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  • Jennifer Marks

'Cash is King' in Williams-Sonoma Moves

Williams-Sonoma is battening down the hatches in the face of recession it expects to squeeze retailers for months to come. In addition to tightening inventories, slashing capital expenditures tied to new store development and looking for opportunities to exit bad leases, the company amended credit facilities and spiked a $150 million share repurchase program.

"Cash is king in this environment, and all our decisions are and will be made with this in mind," chairman and ceo Howard Lester told analysts during the company's third-quarter conference call last week.

Although Williams-Sonoma posted an earnings loss of $11 million for the third quarter, the results actually beat expectations. The multi-nameplate retailer cited the Wall Street collapse and housing decline as the primary drivers of the trend, noting that comps declined progressively throughout the quarter.

Executives did not mention the impact of the Linens 'n Things liquidation on sales until asked by an analyst. President Laura Alber said she would not have thought there was much impact, but was surprised during a recent store visit to see consumers moving between Williams-Sonoma and LNT stores.

"If I hadn't seen it with my own eyes I would have said it doesn't matter. I'll be glad when it's over," she said.

Sales during the quarter fell at every company nameplate — including, for the first time, PB Teen.

Special promotions and events are being used to drive traffic through the holidays, and similar strategies will be pursued going into 2009. The overview by nameplate:

  • Pottery Barn: Merchandise highlights were pillows and "select" merchandise. The format will be significantly more promotional through the end of the year.

  • PB Kids: Margins hurt by increased markdowns and accelerated promotions.

  • PB Teen: Will test teen merchandise for the first time in a PB Kids store opening this month. Plans to introduce a wider range of price points.

  • Williams-Sonoma: Promoting gift assortments and special marketing ploys such as "buy one/get a gift card for later purchase." Focus is on new and exclusive offerings.

  • Williams-Sonoma Home: The high-end format's performance is going to fall well below expectations. The company is evaluating the prospects for the format in the current environment.

  • West Elm: Positive comps in textiles, lighting and tabletop couldn't compensate for poor comps across other categories. But the company remains optimistic about West Elm's long-term prospects.

Because W-S has become so aggressive with promotions and marketing projects, "We are starting to see some things move the consumer our way a little bit," said Lester.

For the quarter ended Nov. 2, net loss was approximately $11 million, or 10 cents per share, vs. net earnings in the year-ago quarter of $27 million, or 25 cents per share.Consolidated sales fell 16.0% to $752 million. Total comps dropped 21.4%.

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