First Quarter Highlights:

Operating results improved over last year

Comparable store sales declined 7.5%

Merchandise margin strengthened to 54% of sales; gross profit increased to 30% of sales

Inventories declined $91 million over last year

Cash balance of $136 million at the end of the quarter

Litigation settlement reached, $10 million collected

Reduced consolidated long-term debt by $79 million and recorded a $48 million gain on repurchase of debt

First Quarter Results

The Company reported net income of $29 million, or $0.32 per share, for the first quarter, versus a net loss of $33 million, or $0.37 per share, for the same period last year. The operating results improved by $4 million to a loss of $27 million. Total sales for the first quarter declined to $281 million from $310 million in the year-ago quarter. The decline in total sales during the quarter was a result of the reduction in store count and a decline in comparable store sales of 7.5% which can be attributed to the overall economic environment. Without the effects of Canadian currency conversion rates, the decline in comparable store sales during the fiscal quarter was 6.1%.

Merchandise margins for the quarter were 54% of sales compared to 51% of sales in the same period last year. The increase in merchandise margin was primarily the result of reduced supply chain costs and decreased clearance activity, given the Company's clean and conservative inventory levels. Store occupancy costs were $67 million compared to $71 million last year. The decline was primarily the result of negotiated rental reductions as well as a lower overall store count.

First quarter selling, general and administrative expenses were $106 million compared to $109 million in the year ago quarter. SG&A expenses consisted primarily of $13 million in marketing, $69 million in payroll, and $24 million in other G&A costs. Selling, general and administrative expenses included approximately $7 million in special charges resulting from lease termination charges, store closing costs, and severance versus $3 million in special charges during the same period last year.

Balance Sheet and Liquidity

As previously reported, the Company approached the first half of fiscal 2010 very cautiously in terms of inventory purchases in anticipation of a continuing difficult environment. This approach coupled with the Company's disciplined inventory management resulted in inventory at the end of the first quarter of $294 million versus $385 million at the end of the first quarter last year.

Cash and cash equivalents at the end of the quarter were $136 million. During the quarter, the Company collected $10 million from the settlement of foreign litigation. In addition, as of the end of the quarter, the Company's calculated borrowing base on its secured credit facility was $194 million. After excluding the required availability of $32.5 million and the $101 million in outstanding letters of credit and bankers' acceptances, $61 million remained available for use by the Company for working capital purposes. The Company did not utilize its secured credit facility during the first quarter for any purpose other than its customary letter of credit needs. Management expects to continue the Company's conservative approach to merchandise purchases, expense planning, and capital expenditures throughout this fiscal year.

As previously reported, during the first quarter, a foreign subsidiary of the Company entered into privately-negotiated agreements purchasing $79 million of the Company's outstanding 6.375% convertible senior notes. The notes were acquired at a purchase price of $27 million, including accrued interest. As a result of this transaction, the Company has reduced its outstanding debt on a consolidated basis by $79 million. The Company reported a gain on this transaction of $48 million during the first quarter. In addition, the Company adopted FASB Staff Position APB14-1 under which it reduced the carrying value of its outstanding convertible senior notes as of the end of the quarter by a net $1.3 million.

Real Estate Update

The Company ended the quarter with 1,073 Pier 1 Imports stores in North America. As a result of on-going negotiations with its landlords to achieve rental reductions across its store portfolio, the Company has now reached agreements in principal to terminate the leases on 22 stores and will close 5 additional stores for which termination or rental reduction agreements have not been reached. The Company estimates total charges of approximately $8 million in cash and non-cash termination charges related to these closures, of which $5 million were incurred in the first quarter of fiscal 2010. The cash portion of these charges will be partially offset by the liquidation of inventory in the closing stores. To date, the Company has achieved approximately $9 million in rental savings for fiscal 2010 and expects to close approximately 50 locations. Going forward, the Company will focus its negotiation efforts on achieving rental reductions.

Conference Call Information

The Company will host a conference call to discuss the first quarter results at 10:00 a.m. Central Time today. The call will be broadcast live on the Company's website at www.pier1.com. The conference call can be accessed by linking through to the "Investor Relations" page to the "Events" page, or you can listen to the conference call by calling 1-800-498-7872, or if international, 1-706-643-0435. The conference ID number is 10141396. The conference call will be held in a "listen-only" mode for all participants.

A replay will be available at about 12:00 p.m. (Central Time) for 24 hours and the replay can be accessed by calling 1-800-642-1687, or if international, 1-706-645-9291 using the conference ID number 10141396.

Financial Disclosure Advisory

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 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 of imported decorative home furnishings and gifts. Information about the Company is available on www.pier1.com.

                                                                                               Pier 1 Imports, Inc.