Williams-Sonoma, Inc.

FOUNDED: 1956

Contact Information:

HEADQUARTERS: 3250 Van Ness Ave.
San Francisco, CA 94109
PHONE: (415)421-7900
FAX: (415)616-8359
URL: http://www.williams-sonomainc.com

OVERVIEW

With 2002 sales of more than $2 billion, Williams-Sonoma, Inc. is one of the top retailers of home products, including cookware, through the Williams-Sonoma chain, and contemporary tableware and home furnishings via their Pottery Barn chain. The company has two segments, made up of the retail segment and its four chains, including Williams-Sonoma; Pottery Barn; Pottery Barn Kids, selling children's furnishings; and Hold Everything, selling storage items; and the direct-to customer segment with its six direct-mail catalogs, including Williams-Sonoma; Pottery Barn; Pottery Barn Kids; Pottery Barn Bed+ Bath; Hold Everything; and Chambers, a bed and bath product seller; along with four Web sites, which includes an online bridal registry. Williams-Sonoma merchandise may be found at its 415 stores located in 41 states, Washington DC, and Toronto, Canada. Of these 415 stores, Williams-Sonoma is the largest, with 214 retail outlets, 145 Pottery Barn stores, 27 Pottery Barn Kids, 15 Hold Everything, and 14 outlet stores.

COMPANY'S FINANCES

The retail segment of the company accounted for 59.3 percent of net revenues in 2001, while the direct-to-customer segment accounted for the remaining 40.7 percent of revenue. Sales for the fiscal year ending February 3, 2002 were nearly $2.1 billion—a 14.1 percent increase from the previous year. 2002 net income stood at $75.1 million, up 32.2 percent from 2001.

Williams-Sonoma has shown a consistent increase in profits over the past five years. The company's stock ranged from a low of $21.73 to a high of $46.00 over a 52-week period. Williams-Sonoma's price-earnings ratio was 76.87.

ANALYSTS' OPINIONS

As a leading home products retailer with a growing business, Williams-Sonoma will tell any potential investor that it is a solid investment. Several analysts also agree the retail home products industry is a growing one and in which Williams-Sonoma is a strong leader. In a 2002 report, U.S. Bancorp Piper Jaffray upgraded Williams-Sonoma stock to Strong Buy, based on stronger than expected sales and the belief that the company is in the middle of a beneficial operational turnaround which would allow it to outperform others in the retail market. A 2002 Lehman Brothers report concurred, noting that Williams-Sonoma's cost cutting measures, strong sales, increased store expansion, and extremely positive customer response to new Pottery Barn merchandise in particular has made the company's stock a very attractive buy. Robertson Stephens noted that with a proven growth track record, the company that began with a single concept begun in 1956 has now expanded to include six distinct brands that enjoy strong brand recognition that holds meaningful potential for continued long-term growth.

HISTORY

The first Williams-Sonoma store opened, aptly enough, in Sonoma, California in 1956 by founder Charles E. Williams, currently vice chairman and one of the company's directors. The store's first product offerings were a small variety of cookware imported from France. Williams then moved the store to its current headquarters location, San Francisco, California. That year, the store began its first in-store bridal registry service.

Williams-Sonoma's direct-to-customer business began with the introduction of the company's first catalog in 1971, called A Catalog For Cooks, marketing some of the company's products. The company was incorporated the next year. In 1973, the second Williams-Sonoma store opened in Beverly Hills, California. The store began expanding throughout the Golden state, with a third store opening in Palo Alto, and a fourth in Costa Mesa. The company's first distribution center was opened in 1977, in Emeryville, California.

Williams then sold his fledgling retail chain in 1978, to Howard Lester and Jay McMahan. Currently, Chairman Lester owns almost 9 percent of the company, while McMahan has a 10 percent stake. The company also opened its first out-of-state store in Dallas, Texas the year of its sale. Another effort to expand its direct-to-customer reach came with the acquisition of the Gardeners Eden catalog, which was eventually sold in 1999.

The company went public in 1983 as Williams-Sonoma, Inc., trading on the NASDAQ under the symbol WSGC. That year, the company also began distribution of its Hold Everything catalog, offering storage solution products. To sustain its growing operations, the company built a 450,000 sq. ft. distribution center in Memphis, Tennessee, which opened in 1984. The next year, the company's first Hold Everything store was launched in Corte Madera, California, but the company's acquisition of the 21 Pottery Barn chain of stores in 1986 was what really signaled that Williams-Sonoma intended to become a retail force to be reckoned with. The Pottery Barn chain sold retail and direct-to-customer merchandise, including casual home furnishings, flatware, and table accessories from around the world. Ever expanding its brand, the company issued a Williams-Sonoma cookbook in 1986, as well.

Following their proven business plan of establishing retail and direct channels, the company began mailing out the first Pottery Barn catalogs in 1987. Two years later, the company issued its Chambers catalogs, offering a variety of high quality linens, towels, robes, soaps, and accessories for the bed and bath. With all the new business, the company began to outgrow its Memphis distribution center, and finished expansion of the center in 1991, extending it 307,000 sq. ft. At the same time, the company dove into technology with its launch of a nationally-linked, computerized bridal registry hitting all Williams-Sonoma stores. Building on its publishing presence, the first of the Williams-Sonoma Kitchen Library cookbooks hit the bookshelves in 1992, the same year innovative founder Chuck Williams received the first annual Retailer of the Year award at the San Francisco Gourmet Products Show.

By 1993, Williams-Sonoma stores numbered more than 200, nearly half its current total. The company proceeded to launch new store formats, Williams-Sonoma Grande Cuisine, which featured upscale cookware, and Pottery Barn Design Studio in 1994. Williams, who was then named to the Who's Who of Food and Beverage by the James Beard Foundation, issued his Simple American Cooking and Gifts from the Kitchen, books. The following year, Pottery Barn launched its gift registry and Williams was lauded again, this time received the Lifetime Achievement Award by the Beard Foundation.

As the company celebrated its fortieth anniversary, the new Customer Care Center opened in Summerlin, Nevada, in 1996. The Williams-Sonoma cookbook became the best-selling cookbook series of the 1990s, when its ten millionth copy was printed that year. Building on the successful venture, Williams published another book in 1997 about the history of food in the United States entitled, Celebrating the Pleasures of Cooking.

In 1998 the company reached __BODY__ billion in sales and Williams-Sonoma, Inc. was listed on the New York Stock Exchange (NYSE) under the symbol WSM, which it stands today. The corporate Web site was also launched that year and a second Customer Care Center was opened in Oklahoma City, OK. The company launched both its Williams-Sonoma Internet wedding and gift registry Web site, wsweddings.com, and its Williams-Sonoma e-commerce site, williams-sonoma.com, in 1999. Additionally, Williams-Sonoma began its Pottery Barn Kids catalog, offering stylish, quality children's furnishings. The next year, the first of the Pottery Barn Kids stores opened nationwide followed a year later by its own Web site. In 2000, the company introduced its Pottery barn Web site, potterybarn.com, and launched Pottery Barn Bed+Bath, a catalog offering bed and bath goods. The company's TASTE magazine was also published. 2001 brought the company's Pottery Barn online gift and bridal registry along with a Pottery Barn Kids online gift registry. The company also expanded internationally with five new retail outlets opening in Toronto, Canada, including two Williams-Sonoma, two Pottery Barn, and one Pottery Barn Kids.

STRATEGY

The overall corporate vision consists of enhancing the quality of life at home. As part of its 2002 growth strategy, Williams-Sonoma plans expand businesses that have done well or exceed expectations, including the Pottery Barn Kids and the company's direct-to-customer segment. The company will open 66 new stores throughout the year, including 25 new Pottery Barn Kids, adding to its existing 27 PBK stores; 23 Williams-Sonomas, 15 Pottery Barns, one Hold Everything and two clearance stores. The company will also close 16 underperforming locations. The new stores include the three additional stores in Toronto, Canada, adding to its existing five Canadian locations. Toward goals in the direct-to-customer category, Williams-Sonoma plans to increase catalog circulation by 10 percent, mailing out 270 million catalogs. Other plans include a private label credit card launch in May 2002 and expanding their seasonal gift assortment.

Williams-Sonoma will further efforts to streamline supply chain operations and lower expenses begun in 2001, with inventories down 10 percent from the previous year. The company plans to reduce merchandise costs by increasing purchasing volumes and pursuing possible new supply channels. Also, through increased sourcing quality, the company hopes to reduce customer returns.

INFLUENCES

With a history of building distinct brands, Williams-Sonoma's success in that area has led them to aggressively pursue new retail sectors and create new brands to reflect new times and new customers. Building on the success of Pottery Barn, the company built 27 Pottery Barn Kids stores. The stores outperformed expectations, and as a result, will be one of the main areas of new growth for the company, which plans on opening another 25 in one year alone. While Williams-Sonoma and Pottery Barn are relatively mature brands, Pottery Barn Kids is exactly what the company foresees will keep its name fresh and attractive to new consumers. The creation of the West Elm catalog, the company's answer to more affordable home furniture, is another way for the company to build on the success of Pottery Barn, while forging out another niche—a lower-priced, alternative Pottery Barn. Enjoying sales success in late 2001 and 2002 while other retailers were struggling, growth in these areas will most likely continue in these areas.

CURRENT TRENDS

Along with many old-school retail chains, one trend that Williams-Sonoma is following is that of e-commerce. Launching its first e-commerce segment in 1999, the company took many of its key brands online—not an easy task for a retailer with such diverse products and segmented corporate structure. Challenges arose due to the lack of communication between the retail side of the company and the catalog division. The two had different shipping methods from the warehouse and had unique compensation systems. The company soon established a cohesive online strategy, however, coupling its retail houses, direct marketing and online selling along with its wide range of brands from Pottery Barn, Pottery Barn Kids, to Williams-Sonoma. The trend has proved successful, with direct-to-customer sales, which include Internet and catalog revenue, increasing 15.4 percent in the second quarter of 2001. With several cutting-edge Web sites, the company, however, does not plan to focus on enhanced technology to bring them future success, preferring, instead the more tried and true strategy of improving customer service.

PRODUCTS

The company offers a variety of merchandise through its four retail chains, catalogs, and Internet Web sites. Chains include Williams-Sonoma, selling hundreds of high-end products for kitchen and entertaining, including cookware, serveware, tools, linens, food products, cooking ingredients, and a large cookbook library; Pottery Barn, offering a variety of contemporary home furnishings, bedding/bath, rugs, window treatments, ledges and lighting for the home, tableware, flatware, and decorative accessories; Pottery Barn Kids, selling stylish, quality children's furnishings and decorative accessories for children aged 0-12; and Hold Everything, selling a range of storage solution items. Pottery Barn has also adopted the Design Studio, a service that helps customers plan their living spaces. Additionally, the company's Grand Cuisine specializes in upscale cookware. Its six direct-mail catalogs include Williams-Sonoma; Pottery Barn; Pottery Barn Kids; Pottery Barn Bed+Bath; Hold Everything; and Chambers, a bed and bath product seller. Four company Web sites sell the company's merchandise and offer online bridal and gift registry. Williams-Sonoma merchandise may be found at its 415 stores located in 41 states, Washington DC, and Toronto, Canada.

Williams-Sonoma plans to test a new catalog in 2002 called West Elm. The new brand will offer quality items at accessible prices and target young, design conscious consumers seeking home furnishings and accessories for their apartments, lofts, or first homes. Product categories in the new brand will include, furniture, decorative accessories, table top items and a wide range of textile collections. Williams-Sonoma will launch the catalog nationwide in the summer of 2002 and, if proven successful, may expand the brand into retail outlets beginning in 2003.

GLOBAL PRESENCE

The company opened its first stores outside of the United States in 2001, launching three Williams-Sonoma, three Pottery Barn, and two Pottery Barn Kids in Toronto, Canada. Three locations were chosen for the stores, which opened in late 2001 and early 2002. The company acknowledged that many Canadians already shopped at the U.S. retail stores and that their entry into Canada was a response to the demand of the company's home products in the country. To help penetrate its new market, Williams-Sonoma plans to be competitive price-wise and offer good value. The company also plans to use the newly opened Canadian stores as benchmarks for possible future international expansion, and as of March 2002, had exceeded the company's expectations. They further estimate another 15 to 20 location there are feasible.

EMPLOYMENT

With 27,000 employees, Williams-Sonoma offers many career opportunities in their various corporate departments, including the corporate headquarters; customer care centers; data center; distribution center; retail stores; Canadian retail stores; and through the Corporate Internship Program for college juniors seeking retail experience. The company is an Equal Opportunity Employer and offers a benefits package that includes an Associate discount program; paid vacations and holidays; health, life, and travel insurance; short-and long-term disability programs; health and dependent care tax-free spending accounts; medical, family and bereavement leave; tuition reimbursement; same-sex domestic partner benefits; and a stock incentive plan.

Williams-Sonoma seeks employees with skills in the following areas: critical thinking, planning and organization, decision making, business knowledge, people skills, customer focus, job knowledge, interpersonal communication, and commitment to please customers and continuous long-term financial growth. Additionally, they list their corporate values as people, customers, quality, shareholders, and ethical sourcing.

SOURCES OF INFORMATION

Bibliography

"Old Retailer Whips Up New Recipe." San Francisco Business Times, 19 October 2001.

Williams-Sonoma Home Page, 2002. Available from http://www.williams-sonomainc.com.

"Williams-Sonoma, Inc." Hoover's Online, June 2002. Available at http://www.hoovers.com.

"Williams-Sonoma, Inc." The Gale Group. Available at http://galenet.galegroup.com.

"Williams-Sonoma Outlines Overall Growth Plan." Home Textiles Today, 4 March 2002.

"Williams-Sonoma Sets Foot in Canada." DSN Retailing Today, 10 December 2001.

"Williams-Sonoma Tries a New Recipe." Business Week, 6 May 2002.

For an annual report:

on the Internet at: http://www.williams-sonomainc.com or write: Williams-Sonoma Inc., 3250 Van Ness Ave., San Francisco, CA 94109

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Williams-Sonoma's primary SICs are:

5719 Miscellaneous Homefurnishings Stores

5261 Retail Nurseries And Garden Stores

5961 Mail Order Houses

6719 Holding Companies, Not Elsewhere Classified

Also investigate companies by their North American Industry Classification System codes, also known as NAICS codes. Williams-Sonoma's primary NAICS codes are:

442299 All Other Home Furnishings Stores

444220 Nursery and Garden Centers

454110 Electronic Shopping and Mail-Order Houses

551112 Offices of Other Holding Companies