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Williams-Sonoma Beats Estimate But Pottery Barn Woes Prompt Changes

As it detailed fourth quarter and fiscal year financial results, Williams-Sonoma announced leadership changes in its beleaguered Pottery Barn, Pottery Barn Kids and PBteen banners.

Sandra Stangl, president of the Pottery Barn Brands, has resigned and is leaving company on March 31 with Marta Benson, formerly evp/Pottery Barn merchandising and visual merchandising, designated as her successor.

Jennifer Kellor, formerly evp/Pottery Barn Kids and PBteen merchandising and visual merchandising, becomes president of the Pottery Barn Kids and PBteen brands reporting to Laura Alber, Williams-Sonoma president and CEO, and Jeff Howie, formerly evp/Pottery Barn Brands inventory management and brand finance, becomes evp and chief administrative officer, Pottery Barn Brands reporting to both Benson and Kellor.

For the fiscal fourth quarter, Williams-Sonoma posted net earnings of $144.6 million, or $1.63 per diluted share, versus $141.1 million, or $1.55 per diluted share, in the year-earlier period.

The company exceeded an analyst average estimate published by MarketBeat of $1.51 per diluted share.

In the fiscal quarter, comparable sales slipped 0.9% with Pottery Barn comps down 4.1%, Williams-Sonoma comps up 1.4%, West Elm comps up 6.5%, Pottery Barn Kids comps down 4.9% and PBteen comps down 8.1%.

Net revenues were $1.58 billion versus $1.59 billion in the quarter a year before. E-commerce revenues were $808.9 million while retail revenues were $772.6 million as compared to $791.9 million and $794.4 million, respectively, in the period the year previous. Operating income was $215.8 million versus $222.7 million in the year-prior quarter, Williams-Sonoma maintained.

For the full fiscal year, net earnings were $305.4 million, or $3.41 per diluted share, versus $310.1 million, or $3.37 per diluted share, in the annum a year earlier.

In the fiscal year, comps increased 0.7% with Pottery Barn comps down 3.5%, Williams-Sonoma comps up 1.3%, West Elm comps up 12.8%, Pottery Barn Kids comps down 1.4% and PBteen comps down 6.2%

Net revenues were $5.08 billion versus $4.98 billion in the year before. E-commerce revenues were $2.63 billion while retail revenues were $2.45 billion as compared to $2.52 billion and $2.45 billion, respectively, in the previous year. Operating income was $472.6 million versus $488.6 million in the year prior.

In a conference call, Julie Whalen, Williams-Sonoma CFO, said the company was “disappointed” in Pottery Barn’s top line performance. She noted that, across the company, operating income slipped 20 basis points primarily due to investment in digital advertising intended to drive new customer acquisition. In the conference call, Alber said the company had launched initiatives in each of its retail banners to drive sales, including a brand repositioning at Pottery Barn, where operations are gaining traction in decorating and value price points. She noted that Williams-Sonoma had developed a new Pottery Barn store prototype that would be incorporated into selective remodels going forward.

In announcing the financial results, Alber said, “In 2016, we delivered revenues of over $5 billion, which included another year of double-digit growth across West Elm, our newer businesses Rejuvenation and Mark and Graham, and our company-owned global operations. Additionally, from an operational perspective, we executed one of our best holiday seasons and delivered an improved customer experience, which is at the center of everything we do. Entering 2017, we will continue to improve performance and increase our competitive advantage, with a focus on innovation in e-commerce, our products and service, and the retail experience. We will also remain relentlessly focused on operational excellence throughout our supply chain, driving strategies that will improve our customers’ experience across all of our brands.”