Pottery Barn 2006 Annual Report Download - page 16

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In 2004, the Chambers brand was retired as a result of the launch of Williams-Sonoma Home, our newest brand.
This premium brand, offering classic home furnishings and decorative accessories, extends the Williams-Sonoma
lifestyle beyond the kitchen into every room of the home. In addition, we launched our first Hold Everything
e-commerce website and opened three new prototype stores.
In 2005, we opened our first three Williams-Sonoma Home stores, in West Hollywood, California; Cincinnati,
Ohio; and Indianapolis, Indiana.
In 2006, after testing five new prototype stores and several merchandise assortment transitions throughout 2004 and
2005, we decided to transition the merchandising strategies of the Hold Everything brand into our other existing
brands. All of our Hold Everything retail stores were closed during late 2005 and the first quarter of fiscal 2006. The
final phase of our operational shutdown was completed in the second quarter of fiscal 2006, with our final Hold
Everything catalog mailed in May 2006 and our Hold Everything website ceasing operations in June 2006.
Additionally, in 2006, we launched our Williams-Sonoma Home e-commerce website.
RETAIL STORES
The retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West
Elm, and Williams-Sonoma Home). As of January 28, 2007, we operated 588 retail stores, located in 44 states,
Washington, D.C. and Canada. This represents 254 Williams-Sonoma, 197 Pottery Barn, 92 Pottery Barn Kids,
22 West Elm, 7 Williams-Sonoma Home and 16 Outlet stores (our Outlet stores carry merchandise from all
merchandising concepts).
In fiscal 2007, we expect to increase retail leased square footage by approximately 5% to 6%, including 21 new
stores (8 Pottery Barn, 5 West Elm, 4 Williams-Sonoma, 2 Pottery Barn Kids and 2 Williams-Sonoma Home)
and 20 remodeled or expanded stores (12 Williams-Sonoma, 7 Pottery Barn and 1 Pottery Barn Kids), offset by
the permanent closure of 8 stores (4 Williams-Sonoma and 4 Pottery Barn) and the temporary closure of 20
stores (12 Williams-Sonoma, 7 Pottery Barn and 1 Pottery Barn Kids). The average leased square footage for
new and expanded stores in fiscal 2007 will be approximately 17,800 leased square feet for West Elm, 16,900
leased square feet for Pottery Barn, 13,600 leased square feet for Williams-Sonoma Home, 9,400 leased square
feet for Pottery Barn Kids and 7,000 leased square feet for Williams-Sonoma.
The retail business complements the direct-to-customer business by building brand awareness. Our retail stores
serve as billboards for our brands, which we believe inspires confidence in our customers to shop via our
direct-to-customer channels.
Detailed financial information about the retail segment is found in Note M to our Consolidated Financial
Statements.
DIRECT-TO-CUSTOMER OPERATIONS
The direct-to-customer segment has six merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn
Kids, PBteen, West Elm and Williams-Sonoma Home) and sells products through our seven direct-mail catalogs
(Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Bed and Bath, PBteen, West Elm and
Williams-Sonoma Home) and six e-commerce websites (williams-sonoma.com, potterybarn.com,
potterybarnkids.com, pbteen.com, westelm.com and wshome.com). Of these six merchandising concepts, the
Pottery Barn brand and its extensions have been the major source of revenue growth in the direct-to-customer
segment for the last several years which we believe reflects our continuing investment in product design, product
quality and multi-channel marketing.
The direct-to-customer channel over the past several years has been strengthened by the introduction of
e-commerce websites in all of our core brands and the launching of our newest brands: West Elm, PBteen and
Williams-Sonoma Home. Although the amount of e-commerce revenues that are incremental to our
direct-to-customer channel cannot be identified precisely, we estimate that approximately 45% of our company-
wide non-gift registry Internet revenues are incremental to the direct-to-customer channel and approximately
55% are driven by customers who recently received a catalog.
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