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Williams-Sonoma Home to be Edited, West Elm to Expand

By Home Textiles Today staff -- Gifts and Dec, 4/29/2010 8:42:00 AM

New York – Williams-Sonoma Inc. is in the process of editing its lackluster Williams Sonoma Home business but aggressively building on the momentum of its West Elm brand, the company noted during its presentation at the Barclays Capital Retail and Restaurant Conference.

Sharon McCollam, executive vice president, COO and CFO, explained the company’s strategy for the two nameplates over the next 12 months.

“We believe that to best leverage the opportunity with Williams Sonoma Home, we will be using the Williams-Sonoma brand and taking aspects of that brand and using the ones that are most beneficial to our bridal registry and our designer businesses and marketing those to the Williams-Sonoma brand,” she said. “The Williams-Sonoma Home brand, as it exists today with stand-alone stores, etcetera, our strategy is to restructure that and to keep the profitable aspects and to get rid of the unprofitable aspects.”

She added that the year-long project is underway, and the company is already “making great progress toward that.”

Receiving quite different treatment is West Elm, she continued.

“West Elm is where we are very focused right now. I think we could not be more excited about where we are heading with West Elm,” McCollam said. “We think there is substantial opportunity with this more value-focused customer to really take that brand, make it broader, and that is really a significant opportunity.”

More specifically, the company plans to expand the limited assortment to include more categories of goods. It will also widen its design approach to appeal to a broader demographic and embark on retail expansion – “and what a better time to be looking at that. We just had meetings last week with all of our landlords, really discussing the opportunities for West Elm. We will refine the real estate positioning.”

This likely means smaller stores to allow for more stores as well as enhanced internet capabilities. “This customer is highly web savvy,” she noted.

Both nameplates are part of the company’s larger effort to restore retail channel profitability to its historical levels, said Patrick Connolly, director, eexcutive vice president and chief marketing officer.

“The opportunity is in reducing fixed occupancy costs, and we are working very diligently to rationalize our portfolio of stores and optimize our sales and costs per square foot,” he said. “This will be accomplished through selective store closings, lease renegotiations, in addition to driving comparable store increases.”

He said the company “may also consider” smaller store footprints going forward.

“While we cannot optimize these costs overnight, there is nothing structurally that prohibits us from reinstating our historical retail channel profitability over time.”

At the center of the company’s thinking right now is its e-commerce and internet-related businesses and initiatives, which Connolly said “have become the focus of our capital investment. We are reorganizing key parts of our business to focus exclusively on the internet opportunity, not only as it relates to our core ecommerce but also to building content and community, new revenue streams and potentially new businesses.”

Connolly said 40 percent of Williams-Sonoma Inc.’s total corporate revenue is direct, and 30 percent is ecommerce.

“We believe that this new model will increasingly be the preference of the upscale consumer,” he continued. “We believe that we are approaching an inflection point where our retail and direct revenues will begin to converge. Because the internet is our most profitable channel, sales growth in this channel will have a disproportionally positive impact on total corporate earnings. This 30 percent of corporate revenue that is e-commerce is very profitable. It is the primary driver of the channel.”

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