Dear Laura,

Written by:




I just wanted to wish you a belated Happy New Year and say congrats on your results you recently announced from the holiday season. Very impressive.

You’ve certainly had quite a year, what with the passing of Howard Lester, the guiding guru of Williams-Sonoma (WSM) and your predecessor as CEO coming on top of what has been a rough stretch when your company just wasn’t having a whole lot of fun…not to mention making a whole lot of money.

There was of course the economy. After Lehman Brothers, all of a sudden the whole idea of $200 frying pans and retro telephones like Nick and Nora used didn’t seem like such a good idea. It was kind of hard to trade down your merchandise assortment as fast as your customers were trading down their lives.

Then there was the Williams-Sonoma Home mess. Howard OK-ed it when people were spending money on their homes like drunken decorators and a higher end operation slotted above Pottery Barn seemed very logical. When the upper middle class became not-so-upper, this was the wrong store at the wrong time.

And let’s not forget Pottery Barn. It’s your biggest single unit and it had been lost in a sea of design sameness for a long, long time. PB’s look wasn’t bad, but everyone down to the dollar stores was copying it…and at a third of the price.

Then Howard got sick, retired and eventually passed away. Nobody was better at building retail business models just as an engineer designs a machine, which is of course what Howard was. You hardly ever heard anybody in retailing use the word algorithm… and actually use it correctly.

It sure was some time to take charge of things. They say everything in life is timing, but they don’t always say it’s good timing.

So, congrats on having a very strong holiday season and for projecting continuing strength in the immediate future.

What you accomplished was pretty amazing. In the kitchen business, you kept the plutonium encrusted cookware sets and espresso machines that would make a Starbucks (SBUX) barista blush, but you salted in (sorry) some lower price product to get the shopper to start spending, adding some much needed spice (sorry again) to the assortment.

You bit the bullet and decided to shut down the WS Home stores. Your decision to keep the direct online and catalog businesses shows –- correctly, I think – that there is still a market segment here to be served. Maybe you’ll eventually even bring back the stores. Maybe not.

You seem to have finally got PB’s design story straightened out. I’d still like to see it a little more differentiated than it is now, but there’s freshness there we haven’t seen in a long time. Now comes the harder part. If the economy truly is righting itself and your core customer is back spending again, that’s a big part of the equation. The boys on Wall Street should be as happy as your customers on Main – well Upper Main – Street.

\"TheBut there is still much to do. All Sonoma nameplates got as promotional during the past 18 months as they’ve ever been. Not Kohl’s (KSS) 70-off-before-7am-promotional, but there were more sales, online specials and pop-up events than you were used to.

How you keep that balance right is going to be key. You said your margins were solid during Christmas so you must have found the right formula. Howard would be proud. You do have to ultimately figure out how to succeed in the better soft home business. WS Home was your second shot at this segment (anybody remember Hold Everything?) and you can’t quite make it work. Don’t be too hard on yourself: Nobody else has made the upstairs bed and bath segment work on any scale – OK, maybe Bloomingdale’s – but there’s a customer out there, you’ve just got to build a better bed to get them in.

I haven’t mentioned West Elm yet and that may be your biggest challenge. It’s certainly your biggest opportunity as it represents an underserved market segment that’s beyond IKEA but not quite ready for your Pottery Barn or Crate and Barrel, much less Raymour and Flanigan.

The trick is learning where to draw the line. It’s a dicey proposition that continually trips up Gap (GPS) and its Old Navy unit, among others. And don’t forget Zara Home is waiting in the wings in Europe and wouldn’t they be a formidable WE competitor if they chose to enter the American? So, you need to continue to fine-tune West Elm but you can’t be too cautious either. This is your biggest growth vehicle and you better own that retail space before somebody else moves in. So there’s lots to do and lots to work out, but here’s the thing, Laura. I ask you the same question I once posed to the CEO of a big retailing operation who was bemoaning the problems – all very legitimate, by the way—he was dealing with: Is there any other retailer in your merchandising classification that you’d rather be running?

He thought about it for a minute and eventually said no. I don’t think you even need a minute. You run a great company and you are poised to continue to reap the benefits of all the hard work you’ve put into making it better.

And, besides, who else sells a toaster made of glass so you can watch your bagel brown?




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