Pottery Barn 2011 Annual Report Download - page 19

In fiscal 2012, we expect to decrease retail leased square footage by approximately 0% to 1%. We expect to add
30 stores, including 17 new stores (7 West Elm, 4 Williams-Sonoma, 3 Pottery Barn, 2 Pottery Barn Kids and 1
Rejuvenation) and 13 remodeled or expanded stores (4 Williams-Sonoma, 4 Pottery Barn, 3 Pottery Barn Kids
and 2 West Elm), partially offset by the closure of 29 stores, including the permanent closure of 16 stores (8
Williams-Sonoma, 5 Pottery Barn, 2 West Elm and 1 Pottery Barn Kids) and the temporary closure of 13 stores
(4 Williams-Sonoma, 4 Pottery Barn, 3 Pottery Barn Kids and 2 West Elm). The average leased square footage
per store for new and expanded stores in fiscal 2012 will be approximately 13,000 for Pottery Barn, 11,600 for
West Elm, 7,300 for Williams-Sonoma, 5,800 for Rejuvenation and 5,500 for Pottery Barn Kids.
The retail business complements the direct-to-customer business by building brand awareness and attracting new
customers to the brand. 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 3.9% of our purchases during fiscal 2011. Approximately 61% of our
merchandise purchases in fiscal 2011 were foreign-sourced from vendors in 50 countries, predominantly in Asia
and Europe, 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, direct mail catalogs and
e-commerce websites compete with other retail stores, including large department stores, discount retailers, other
specialty retailers offering home-centered assortments, other direct mail 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 current 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 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 typically been realized during the period from October through December, and
levels of net revenues and net earnings have typically 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 key brand names as trademarks in the U.S., Canada and approximately 75 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,” “Williams-Sonoma
Home” and “Rejuvenation” 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
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Form 10-K