Williams-Sonoma Takes Loss Amid Catalog Circ Cuts
Williams-Sonoma Inc., which reported $10.4 million in net earnings a year ago in first-quarter 20008, took an $18.7 million loss in first-quarter 2009. The company’s first-quarter revenue dropped from $781.8 million to $611.6 million during the same period. The quarter ended May 3.
The multi-brand home furnishings marketer saw its direct marketing revenue drop from $348.2 million, or 44.5% of sales, in first-quarter 2008 to $254.2 million, or 41.6% of sales, during the quarter just ended. Retail revenue fell from $433.6 million a year ago to $357.4 million during the same period.
The overall drop in direct marketing sales amounted to 27%: within that, Internet revenue fell 22.8%, from $252 million a year ago to $194 million.
The company cut its catalog circulation by 17% between the quarters. It did not offer raw circulation figures.
In a statement, chairman and CEO Howard Lester boasted of enhancing profitability by “reducing our advertising expense as a percentage of revenues and optimizing our promotional activity.” The company’s selling, general and administrative expenses dropped from $259.23 million, or 33.2%, a year ago, to $213.2 million or 34.9%, for the quarter
Lester also outlined five initiatives for the rest of the year, including: capturing market share through innovative merchandise and a greater emphasis on opening price points; delivering superior customer service; continuing our catalog circulation optimization strategy; driving efficiencies in our worldwide supply chain; and maximizing profitability and cash flow.
The Querent’s Take: Lester’s strategy appears to include a willingness to sacrifice both top-line revenue and net income in favor of building market share. Fair enough, especially in a recession – but attempting to build share while cutting catalog circulation is an odd way of achieving this goal. And it will be interesting to see how he manages to deliver “superior customer service” while “driving efficiencies in our worldwide supply chain”, which sounds an awful lot like “we’re going to be cutting back-office staff when the second-quarter numbers come in.” And we all know how well surviving employees offer superior customer service when their ranks have been eviscerated…
