Following West Elm Woes, Williams-Sonoma To Shift Marketing

Williams-Sonoma's latest financial results may be well ahead of competitors in the furniture universe, but it's still feeling the pinch of consumer pullbacks. Sales at West Elm, its mid-priced brand, fell 11% in the fiscal fourth quarter.

Sales at the San Francisco-based company as a whole slipped to $2.45 billion, down from $2.5 billion in the fourth quarter of 2021. While quarterly sales rose 6% at Pottery Barn and 4% at Pottery Barn Kids and Teens, they sank at West Elm, which accounts for about a quarter of the company's total sales. And revenues also eased by 3% at Williams-Sonoma.

Net earnings fell to $355 million from $402.9 million in the prior year.

"We continue to outperform our peers, gain market share, and distinguish ourselves as the world's largest digital-first, design-led, sustainable home retailer," said Laura Alber, president and chief executive officer, in the company's announcement. For the full year, both revenues and profits reached record levels.



In a call webcast for investors, Albers said the company is confident it can get West Elm back on track. Day Kornbluth, formerly of Ralph Lauren Home, starts as its new president next month.

"She'll lead West Elm through its next chapter of growth," Alber said, focusing on "industry-leading design and value, increased brand awareness and customer acquisition."

Alber said that sales at Pottery Barn, which has a broader range of products and a better seasonal assortment, were more resilient.

With West Elm, "there are some nuances in the psychographic and demographic. We keep looking at how to better position ourselves for this inflection point where consumers are more uncertain. And we're also making sure we're positioning our marketing to be as relevant now as it was in the pandemic."

Fewer people moving house also dampened West Elm Sales.

Given the uncertainty in the larger economy, it offered a hazy outlook for the year ahead, saying revenues could range from a decline of 3% to a gain of 3%.

Observers are on the fence about how well the company will do in months ahead when the housing market is expected to remain challenging.

"We believe Williams-Sonoma is well-positioned to weather the uncertain industry demand environment, likely exiting this period in a better position than many of its peers," writes Seth Basham, who follows the company for Wedbush, and currently gives it a neutral rating. "However, the company is clearly not immune to these headwinds."

And while Williams-Sonoma's results show a strong, flexible balance sheet, the "increasingly challenging macro backdrop" makes Peter Benedict, who covers the company for Baird, think the retailer could be too optimistic in revenue forecasts.

He is encouraged, however, by growth in its B2B sales division, with revenues up 27% for the year.

Still, given uncertainties in the housing market and broader consumer trends, he's sticking with his neutral rating.

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