By Barbara Thau
SAN FRANCISCO–Most of Williams-Sonoma Inc.’s retail formats generated revenue declines for the first quarter ended May 4, with West Elm and Williams-Sonoma Home being notable exceptions.
The lackluster performance was more a reflection of the poor economic environment for home goods than merchandising issues at the company, said Howard Lester, chairman and chief executive officer, during a conference call.
“Mall traffic is clearly down for us in the home furnishings area,” Lester said. In addition to economic pressures, factors such as the election are “distracting” shoppers from buying home goods, he said.
Executives warned that the tough climate for home goods shows no signs of abating.
Williams-Sonoma Inc.’s net revenues decreased 4.4 percent to $781.8 million. Net earnings fell 42 percent to $10.4 million.
Direct-to-customer net revenues, which includes catalog and Internet revenues, fell 4.0 percent to $348.2 million.
In its retail concept groups, Pottery Barn’s comparable-store sales dropped 10.5 percent; Williams-Sonoma’s fell 4.8 percent; and Pottery Barn Kids fell 10.9 percent.
West Elm was the bright spot in the Williams-Sonoma group, which also includes Williams-Sonoma and Williams-Sonoma Home.
The retailer will open 10 new West Elm stores instead of 12, and increase e-commerce marketing.
The focus on Williams-Sonoma Home, another bright spot, will be on home furnishings and decorative accessories, what Dave DeMattei, group president of the Williams-Sonoma group, called “drivers of growth.”
By contrast, the Williams-Sonoma kitchenware brand was down in the quarter. Although premium electrics, cookware and cutlery were strong, housewares and cooks tools were soft, he said.
Pottery Barn saw sales drops across all merchandise categories, although new product outperformed other goods, said Laura Alber, president.
The retailer will focus on more newness, “great price points” and enhanced visual presentation.
“We’re focused on areas of our business where the customer can easily update their home,” Alber said, such as lighting, decorative accessories and pillows, “which are highlights of our business.”
Despite the comp decline, “We believe we’ve made substantial progress” in the Pottery Barn business—which has been the retailer’s Achilles heel—Lester said.
Pottery Barn Kids has been the most impacted by the macroenvironment. To revive that business, the retailer is adding newness in bedroom offerings and strengthening its vendor base in the nursery category, Alber said.
Across its formats, the retailer continues to bet big on e-commerce, with site upgrades set for Pottery Barn Kids and Pottery Barn Teen in the third quarter.
The Williams Sonoma and Pottery Barn brands recently underwent Web site upgrades as the company shifts its focus from catalog to more profitable e-commerce vehicles.
Lester balked at the notion that Williams-Sonoma is losing market share.
“When you look at our direct competition, to the best of our knowledge … we’re doing better than they are,” Lester said. “Others where their comps might be better, they’re highly promotional,” he said. “Our strategy is to protect our brand.”