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Pottery Barn returning to lower prices

San FranciscoWilliams-Sonoma Inc. is working to restore the Pottery Barn nameplate after what was an underwhelming year for its largest brand, the company said during its earnings call this morning.

Laura Alber, president, said Williams-Sonoma was “very disappointed” with Pottery Barn’s results over the period. “In 2006, the brand’s positioning was not as differentiated as it had been in past,” she said. “Our product assortment was too formal, we reduced the number of opening price point skus we offered, and many of the programs were redundant to past successes.”

A five-pronged “brand revitalization strategy” was kick-started earlier this year. It includes:
 · Product: new assortments that “differentiated and relevant to our core customer,” Alber said;
 · Value: the “right balance of quality and price;”
 · Presentation: remixed assortments, re-allocated floor space, and improved in-store merchandising;
 · D irect-to-customer: customer-specific “versioning” online and in catalogs;
 · Testing and building on new concepts such as the Outdoor Book and the Bed + Bath stores.

Of these initiatives, pricing is at the forefront.

“We had significantly decreased our opening price point, and it’s a very important part of our new customer acquisition strategy – to have price points that appeal to younger customers,” Alber said. “You will see that as you go, even in the current spring catalog in homes today, more opening price points than you’ve seen in past.”

Fourth quarter sales at W-S were $1.26 billion, up 3.3% from the same period one year ago, while fiscal 2006 revenues were $3.73 billion, up 5.3%. Earnings for the quarter were up 3.9% to $1.06 per diluted share – but for the year fell 1.1% to $1.79 per diluted share, largely due to “implementation of new accounting procedures” and costs related to the shutting down of the Hold Everything division.

For the year, comparable store sales edged up a scant 0.3%, held back by Pottery Barn’s comp store drop of 2.1%. The Pottery Barn effect accelerated during the fourth quarter, when its negative 5.3% comp drop took the whole company comp down by 0.6%.

The Pottery Barn Kids concept which posted a positive year-over-year sales growth, is a bright spot, with all major merchandise categories strong. “Particularly impressive was growth in textiles and decorative accessories,” Alber said, adding that the bedding program was a driver at the retail store level.

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