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Pier 1 Imports Reports Another Quarterly Loss

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Pier 1 Imports, Inc. announced a net loss from continuing operations of $22,765,000, or $0.26 per share, for the first quarter ended May 27, 2006. The Company reported a net loss of $23,172,000 or $0.27 per share for the first quarter, which included an after-tax loss from discontinued operations of $407,000 or $0.01 per share. Total sales declined 3.6% for the first fiscal quarter to $376,092,000, from $390,314,000 in the year-ago quarter, and comparable store sales declined 6.6%. The results of The Pier Retail Group Limited ("The Pier"), the Company's subsidiary based in the United Kingdom, have been classified as discontinued operations for all periods presented in the Company's consolidated financial statements; this subsidiary was sold on March 20, 2006. Attached is a supplemental schedule presenting last year's quarterly and annual results reclassified for discontinued operations. Fiscal 2007 first quarter results are based on the following: - Merchandise margins improved to 53.8% from 53.2% in the year-ago quarter. - Store occupancy costs increased $5.1 million and de-leveraged to 20.0% of sales in the first quarter versus 17.9% for the year-ago quarter. - Selling, general and administrative costs were 39.2% of sales compared to 35.9% of sales in the first quarter last year. Payroll costs de-leveraged during the quarter versus last year, and marketing costs were 8.0% of sales, which was even with the year-ago period. Other SG&A costs in the first quarter included $2.0 million of non-cash impairment charges recognized on store assets. Marvin J. Girouard, the Company's Chairman and Chief Executive Officer, said, "In mid-March, we launched our brand repositioning campaign featuring Pier 1's unique Modern Craftsman merchandise, which included new advertising and new in-store visuals intended to mirror Pier 1's catalogs. During the first quarter, customer traffic remained weak. We recognize that it will take time to attract new customers and inform our existing customers of the significant changes in our merchandise assortment. "As of May 27, 2006, inventories were $357 million, down 12.5% from the year-ago period. Cash at the end of the first quarter was $235 million. We are carefully managing the balance sheet in order to maintain flexibility and liquidity to operate the business efficiently, while working to increase sales with the appropriate inventory levels in stores. "Pier 1's Summer Sale and Clearance event begins in late June and is primarily supported by TV ads and in-store promotions. We will launch our newest merchandise collection called 'Loft 21' in mid-July. It features lifestyle furniture and accessories exclusively available at Pier 1. To support this merchandise introduction, we plan to distribute 9 million copies of our latest catalog. We continue to see better merchandise margins this quarter compared to last year, but expect June comp store sales to be in the negative low- to mid-teens range compared to last year, when sales were driven by heavier promotions." The Company will host a conference call to discuss fiscal 2007 first quarter results at 10:00 a.m. Central Time today. A web cast is available on our web site at www.pier1.com linking through to the "Investor Relations" page and the "Events" page, or you can dial into the conference at 706-643-0435, ID 4639617. The teleconference will be held in a "listen-only" mode for all participants other than the Company's current sell-side and buy-side investment professionals. The Company will hold its annual shareholders' meeting at 10:00 a.m. Central Time on June 22, 2006, in the Trinity Room of the Fort Worth Club, Fort Worth, Texas. Pier 1 Imports, Inc. is North America's largest specialty retailer of imported decorative home furnishings and gifts with Pier 1 Imports(R) stores in 49 states, Puerto Rico, Canada, and Mexico and Pier 1 kids(R) stores in the United States.

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