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West Elm Growing Strong For Williams-Sonoma

West Elm may some day lead the pack of Williams-Sonoma's seven brands, according to Chief Executive Officer Ed Mueller, who relayed the news during the company's first quarter conference call last week.

“Although we believe it is too early to predict the ultimate growth potential of West Elm, the strengthening customer response to date is confirmation of our belief that West Elm, over time, has the potential to become our largest brand,” he said.

To that end, the company is opening six additional West Elm prototype stores later this year. Williams-Sonoma opened its fifth West Elm store in San Diego during the first quarter.

“We foresee the West Elm stores getting larger as we move forward, but we are cautious about that,” said Mueller. “We have stepped up our efforts to find more stores sooner, and we are aggressively looking for space. For next year, we are looking at more sites than we were three months ago.”

West Elm will continue to focus on increasing catalog circulation, page count, electronic direct marketing and online customer-acquisition efforts for the brand, added Mueller.

Among the keys to West Elm success, he explained, were: keeping abreast of the current merchandise assortment; evolving that assortment to appeal to a broader customer base; executing an effective retail strategy; and improving multi-channel retailing efforts.

“We think many of the West Elm assortments can be expanded and grow considerably in terms of sku count,” he said.

For the Hold Everything brand, Mueller said the company is “significantly refining” its catalog market-circulation strategy and expanding online marketing initiatives, while planning to open two prototype stores in the second quarter.

Williams-Sonoma Home will focus on increasing catalog circulation and adding order placement functionality to the current e-catalog Web site, while opening its first three prototype stores in the third quarter.

“We believe that the retail launch of Williams-Sonoma Home is strategic to expanding the multi-channel reach of the brand, due to the customer's desire to actually see the product and fully experience the brand's design,” said Mueller.

He added that the company continued during the quarter to make progress on its supply chain initiatives. Williams-Sonoma will continue to “work with our vendors to rapidly improve our in-stock positions on core furniture inventories as early as possible in 2005,” said Mueller, noting that inventory levels were up 23 percent at the end of the quarter.

During the quarter, he said, the company was able to better fill customer backorders which allowed it to book revenues and earnings not expected until the second quarter.

Mueller reiterated the company's 2005 diluted earnings per share guidance to be in the range of $1.84 to $1.88, an increase of 15 percent to 17.5 percent versus the $1.60 it reached in 2004.

Referring back to West Elm, he added that followers of the brand should stay tuned. “There is more to come as we will open the balance of these (six) stores this year and early into next year,” he said. “We continue to monitor the volume, but we are very pleased with it.”

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