Pottery Barn 2012 Annual Report Download - page 19

Download and view the complete annual report

Please find page 19 of the 2012 Pottery Barn annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

The retail business complements the direct-to-customer business by building brand awareness and attracting new
customers to our brands. Our retail stores serve as billboards for our brands, which we believe inspires
confidence in our customers to shop online and through our catalogs.
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% of our purchases during fiscal 2012. Approximately 61% of our
merchandise purchases in fiscal 2012 were foreign-sourced from vendors in 52 countries, predominantly in Asia
and Europe, of which approximately 98% 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 more volatile economic environment since 2008 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 January, and
levels of net revenues and net earnings have typically been lower during the period from February 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 75 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 90 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,” “Rejuvenation” and “Mark and Graham” 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 and store designs, among other things, which are also used by our
subsidiaries under license. We hold patents on certain product functions and product designs. Patents are
generally valid for 14 to 20 years as long as their registrations are properly maintained. In addition, we have
registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,”
“potterybarnkids.com,” “pbteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,”
“rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, copyrights, trade dress rights and
domain names that we hold are of material importance to us.
5
Form 10-K