Pottery Barn 2007 Annual Report Download - page 35

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Various factors affect comparable store sales, including the number, size and location of stores we open, close,
remodel or expand in any period, the general retail sales environment, consumer preferences and buying trends,
changes in sales mix between distribution channels, our ability to efficiently source and distribute products,
changes in our merchandise mix, competition (including competitive promotional activity), current local and
global economic conditions, the timing of our releases of new merchandise and promotional events, the success
of marketing programs, the cannibalization of existing store sales by our new stores, increased catalog
circulation, continued strength in our Internet business and fluctuation in foreign exchange rates. Among other
things, weather conditions can affect comparable store sales because inclement weather can alter consumer
behavior or require us to close certain stores temporarily and thus reduce store traffic. Even if stores are not
closed, many customers may decide to avoid going to stores in bad weather. These factors have caused our
comparable store sales to fluctuate significantly in the past on an annual, quarterly and monthly basis and, as a
result, we expect that comparable store sales will continue to fluctuate in the future.
DIRECT-TO-CUSTOMER REVENUES
Dollars in thousands
Fiscal 2007
(53 Weeks)
Fiscal 2006
(52 Weeks)
Fiscal 2005
(52 Weeks)
Catalog revenues1$ 559,966 $ 645,975 $ 739,734
Internet revenues11,103,750 927,560 766,306
Total direct-to-customer revenues1$1,663,716 $1,573,535 $1,506,040
Percent growth in direct-to-customer revenues 5.7% 4.5% 13.6%
Percent increase (decrease) in number of catalogs circulated 3.7% (1.6%) 4.6%
Percent increase in number of pages circulated 7.9% 3.2% 9.7%
1We estimate that approximately 60% of our company-wide non-gift registry Internet revenues are driven by customers who
recently received a catalog and approximately 40% are incremental to the direct-to-customer channel.
In our direct-to-customer channel, net revenues in fiscal 2007 increased by $90,181,000, or 5.7%, over fiscal
2006. This increase was primarily driven by net revenues generated in the PBteen, West Elm, Pottery Barn and
Williams-Sonoma brands due to the impact of the extra week of net revenues in fiscal 2007, a 53-week year, an
overall increase in catalog and page circulation of 3.7% and 7.9%, respectively, and continued strength in our
Internet business, which continued to be our fastest growing shopping channel, with revenues increasing 19.0%
to $1,103,750,000. This increase was partially offset by lost revenues in the Hold Everything brand due to its
transition during the second quarter of fiscal 2006.
Direct-to-customer revenues in fiscal 2006 increased by $67,495,000, or 4.5%, over fiscal 2005. This increase
was primarily driven by revenues generated in the Pottery Barn Kids, Pottery Barn, PBteen, Williams-Sonoma
and West Elm brands due to an overall increase in catalog page circulation of 3.2% and continued strength in our
Internet business, primarily resulting from our catalog advertising, expanded efforts associated with our
electronic direct marketing initiatives and strategic e-commerce partnerships. This increase was partially offset
by lost revenues in the Hold Everything brand due to its shutdown during the second quarter of fiscal 2006 and a
reduction in year-over-year revenues in the Williams-Sonoma Home brand.
COST OF GOODS SOLD
Dollars in thousands
Fiscal 2007
(53 Weeks)
% Net
Revenues
Fiscal 2006
(52 Weeks)
% Net
Revenues
Fiscal 2005
(52 Weeks)
% Net
Revenues
Total cost of goods sold $2,408,963 61.1% $2,240,226 60.1% $2,103,465 59.4%
Cost of goods sold includes cost of goods, occupancy expenses and shipping costs. Cost of goods consists of cost
of merchandise, inbound freight expenses, freight-to-store expenses and other inventory related costs such as
shrinkage, damages and replacements. Occupancy expenses consist of rent, depreciation and other occupancy
costs, including common area maintenance and utilities. Shipping costs consist of third party delivery services
and shipping materials.
25
Form 10-K