Williams-Sonoma Inc. reported $399,000 in net income during its most recent second quarter, a staggering drop from the $18.4 million in net income it earned during second-quarter 2008. The company’s net revenue fell from $819.6 million to $672.1 million during the same period. The most recent quarter ended Aug. 2.
The drop in income came amid increases in costs of goods sold, from 66% of revenue a year ago to 68%, and an increase in selling, general and administrative expenses, from 30.9% to 32%.
Direct-to-customer revenue, which at $356.4 million made up 43.5% of total revenue a year ago, fell to $271.9 million, or 40.5% of revenue during the most recent quarter. On a dollar basis, direct sales fell by 24% from second-quarter 2008’s level.
Between the two quarters, the company reduced catalog circulation among its brands by 19%, and total pages mailed by 25%.
The Eavesdropper’s Take: During a conference call, company officials were asked if the cutbacks in catalog circulation were excessive, given the fact they were outstripped by the fall in DM revenue. No, replied CMO Pat Connolly. “We are in our 23rd year of using sophisticated regression analysis to rank our file when we go to mail it,” Connolly said. “And over the growth years we were looking at how we could use this to find the next best prospect. In this environment we are able to use those techniques to identify those people who would most likely not buy, and not mail them. We have done a number of control groups, and are very confident that the circulation we have cut would have produced minimal sales compared to the cost of mailing those catalogs.” The company is also diverting some of its spending to online marketing efforts, which are producing “attractive results,” Connolly added. “We are very optimistic about our opportunities here, especially in the back half of the year across a wide range of digital marketing efforts, from e-mail to affiliates to retargeting to paid search and also the initial results of Google’s new Caffeine algorithm, which tend to favor brands and are pushing up our page ranking.”
