PIER 1 IMPORTS INC/DE - 10-Q Quarterly Report

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended August 31, 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 Number 1-7832

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

Delaware 75-1729843
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

301 Commerce Street, Suite 600, Fort Worth, Texas 76102
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

PART I

Item 1. Financial Statements.

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)

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

PIER 1 IMPORTS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)

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

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

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

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 31, 2002
(in thousands except per share amounts)
(unaudited)

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

PIER 1 IMPORTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2002
AND SEPTEMBER 1, 2001
(unaudited)

The accompanying unaudited financial statements should be read in conjunction
with the Form 10-K for the year ended March 2, 2002. All adjustments that are,
in the opinion of management, necessary for a fair statement of the financial
position as of August 31, 2002, and the results of operations and cash flows for
the three and six months ended August 31, 2002 and September 1, 2001 have been
made and consist only of normal recurring adjustments. The results of operations
for the three and six months ended August 31, 2002 and September 1, 2001 are not
indicative of results to be expected for the fiscal year because of, among other
things, seasonality factors in the retail business. The classification of
certain amounts previously reported in the statement of cash flows for the six
months ended September 1, 2001 has been modified to conform to the August 31,
2002 method of presentation.

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 effect,
when dilutive, of the Company's weighted average number of stock options
outstanding. Earnings per share for the three and six months ended August 31,
2002 and September 1, 2001 are calculated as follows (in thousands except per
share amounts):

NOTE 2 - COMPREHENSIVE INCOME

The components of comprehensive income, net of related tax, for the three and
six months ended August 31, 2002 and September 1, 2001 are as follows (in
thousands):

NOTE 3 - ADOPTION OF NEW ACCOUNTING STANDARDS

In the first quarter of fiscal 2003, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets,"
which supersedes Accounting Principles Board ("APB") Opinion No. 17, "Intangible
Assets." This statement addresses the initial recognition and measurement of
intangible assets acquired outside of a business combination and the accounting
for goodwill and other intangible assets subsequent to their acquisition. SFAS
No. 142 also provides that intangible assets with finite useful lives be
amortized and that goodwill and intangible assets with indefinite lives will not
be amortized, but will rather be tested for impairment upon adoption and on an
annual basis thereafter. The Company completed the initial impairment test and
concluded that goodwill was not impaired as of August 31, 2002. The adoption of
SFAS No. 142 during the first quarter of fiscal 2003 did not have a material
impact on the Company's consolidated balance sheets or its statements of
operations, shareholders' equity and cash flows. The impact of the
non-amortization provisions of SFAS No. 142, if applied at the beginning of
fiscal year 2002, would have resulted in second quarter net income of
$13,865,000 versus reported net income of $13,802,000 and year-to-date net
income of $26,254,000 versus reported net income of $26,147,000. Basic and
diluted earnings per share would have remained at $0.15 and $0.14, respectively,
for the second quarter and $0.27 for both basic and diluted earnings per share
for the year-to-date period.

In the first quarter of fiscal 2003, the Company also adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which replaces
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 with additional guidance on estimating cash flows
when performing a recoverability test, requires that a long-lived asset to be
disposed of, other than by sale, be classified as "held and used" until it is
disposed of and establishes more restrictive criteria to classify an asset as
"held for sale." SFAS No. 144 also supersedes APB Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," regarding the disposal of a segment of a business and extends the
reporting of a discontinued operation to a "component of an entity" and requires
the operating losses thereon to be recognized in the period in which they occur.
The adoption of SFAS No. 144 did not have a material impact on the Company's
consolidated balance sheets or its statements of operations, shareholders'
equity and cash flows.

PART I

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

GENERAL

Pier 1 Imports, Inc. (the "Company") is one of North America's largest specialty
retailers of unique decorative home furnishings, gifts and related items for the
home. The Company, through certain subsidiaries, operates stores in North
America under the names "Pier 1 Imports" and "Cargokids!" ("Cargokids"). In the
United Kingdom, retail locations operate under the name "The Pier." The Company
has over 1,000 retail locations in 48 states, Canada, Puerto Rico, the United
Kingdom and Mexico with merchandise directly imported from over 40 countries
around the world.

RESULTS OF OPERATIONS

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

(1) Other sales consisted of wholesale sales and royalties received from
franchise stores, international joint ventures in Mexico and Puerto Rico,
and Cargokids' contract sales. Amounts from the prior fiscal year also
included sales to the Company's franchise stores in Japan and Cargokids'
dealer sales.

The Company recorded net sales of $410.9 million for the second quarter of
fiscal 2003, an increase of 15.0% over last year's second quarter net sales of
$357.2 million. Same-store sales for the second quarter of fiscal 2003 increased
5.8% over last year's comparable period. Net sales for the first six months of
fiscal 2003 improved 16.5% to $795.3 million from $682.6 million for the
comparable period a year ago. Same-store sales for the first half of fiscal 2003
increased 7.4% over last year's comparable period. Successful integrated
marketing initiatives and favorable customer response to the Company's value
pricing strategy and to the new merchandise that arrived in stores in late July
and throughout August contributed to the positive sales gains. The Company has
continued to experience increased customer traffic and average ticket for the
first half of fiscal 2003.

In addition, the increase in net sales was also attributable to the net increase
of 103 new North American Pier 1 stores at the end of the second quarter of
fiscal 2003 compared to the end of the comparable period last fiscal year.
Increases in North American Pier 1 stores sales were partially offset by a
reduction in sales due to the Company's discontinued operations in Japan, the
termination of one franchise store agreement, and lower contract sales at
Cargokids as management shifted its focus to concentrate on retail sales. The
North

American Pier 1 store count totaled 949 at the end of the second quarter
compared to 846 stores a year ago. During the second quarter, the Company opened
30 and closed six North American Pier 1 stores and closed one Cargokids store,
which resulted in an increase of 3% in total retail square footage during the
quarter and an increase of 13% over the same quarter last year. During the first
half of fiscal 2003, the Company opened 55 and closed 16 North American Pier 1
stores and closed one Cargokids store, which resulted in an increase of 5% in
total retail square footage from the beginning of fiscal 2003. Including
Cargokids locations, the worldwide store count across North America, Puerto
Rico, the United Kingdom and Mexico totaled 1,012 as of August 31, 2002.

A summary reconciliation of the Company's stores open at the beginning of fiscal
2003 to the number open at the end of the second quarter follows (openings and
closings include relocated stores):

(1) International stores were located in Puerto Rico, the United Kingdom and
Mexico.

Net sales on the Company's proprietary credit card during the second quarter
totaled $107.4 million, an increase of 3.9% over proprietary credit card sales
of $103.4 million for the same period last fiscal year. Proprietary credit card
sales totaled $208.3 million for the first six months of fiscal 2003, an
increase of 4.4% over the same period last year. Second quarter proprietary
credit card sales comprised 28.4% versus 31.4% of total sales in the same period
last fiscal year, while year-to-date proprietary credit card sales accounted for
28.3% of total U.S. store sales versus 31.7% of sales in the year earlier
period. The Company continues to increase overall sales on its proprietary
credit card by opening new accounts and developing customer loyalty through
marketing promotions targeted to cardholders.

Gross profit, after related buying and store occupancy costs, expressed as a
percentage of sales, increased over 160 basis points to 40.1% for the second
quarter of fiscal 2003 and increased 140 basis points to 41.4% for the first six
months of fiscal 2003. As a percentage of sales, merchandise margins increased
160 basis points for the second quarter and 110 basis points for the six-month
period ended August 31, 2002 from the comparable periods a year ago. Merchandise
margin increases were primarily the result of lower promotional and clearance
activity during the first and second quarters of fiscal 2003, as well as
slightly higher margin rates before discounts as a result of lower prices
charged by vendors. Store occupancy costs for the second quarter, as a
percentage of sales, were 13.3%, an improvement of nearly 10 basis points
compared to the year ago quarter. Year-to-date, store occupancy costs improved
30 basis points compared to the same period last year. Store occupancy
improvements resulted from leveraging relatively fixed rental costs over a
higher sales base.

Selling, general and administrative expenses for the second quarter of fiscal
2003 were $118.6 million, an increase of $13.5 million over the same quarter
last year, but a decline of 50 basis points as a percentage of sales, to 28.9%
this year from 29.4% last year. Year-to-date selling, general and administrative
expenses increased $27.3 million. As a percentage of sales, when compared to the
same period last year, year-to-date selling, general and administrative expenses
declined 90 basis points. Expenses that normally grow proportionately with sales
and number of stores, such as store payroll, marketing, store supplies and
equipment rental, increased $6.8 million and $16.3 million for the quarter and
year-to-date periods, respectively. As a percentage of sales, these variable
expenses declined 100 basis points for the second quarter and 90 basis points
year-to-date. Store payroll including bonus continues to be well controlled,

increasing $6.8 million but remaining flat as a percentage of sales for the
quarter. For the first half of fiscal 2003, store payroll including bonus
increased $17.1 million or 40 basis points as a percentage of sales, which was
largely the result of an increase in store bonuses, awarded based on sales gains
over the prior year. Marketing expenses increased $1.1 million and $0.3 million
for the quarter and year-to-date periods, respectively, but declined 30 basis
points to 4.2% of sales for the quarter and to 4.9% of sales year-to-date, a
decline of 80 basis points. Marketing expenses for fiscal 2003 are expected to
approximate 4.5% of sales, which is consistent with fiscal 2002. Primarily as a
result of implementation of a redesigned program for bags and boxes used in the
stores, store supplies and equipment expenses during the second quarter and
first half of fiscal 2003 declined $1.1 million, a decline of 70 basis points
for the quarter and 50 basis points for the first six months. The Company
expects these savings in bags and boxes to continue through the remainder of the
year. Headquarters payroll increased $1.2 million for the quarter, and declined
20 basis points as a percentage of sales when compared to the second quarter
last year. Headquarters payroll increased $3.2 million and decreased 10 basis
points as a percentage of sales for the first six months of fiscal 2003.
Headquarters bonus accruals increased $3.6 million or 90 basis points for the
quarter and $5.3 million or 60 basis points year-to-date as a result of better
profit results for the first half of fiscal 2003 compared to the same period a
year ago. All other selling, general and administrative expenses increased $1.9
million for the quarter, a decline of 20 basis points as a percentage of sales.
For the six-month period, all other selling, general and administrative
increased $2.5 million and decreased 50 basis points as a percentage of sales,
when compared to the same period last year.

Operating income increased 58.9% to $35.0 million for the second quarter of
fiscal 2003 from $22.0 million for the second quarter of fiscal 2002. For the
first six months of fiscal 2003, operating income increased 67.5% to $69.9
million from $41.7 million for the same period last year. As a percentage of
sales, operating income for the second quarter increased to 8.5% from 6.2% for
the same period a year ago. Year-to-date, operating income increased to 8.8% of
sales versus 6.1% of sales for the comparable period last year.

The Company's effective income tax rate for fiscal 2003 is estimated at 37%,
consistent with fiscal 2002.

Net income for the second quarter of fiscal 2003 was $22.1 million, or $.23 per
diluted share, compared to net income of $13.8 million, or $.14 per diluted
share, for the second quarter of fiscal 2002. Net income for the first six
months of fiscal 2003 was $44.3 million, or $.46 per diluted share, compared to
net income of $26.1 million, or $.27 per diluted share, for the first six months
of fiscal 2002. Net income for the quarter and year-to-date periods increased
59.9% and 69.3%, respectively, compared to the same periods last year.

LIQUIDITY AND CAPITAL RESOURCES

The Company ended the second quarter of fiscal 2003 with $149.5 million in cash
and temporary investments compared to $64.4 million a year ago. Net income,
adjusted for non-cash and non-operating related items, was $74.9 million and
served as the Company's primary source of operating cash flows for the six
months ended August 31, 2002. Operating activities in the first half of fiscal
2003 used $5.2 million of cash versus providing $73.1 million during the same
period last year. The change in cash flow was primarily the result of an
increase of $81.8 million in inventories during the first six months of fiscal
2003 compared to a decline in inventory levels last year of $9.5 million in the
comparable period. Inventory increases in the current year were concentrated in
the distribution centers and resulted from a plan to ensure adequate supply for
the planned openings of 65 new stores during the remainder of fiscal 2003 and to
support promotions planned for the next few months. Inventory growth also
resulted from the addition of 39 net new Pier 1 stores since the end of fiscal
2002, along with 103 net new Pier 1 stores from last year's second quarter-end.
Average inventory physically in stores remained consistent with last year's
second quarter balance at just over $200,000 per store. The Company believes
that its current levels of inventory are well positioned for the planned store
openings for the remainder of fiscal 2003 and upcoming marketing initiatives.
All other operating activities provided cash of $1.8 million.

During the first half of fiscal 2003, the Company spent a net $42.2 million in
investing activities. Capital expenditures were $46.6 million and consisted
primarily of the land purchase and beginning construction costs for both the
replacement of one of the Company's current distribution centers and for the
Company's future headquarters along with new and existing store development and
investments in information systems. Through the first half of fiscal 2003, the
Company's beneficial interest in securitized receivables decreased $3.8 million
as a result of a decline in the total receivables portfolio from $140.7 million
at fiscal 2002 year-end to $136.9 million at the end of the second quarter of
fiscal 2003. These proprietary credit card receivables have declined due to a
decrease in the proprietary credit card usage as a percentage of sales and
improved customer payment rates. The Company has continued to have $100 million
of these receivables securitized at both fiscal 2002 year-end and the end of the
second quarter of fiscal 2003. Therefore, the decline in the receivables balance
resulted in a reduction in the beneficial interest.

Financing activities for the first six months of fiscal 2003 used a net $38.7
million of the Company's cash resources. Year-to-date, the Company repurchased
2,134,000 shares of its common stock for $40.2 million, leaving $109.8 million
remaining authorized for repurchase under the stock buyback program approved by
the Board of Directors during the first quarter of fiscal 2003. Dividend
payments totaled $9.4 million for the first half of fiscal 2003, and other
financing activities, primarily the exercise of stock options, provided cash of
$11.1 million.

The Company's minimum operating lease commitments remaining for fiscal 2003 were
$87.5 million. The present value of total existing minimum operating lease
commitments discounted at 10% was $759.7 million at the fiscal 2003 second
quarter-end.

Working capital requirements are expected to continue to be funded through cash
flow from operations, bank lines of credit and sales of proprietary credit card
receivables. The Company's bank facilities consist of a $125 million revolving
credit facility, which expires November 2003, all of which was available at the
end of the second quarter of fiscal 2003. The Company also has other long-term
and short-term bank facilities used principally for the issuance of letters of
credit totaling $153.8 million, of which $50.1 million was available at August
31, 2002. The Company's current ratio was 2.8 to 1 at the end of the second
quarter of fiscal 2003 and 2.9 to 1 at the end of fiscal year 2002.

On September 26, 2002, the Company declared a cash dividend of $.05 per share
payable on November 20, 2002 to shareholders of record on November 6, 2002. The
Company currently expects to continue to pay cash dividends in the future but to
retain most of its future earnings for expansion of the Company's business.

Management believes the funds provided from operations, available lines of
credit and sales of the Company's proprietary credit card receivables will be
sufficient to meet the Company's expected cash requirements for the next fiscal
year.

OTHER EVENTS AND UNCERTAINTIES

On September 30, 2002, the Pacific Maritime Association, a group representing
West Coast port operators and international shipping lines, initiated a lockout
at 29 West Coast ports of members of the International Longshore and Warehouse
Union, effectively bringing port operations to a halt. On October 8, 2002, a
federal court issued a restraining order effective until October 16, 2002 ending
the lockout. The court is expected to impose an 80-day cooling off period at
that time as required by the Taft Hartley Act. The Company has assessed the
probable impact of the temporary loss of use of these ports and has determined
that any negative effects on its results of operations will not be material.
Although port operations may not return to normal for several weeks, the Company
expects no significant adverse effects on its current operations since almost
all seasonal merchandise purchased for the Company's holiday selling season has
already been received into its stores and distribution centers, as has other
merchandise in sufficient quantities to support promotional events and regular
sales through the third quarter and into the fourth quarter.

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
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, terrorist attacks and other
acts of war, labor strikes, weather conditions that may affect sales, the
general strength of the economy and levels of consumer spending, 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 and deliver items from foreign countries to its U.S.
distribution centers at reasonable rates and in a timely fashion. The foregoing
risks and uncertainties are in addition to others discussed elsewhere in this
quarterly 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.
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, 2002, as
filed with the Securities and Exchange Commission.

IMPACT OF INFLATION

Inflation has not had a significant impact on the operations of the Company.

PART I

Item 4. Controls and Procedures.

As of August 31, 2002, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chairman of
the Board and Chief Executive Officer ("CEO") and the Executive Vice President,
Chief Financial Officer and Treasurer ("CFO"), of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the CEO and CFO,
concluded that the Company's disclosure controls and procedures were effective
as of August 31, 2002. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to August 31, 2002.

PART II

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

See Exhibit Index.

(b) Reports on Form 8-K

On October 11, 2002, the Company filed a Current Report on
Form 8-K, in compliance with Securities and Exchange
Commission Order No. 4-460.

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. (Registrant)

Date: October 11, 2002 By: /s/ Marvin J. Girouard
-------------------- ---------------------------------------------
Marvin J. Girouard, Chairman of the Board
and Chief Executive Officer

Date: October 11, 2002 By: /s/ Charles H. Turner
-------------------- ---------------------------------------------
Charles H. Turner, Executive Vice President,
Chief Financial Officer and Treasurer

Date: October 11, 2002 By: /s/ Susan E. Barley
-------------------- ---------------------------------------------
Susan E. Barley, Principal Accounting Officer

CERTIFICATIONS

I, Marvin J. Girouard, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: October 10, 2002 By: /s/ Marvin J. Girouard
-------------------- ------------------------------------------
Marvin J. Girouard, Chairman of the Board
and Chief Executive Officer

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 quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: October 10, 2002 By: /s/ Charles H. Turner
------------------- --------------------------------------------
Charles H. Turner, Executive Vice President,
Chief Financial Officer and Treasurer

Exhibit Index