscal years 2001 and 2000. These items are imported from approximately 40
countries and include brass, marble and wood items, as well as lamps, vases,
dried and silk flowers, baskets, wall decorations and numerous other decorative
items. A majority of these products are handcrafted from natural materials.

HOUSEWARES - This product group is imported mainly from the Far East
and Europe and includes ceramics, dinnerware and other functional and decorative
items. These goods accounted for approximately 12% of Pier 1's total North
American retail sales in fiscal years 2002, 2001 and 2000.

BED & BATH - This product group is imported mainly from India, the
United Kingdom, Italy, Thailand and China, and is also obtained from domestic
sources. The group includes bath and fragrance products, candles and bedding.
These goods accounted for approximately 18% of Pier 1's total North American
retail sales in fiscal year 2002, 17% in fiscal 2001 and 18% in fiscal 2000.

SEASONAL - This product group consists of merchandise for celebrating
holidays and spring/summer entertaining and is imported mainly from Europe,
Canada, Taiwan, China and India. These items accounted for approximately 8% of
Pier 1's total North American retail sales in fiscal year 2002, 9% in fiscal
2001 and 10% in fiscal year 2000.

Pier 1 merchandise largely consists of items that require a significant
degree of handcraftsmanship and are mostly imported directly from foreign
suppliers. For the most part, the imported merchandise is handcrafted in cottage
industries and small factories. Pier 1 is not dependent on any particular
supplier and has enjoyed long-standing relationships with many vendors. In
selecting the source of a product, Pier 1 considers quality, dependability of
delivery and cost. During fiscal 2002, Pier 1 sold merchandise imported from
over 40 different countries with 35% of its sales from merchandise produced in
China, 11% from merchandise produced in India and 29% from merchandise produced
in Indonesia, Thailand, Brazil, Italy, the Philippines and Mexico. The remaining
25% of sales was from merchandise produced in various Asian, European, Central
American, South American and African countries or was obtained from U.S.
manufacturers.

Pier 1 operates six regional distribution centers located in or near
Baltimore, Maryland; Chicago, Illinois; Columbus, Ohio; Fort Worth, Texas;
Ontario, California and Savannah, Georgia and leases additional space from time
to time. Imported merchandise and a portion of domestic purchases are delivered
to the distribution centers, unpacked and made available for shipment to the
various stores in each center's region. Due to the time delays involved in
procuring merchandise from foreign suppliers, Pier 1 maintains a substantial
inventory to assure a sufficient supply of products in its stores.

The Company is in the highly competitive specialty retail business and
primarily competes with small specialty sections of large department stores,
home furnishing stores, small specialty import stores and discount stores.
Management believes that its stores compete on the basis of price, merchandise
assortment, visual presentation of its merchandise and customer service. The
Company also believes its Pier 1 stores enjoy a competitive edge over competing
retailers due to greater name recognition, established vendor relationships and
the extent and variety of the merchandise offered. While other retail stores
change their items less frequently, Pier 1 differentiates itself by offering an
array of unique and frequently changing products. The Company believes that its
Cargo operations give it the opportunity to address the underserved children's
furniture and accessories market.

As a retailer of imported merchandise, the Company is subject to
certain risks that typically do not affect retailers of domestically produced
merchandise. The Company typically orders merchandise from four to twelve months
in advance of delivery and pays for the merchandise at the time it is loaded for
transport to designated U.S. and international destinations. Fluctuations in
foreign currency exchange rates, restrictions on the convertibility of the
dollar and other currencies, duties, taxes and other charges on imports, dock
strikes, import quota systems and other restrictions generally placed on foreign
trade can affect the price, delivery and availability of ordered merchandise.
The inability to import products from certain countries or the imposition of
significant tariffs could also have a material adverse effect on the results of
operations of the Company. Freight costs contribute a substantial amount to the
cost of imported merchandise.

The United States and more than 100 other countries culminated seven
years of negotiations with an agreement which became effective January 1, 1995
to reduce, over time, tariff and non-tariff barriers to world trade in goods and
services and established the World Trade Organization to replace the General
Agreement on Tariffs and Trade. The World Trade Organization provides a
framework for international trade matters and includes a process for the
resolution of trade disputes among the member countries. In recent years, the
dispute resolution process of the World Trade Organization has been utilized to
resolve disputes regarding market access between the European Union, the United
States and other countries. In some instances these trade disputes have led to
the threat by countries of sanctions against each other, which have included
import prohibitions and increases in duty rates on imported items. The Company
considers any agreement that reduces tariff and non-tariff barriers in
international trade beneficial to its business in the United States and around
the world.

The 1988 Omnibus Trade and Competitiveness Act was signed into law
amending the Trade Act of 1974. This legislation was enacted partly in response
to a perceived decline in U.S. global competitiveness and the continuing
presence of unfair trade practices that limit U.S. exporters' access to foreign
markets. Under the law, the office of the U.S. Trade Representative may
investigate unfair trade practices of countries around the world. These
investigations may lead to sanctions, which could take the form of quotas or
increased duties on imports into the U.S.

The U.S. Trade Representative is required to take action within 30 days
(subject to being postponed for 180 days) after the conclusion of its
investigation of countries alleged to have committed unfair trade practices.
Upon a determination that a country has committed an unfair trade practice, the
U.S. Trade Representative may designate the subject country a priority foreign
country and impose sanctions in the form of quotas or increased duties. On
previous occasions, the U.S. Trade Representative has identified certain
countries which supply merchandise to the Company as priority foreign countries.
These designations, however, were rescinded after the U.S. Trade Representative
and the countries reached agreements regarding the basis for the designations.

The United States employs other measures besides this trade legislation
to implement its international trade policies and objectives. For example, the
United States may withdraw most favored nation status from a country, resulting
in higher import duties on products from that country. Any type of sanction on
imports is likely to increase the Company's import costs or limit the
availability of products purchased from sanctioned countries. In that case, the
Company will seek similar products from other countries.

The Company, through certain of its wholly-owned subsidiaries, owns
three federally registered service marks under which its Pier 1 Imports stores
do business and one federally registered service mark under which its Cargo
stores do business. These registrations are numbered 948,076 and 1,620,518 for
the mark PIER 1 IMPORTS, 1,104,059 for the mark PIER 1 and 1,348,743 for the
mark CARGO. Additionally, certain subsidiaries of the Company have registered
and have applications pending for the registration of Pier 1 and Cargo
trademarks and service marks in the United States and in numerous foreign
countries.

On March 2, 2002, Pier 1 employed approximately 17,100 associates in
North America, of which approximately 8,000 were full-time employees and 9,100
were part-time employees.

The Company maintains a wholly-owned foreign subsidiary incorporated
under the laws of Hong Kong to manage certain merchandise procurement, export
and financial service functions. Also, a wholly-owned foreign subsidiary
incorporated under the laws of Bermuda owns the right to license and to
franchise the Company's trademarks and service marks outside the United States,
Canada and Puerto Rico.

Certain statements contained in Item 1, Item 7 and elsewhere in this
report may constitute "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934. The Company may also make
forward-looking statements in other reports filed with the Securities and
Exchange Commission and in material delivered to the Company's shareholders.
Forward-looking statements provide current expectations of future events based
on certain assumptions. These statements encompass information that does not
directly relate to any historical or current fact and often may be identified
with words such as "anticipates," "believes," "expects," "estimates," "intends,"
"plans," "projects" and other similar expressions. Management's expectations and
assumptions regarding planned store openings, financing of Company obligations
from operations 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, weather conditions that may affect sales, volatility of fuel and
utility costs, the general strength of the economy and levels of consumer
spending, consumer confidence, the availability of new sites for expansion along
with sufficient labor to facilitate growth, the strength of new home
construction and sales of existing homes, 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 ship items from foreign
countries at reasonable rates in a timely fashion. The foregoing risks and
uncertainties are in addition to others discussed elsewhere in this report. 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.

Item 2. Properties.

The Company leases approximately 203,000 square feet of office space
for its Pier 1 corporate office and leases approximately 13,000 square feet of
additional office space for its Cargo subsidiary. Both corporate office
facilities are located in Fort Worth, Texas. The Company is planning
construction of a new corporate office for the relocation of both corporate
offices. The new facility is expected to be completed in the fourth quarter of
fiscal 2005.

The Company leases the majority of its retail stores, its warehouses
and other office space. At March 2, 2002, the present value of the Company's
minimum future operating lease commitments discounted at 10% totaled
approximately $752 million. The Company currently owns and leases distribution
space of approximately four million square feet. The Company also acquires
temporary distribution space from time to time through short-term leases.

The following table shows the distribution of Pier 1's North American
stores by state and province as of March 2, 2002:

United States

Alabama 14 Kentucky 10 North Dakota 3
Alaska 1 Louisiana 14 Ohio 37
Arizona 16 Maryland 19 Oklahoma 5
Arkansas 7 Massachusetts 22 Oregon 11
California 91 Michigan 29 Pennsylvania 37
Colorado 19 Minnesota 16 Rhode Island 5
Connecticut 19 Mississippi 6 South Carolina 14
Delaware 4 Missouri 16 South Dakota 2
Florida 62 Montana 5 Tennessee 18
Georgia 26 Nebraska 4 Texas 66
Hawaii 2 Nevada 5 Utah 8
Idaho 3 New Hampshire 5 Virginia 29
Illinois 42 New Jersey 21 Washington 21
Indiana 20 New Mexico 5 West Virginia 5
Iowa 7 New York 41 Wisconsin 17
Kansas 8 North Carolina 28 Wyoming 1

Canada

Alberta 5 Manitoba 1 Quebec 8
British Columbia 7 Ontario 23

The Pier's retail operations consist of 19 stores in England, three
stores in Scotland, and one store in Wales. At the end of fiscal 2002, Cargo had
two stores in Georgia, one store in Kansas, two stores in Missouri, four stores
in Virginia and nine stores in Texas.

As of March 2, 2002, Pier 1 owned or leased the following warehouse
properties in or near the following cities:

The Company also leases approximately 98,000 square feet of warehouse
space in the United Kingdom for The Pier's operations and approximately 123,000
square feet of warehouse space in the United States for Cargo's operations. The
Company is currently leasing additional space under short-term agreements. In
support of its long-range growth plan, the Company is expanding its distribution
facilities. The Company will be building a new distribution center to replace
its owned property along with the two locations it currently leases in Savannah.
The new facility is expected to be approximately 770,000 square feet, with
projected occupancy in the first quarter of calendar year 2004.

Item 3. Legal Proceedings.

The Company is subject to various claims, lawsuits, investigations, and
pending actions against the Company and its subsidiaries incident to the
operation of their businesses. Liability, if any, associated with these matters
is not determinable at March 2, 2002; however, the Company considers them to be
either ordinary and routine in nature or immaterial in amount. While a certain
number of the lawsuits involve substantial amounts, management, after
consultation with counsel, does not currently expect such litigation will have a
material adverse effect on the Company's financial

position, results of operations or liquidity. The Company intends to vigorously
defend itself against the claims asserted in these lawsuits.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of the Company's security
holders during the fourth quarter of the Company's 2002 fiscal year.

Executive Officers of the Company

MARVIN J. GIROUARD, age 62, has served as Chairman and Chief Executive
Officer of the Company since March 1999 and has been a member of the Executive
Committee since December 1998. He has been a Director of the Company since
August 1988. From June 1998 to February 1999, Mr. Girouard served as President
and Chief Executive Officer of the Company and from August 1988 to June 1998 he
served as President and Chief Operating Officer of the Company. From May 1985
until August 1988, he served as the Company's Senior Vice President of
Merchandising.

CHARLES H. TURNER, age 45, has recently been promoted to Executive Vice
President of Finance and has served as Chief Financial Officer and Treasurer of
the Company since August 1999. He served as Senior Vice President of Finance of
the Company from August 1999 to April 2002. He served as Senior Vice President
of Stores of the Company from August 1994 to August 1999, and served as
Controller and Principal Accounting Officer of the Company from January 1992 to
August 1994.

ROBERT A. ARLAUSKAS, age 47, has recently been promoted to Executive
Vice President of Stores of the Company. He served as Senior Vice President of
Stores of the Company from September 1999 to April 2002. He served as Vice
President of West Zone Operations of Pier 1 Imports (U.S.), Inc. from August
1995 to September 1999, and served as Director of West Zone Operations of Pier 1
Imports (U.S.), Inc. from June 1993 to August 1995.

JAY R. JACOBS, age 47, has recently been promoted to Executive Vice
President of Merchandising of the Company. He served as Senior Vice President of
Merchandising of the Company from May 1995 to April 2002. He served as Vice
President of Divisional Merchandising of Pier 1 Imports (U.S.), Inc. from May
1993 to May 1995, and served as Director of Divisional Merchandising of Pier 1
Imports (U.S.), Inc. from July 1991 to May 1993.

J. RODNEY LAWRENCE, age 56, has recently been promoted to Executive
Vice President of Legal Affairs and has served as Secretary of the Company since
November 1985. He served as Senior Vice President of Legal Affairs of the
Company from June 1992 to April 2002, and served as Vice President of Legal
Affairs of the Company from November 1985 to June 1992.

PHIL E. SCHNEIDER, age 50, has recently been promoted to Executive Vice
President of Marketing of the Company. He served as Senior Vice President of
Marketing of the Company from May 1993 to April 2002, and served as Vice
President of Advertising of Pier 1 Imports (U.S.), Inc. from January 1988 to May
1993.

DAVID A. WALKER, age 51, has recently been promoted to Executive Vice
President of Logistics and Allocations of the Company. He served as Senior Vice
President of Logistics and Allocations of the Company from September 1999 to
April 2002. He served as Vice President of Planning and Allocations of Pier 1
Imports (U.S.), Inc. from January 1994 to September 1999, and served as Director
of Merchandise Services of Pier 1 Imports (U.S.), Inc. from October 1989 to
January 1994.

E. MITCHELL WEATHERLY, age 54, has been promoted to Executive Vice
President of Human Resources of the Company. He served as Senior Vice President
of Human Resources of the Company from June 1992 to April 2002, and served as
Vice President of Human Resources of the Company from June 1989 to June 1992 and
of Pier 1 Imports (U.S.), Inc. from August 1985 to June 1992.

The officers of the Company are appointed by the Board of Directors,
hold office until their successors are elected and qualified and/or until their
earlier death, resignation or removal.

None of the above executive officers has any family relationship with
any other of such officers or with any director of the Company. None of such
officers was selected pursuant to any arrangement or understanding between him
and any other person.

PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters.

Information required by this Item is incorporated by reference to the
section entitled "Market Price and Dividend Information" set forth in the
Company's Annual Report to Shareholders for the fiscal year ended March 2, 2002.

The Company's common stock is traded on the New York Stock Exchange. As
of May 2002, there were approximately 40,000 shareholders of record of the
Company's common stock.

During fiscal 2002, the Company repurchased over four million shares of
its outstanding common stock. In April 2002, the Board of Directors authorized
the repurchase of up to $150 million of the Company's common stock. This
authorization replaced the previously authorized 2.8 million shares that were
remaining for repurchase at the end of fiscal 2002. Future repurchases of common
stock will be made through open market or private transactions from time to time
depending on prevailing market conditions, the Company's available cash and the
Company's consideration of any loan covenant restrictions and its credit
ratings.

Certain of the Company's existing loan agreements require the Company
to maintain specified financial ratios and limit certain investments and
distributions to shareholders, including cash dividends, loans to shareholders
and repurchases of the Company's common stock. During fiscal 2002, the Company
paid cash dividends totaling approximately $15.1 million, or $.16 per share. The
Company's Board of Directors currently expects to continue to pay cash dividends
in fiscal 2003, but intends to retain most of its future earnings for the
expansion of the Company's business. The Company paid a cash dividend of $.05
per share on May 22, 2002. The Company's dividend policy will depend upon the
earnings, financial condition and capital needs of the Company and other factors
deemed relevant by the Company's Board of Directors.

Item 6. Selected Financial Data.

Information required by this Item is incorporated by reference to the
section entitled "Financial Summary" set forth in the Company's Annual Report to
Shareholders for the fiscal year ended March 2, 2002.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Information required by this Item is incorporated by reference to the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" set forth in the Company's Annual Report to
Shareholders for the fiscal year ended March 2, 2002.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Information required by this Item is incorporated by reference to the
section entitled "Market Risk Disclosures" set forth in the Company's Annual
Report to Shareholders for the fiscal year ended March 2, 2002.

Item 8. Financial Statements and Supplementary Data.

Information required by this Item is incorporated by reference to the
material in the Company's consolidated financial statements described below and
notes thereto set forth in the Company's Annual Report to Shareholders for the
fiscal year ended March 2, 2002:

Consolidated Statements of Operations for the Years
Ended March 2, 2002, March 3, 2001 and
February 26, 2000

Consolidated Balance Sheets at March 2, 2002 and March 3, 2001

Consolidated Statements of Cash Flows for the Years
Ended March 2, 2002, March 3, 2001 and
February 26, 2000

Consolidated Statements of Shareholders' Equity for
the Years Ended March 2, 2002, March 3, 2001
and February 26, 2000

Notes to Consolidated Financial Statements

Report of Independent Auditors

The unaudited quarterly information required by this Item is
incorporated by reference to the section entitled "Market Price and Dividend
Information" set forth in the Company's Annual Report to Shareholders for the
fiscal year ended March 2, 2002 and March 3, 2001.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Company.

Information regarding directors of the Company required by this Item is
incorporated by reference to the section entitled "Election of Directors -
Nominees for Directors" set forth in the Company's Proxy Statement for its 2002
Annual Meeting of Shareholders.

The information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 required by this Item is incorporated by
reference to the section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" set forth in the Company's Proxy Statement for its 2002 Annual
Meeting of Shareholders.

No director or nominee for director of the Company has any family
relationship with any other director or nominee or with any executive officer of
the Company.

Item 11. Executive Compensation.

The information required by this Item is incorporated herein by
reference to the section entitled "Executive Compensation" and the section
entitled "Election of Directors - Board Meetings, Committees and Fees" set forth
in the Company's Proxy Statement for its 2002 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is incorporated herein by
reference to the section entitled "Election of Directors - Security Ownership of
Management" and the section entitled "Executive Compensation - Equity
Compensation Plan Information" set forth in the Company's Proxy Statement for
its 2002 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions.

None.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a) List of consolidated financial statements, schedules and
exhibits filed as part of this report.

1. Financial Statements

Consolidated Statements of Operations for the Years
Ended March 2, 2002, March 3, 2001 and
February 26, 2000

Consolidated Balance Sheets at March 2, 2002 and
March 3, 2001

Consolidated Statements of Cash Flows for the Years
Ended March 2, 2002, March 3, 2001 and
February 26, 2000

Consolidated Statements of Shareholders' Equity for
the Years Ended March 2, 2002, March 3, 2001
and February 26, 2000

Notes to Consolidated Financial Statements

Report of Independent Auditors

2. Financial Statement Schedules

Schedules have been omitted because they are not
required or are not applicable or because the
information required to be set forth therein either
is not material or is included in the financial
statements or notes thereto.

3. Exhibits

See Exhibit Index.

(b) Reports on Form 8-K.

On February 12, 2002, the Company filed a Current Report on
Form 8-K, in compliance with fair disclosure regulations.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: May 30, 2002 PIER 1 IMPORTS, INC.

By: /s/ Marvin J. Girouard
----------------------------
Marvin J. Girouard, Chairman
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.

EXHIBIT INDEX

10.11.4 Amendment No. 5 to the Pooling and Services Agreement dated as
of February 12, 1997 by and among Pier 1 Funding, L.L.C., Pier 1
Imports (U.S.), Inc., as servicer, and Wells Fargo Bank
Minnesota, National Association as trustee, incorporated herein
by reference to Exhibit 10.11.4 to the Company's Form 10-Q for
the quarter ended September 1, 2001.

10.12* Form of Deferred Compensation Agreement, between the Company and
senior executive officers, incorporated herein by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
November 29, 1997.

10.13* Senior Management Annual Bonus Plan, incorporated herein by
reference to Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended May 31, 1997.

10.14.1 Revolving Credit Agreement, dated November 12, 1998, among the
Company, certain of its subsidiaries, NationsBank, N.A., Bank
One, Texas, N.A., and Wells Fargo Bank (Texas), National
Association, incorporated herein by reference to Exhibit 10.1 to
the Company's Form 10-Q for the quarter ended November 28, 1998.

10.14.2 First Amendment to the Revolving Credit Agreement, dated
December 30, 1999, incorporated herein by reference to Exhibit
10.14.2 to the Company's Form 10-K for the fiscal year ended
February 26, 2000.

10.15* The Company's 1999 Stock Option Plan, effective June 24, 1999,
incorporated herein by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended August 28, 1999.

10.16* Forms of Director and Employee Stock Option Agreements,
incorporated herein by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended August 28, 1999.

10.17 Certificate Purchase Agreement among Pier 1 Funding, L.L.C.,
Pier 1 Imports (U.S.), Inc., the purchasers named therein and
Morgan Guaranty Trust Company of New York, as administrative
agent, incorporated herein by reference to Exhibit 10.17 to the
Company's Form 10-Q for the quarter ended September 1, 2001.

10.18 Repurchase Agreements relating to the cancellation of Series
1997-1 Class A Certificates, incorporated herein by reference to
Exhibit 10.18 to the Company's Form 10-Q for the quarter ended
September 1, 2001.

13 Annual Report to Shareholders for the fiscal year ended March 2,
2002.

21 Roster of Subsidiaries of the Company.

23 Consent of Independent Auditors.

*Management Contracts and Compensatory Plans