Pottery Barn 2009 Annual Report Download - page 6

contact strategies. By focusing on each of these initiatives, and reminding the customer why they matter in terms
of aesthetics, quality and satisfaction, we were able to reinforce our brands’ authority and capture market share.
In the Williams-Sonoma Home brand, however, these initiatives were not enough and we did not see the
recovery we expected. As such, we are working on a plan to restructure the unprofitable segments of the
business, including the operations of its eleven retail stores.
Continued Supply Chain Improvements
In supply chain, we made further strategic advancements in our global sourcing, distribution, and transportation
initiatives. During the year, we completed the restructuring of our Asian furniture sourcing network and
continued to expand the in-sourcing of our domestic furniture delivery hubs. At the end of 2009, company-
managed furniture delivery volume increased 20% to over 40%. Both of these initiatives represent major
milestones in our furniture quality initiatives and are expected to continue to reduce furniture returns,
replacements, and damages expense for years to come. Other significant supply chain initiatives this year
included a new inventory control program that significantly lowered inventory shrinkage costs and the
regionalization of large-cube inventories which allowed us to consolidate furniture shipments and reduce
transportation costs. Both of these initiatives brought immediate financial returns to the bottom line in their first
partial year of implementation.
Leveraging Technology to Engage Our Customers
In information technology, we completed the rollout of our most advanced e-commerce platform to date. This
platform enables our merchants to make rapid changes on the sites without IT intervention, optimizes natural
search rankings, and provides customers with faster download times and easier navigation. We also implemented
new functionality related to customer insights, which is allowing us to generate more relevant emails and
improve catalog productivity. Product reviews and the integration of social networking were also significant
advancements this year, which we will continue to capitalize on in 2010. While much opportunity lies ahead in
all of these areas, these initiatives are driving increased traffic, incremental sales, and greater direct marketing
efficiencies across all brands.
Expanding Our Reach
Another highlight of the year was establishing a multi-year franchise agreement with the M.H. Alshaya Company
to launch our portfolio of brands in the Middle East. We opened our first Pottery Barn and Pottery Barn Kids
stores in Dubai in March 2010 to a strong consumer response and will open two additional stores in Kuwait in
mid-2010. We believe with this business model, there is a significant opportunity to expand the reach of our
brands outside of North America.
The Year Ahead
As we look forward to fiscal 2010, our focus is on growing e-commerce and the five other key initiatives that
have driven our momentum over the past year: (1) capturing market share through innovative merchandising and
a greater emphasis on the ‘value’ proposition; (2) delivering superior customer service; (3) executing our catalog
and Internet marketing initiatives; (4) driving efficiencies in our worldwide supply chain – particularly in
furniture sourcing; and (5) maximizing profitability and cash flow through aggressive asset management and
rationalization of our real estate portfolio. We believe that all of these initiatives will improve our competitive
positioning and allow us to take our business to the next level, even with our belief that the economic recovery
will be slow and gradual.
Our Dividend
While we continue to be cognizant of the challenges of the current economic environment, we remain confident
in the cash-generating power of our multi-channel, multi-brand business model and our ability to generate cash
flows in excess of the funding requirements necessary to grow and operate our business. As such, we remain