Pottery Barn 2010 Annual Report Download - page 19

In fiscal 2011, we expect to decrease retail leased square footage by approximately 1% to 2% through the closure
of 26 stores, including the permanent closure of 20 stores (8 Williams-Sonoma, 7 Pottery Barn, 2 West Elm, 2
Outlets, and 1 Pottery Barn Kids) and the temporary closure of 6 stores (4 Pottery Barn and 2 Williams-Sonoma),
partially offset by the addition of 15 stores, including 8 new stores (2 Williams-Sonoma, 2 Pottery Barn, 2 West
Elm, 1 Pottery Barn Kids and 1 Outlet) and 7 remodeled or expanded stores (5 Pottery Barn and 2 Williams-
Sonoma). The average leased square footage per store for new and expanded stores in fiscal 2011 will be
approximately 13,000 for West Elm, 11,900 for Pottery Barn, 7,400 for Williams-Sonoma and 10,000 for Outlet.
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.
SUPPLIERS
We purchase our merchandise from numerous foreign and domestic manufacturers and importers, the largest of
which accounted for approximately 4.7% of our purchases during fiscal 2010. Approximately 60% of our
merchandise purchases in fiscal 2010 were foreign-sourced from vendors in 44 countries, predominantly from
Asia, of which approximately 97% were negotiated and paid for in U.S. dollars.
COMPETITION AND SEASONALITY
The specialty retail business is highly competitive. Our specialty retail stores, mail order catalogs and
e-commerce websites compete with other retail stores, including large department stores, discount retailers, other
specialty retailers offering home-centered assortments, other mail order catalogs and other e-commerce websites.
The substantial sales growth in the direct-to-customer industry within the last decade, particularly in
e-commerce, has encouraged the entry of many new competitors and an increase in competition from established
companies. In addition, the recent decline in the economic environment has generated increased competition
from discount retailers who, in the past, may not have competed with us or to this degree. We compete on the
basis of our brand authority, the quality of our merchandise, service to our customers, our proprietary customer
list, our e-commerce websites and our Internet marketing capabilities, as well as the location and appearance of
our stores. We believe that we compare favorably with many of our current competitors with respect to some or
all of these factors.
Our business is subject to substantial seasonal variations in demand. Historically, a significant portion of our
revenues and net earnings have been realized during the period from October through December, and levels of
net revenues and net earnings have generally been lower during the period from January through September. We
believe this is the general pattern associated with the retail industry. In anticipation of our peak season, we hire a
substantial number of additional temporary employees in our retail stores, customer care centers and distribution
centers and incur significant fixed catalog production and mailing costs.
TRADEMARKS, COPYRIGHTS, PATENTS AND DOMAIN NAMES
We own and/or have applied to register over 60 separate trademarks and service marks. We own and/or have
applied to register our core brand names as trademarks in the U.S., Canada and approximately 45 additional
jurisdictions. Exclusive rights to the trademarks and service marks are held by Williams-Sonoma, Inc. and are
used by our subsidiaries under license. These marks include our core brand names as well as brand names for
selected products and services. The core brand names in particular, including “Williams-Sonoma,” the Williams-
Sonoma Grande Cuisine logo, “Pottery Barn,” “pottery barn kids,” “PBteen,” “west elm” and “Williams-Sonoma
Home” are of material importance to us. Trademarks are generally valid as long as they are in use and/or their
registrations are properly maintained, and they have not been found to have become generic. Trademark
registrations can generally be renewed indefinitely so long as the marks are in use. We own numerous copyrights
and trade dress rights for our products, product packaging, catalogs, books, house publications, website designs
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Form 10-K