Pier 1 Imports, Inc. Reports Second Quarter Financial Results.

FORT WORTH, Texas -- Pier 1 Imports, Inc. (NYSE:PIR) today announced a net loss from continuing operations of $43.4 million or $0.49 per share for the second quarter ended September 1, 2007 versus a net loss of $73.1 million or $0.84 per share for the year ago period. Total sales declined 7.0%

Merchandise Margin and Gross Profit

Merchandise margins in the second quarter were 47% of sales. Historically, the second quarter has the lowest merchandise margins of the year as a result of the semi-annual clearance event in June and July. In addition, margins for the quarter were further reduced by an estimated 200 basis points as a result of the aggressive liquidation of Pier 1 Kids, e-commerce, clearance and the remaining modern craftsman merchandise. During the month of August, when the Company had no unusual promotional discounting activities, merchandise margins were approximately 52% excluding Pier 1 Kids, e-commerce and clearance stores and were comparable to last year. Store occupancy expense for the second quarter decreased $2.5 million from the year ago period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the second quarter were $35.6 million less than the year ago period, and were 34.1% of sales compared to 41.3% of sales last year. The primary contributors to the decrease in on-going costs were savings of approximately $14.0 million in marketing expense, $13.9 million in payroll, and $4.8 million in other general administrative costs when compared to the same period last year.

During the second quarter, selling, general and administrative expenses also included $7.4 million in special charges compared to $10.3 million reported in the same period last year, a decrease of $2.9 million. The following table shows these charges in each of the periods presented. Excluding the impact of these charges, adjusted selling, general and administrative expenses for the second quarter declined $32.7 million from the year ago period and for the year declined $52.5 million when compared to the first six months of fiscal 2007.

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As the Company continues to improve efficiency and simplify all aspects of the organizational structure, management expects to realize additional savings throughout the balance of this year, and estimates the savings to be at least $100 million for the year. On an annualized basis, the on-going savings are estimated to be $150 million, as previously announced.

Return to Profitability and Beyond

Alex W. Smith, the Company's President and Chief Executive Officer, said, "I am delighted that our strenuous efforts to simplify our business and drive out costs are already significantly improving our bottom line. We know that if we continue to focus on execution of our six business priorities, we will be able to reverse five years of deteriorating trends and return to profitability and beyond.

"As we head into the very important holiday selling season, our energies are concentrated on generating sales with sustainable, normalized margins. I look forward to updating you in more detail on our conference call later today."

Conference Call Information

The Company will host a conference call to discuss the 2008 second quarter results at 10:00 a.m. Central Time today. A web cast is available on the Company's website at www.pier1.com linking through to the "Investor Relations" page and the "Events" page, or you can dial into the conference at 1-800-498-7872 or if international dial 1-706-643-0435 and the conference ID number is 17087229. The teleconference will be held in a "listen-only" mode for all participants other than the Company's current sell-side analysts and buy-side investors.

The replay will be available at about 12:00 p.m. (Central) for 24 hours and replay access can be dialed at 1-800-642-1687 or if international dial 1-706-645-9291 and reference the conference ID number 17087229.

Financial Disclosure Advisory

This release references non-GAAP selling, general and administrative expense information that excludes 1) lease termination charges, 2) impairment charges, 3) charges for litigation settlements, 4) the relocation of Pier 1 Kids, and 5) severance and outplacement costs.

The Company believes that the non-GAAP financial measures allow management and investors to understand and compare the Company's operating results in a more consistent manner for the second quarter and first half of fiscal 2008. These non-GAAP measures should be considered supplemental and not a substitute for the Company's financial results that are recorded in accordance with generally accepted accounting principles for the periods presented.

Management's expectations and assumptions regarding 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 included in this press release. Any forward-looking projections or statements should be considered in conjunction with the cautionary statements and risks contained in the Company's annual report filed on Form 10-K. Refer to the Company's most recent SEC filings for any updates concerning these and other risks and uncertainties that may affect the Company's operations and performance. The Company assumes no obligation to update or 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.

Pier 1 Imports, Inc. is the original global importer and is North America's largest specialty retailer of imported decorative home furnishings and gifts. Information about the Company is available on www.pier1.com.

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