Williams-Sonoma's New Recipe

At Cowen Group's (Nasdaq: COWN  ) Consumer Conference last week, Pat Connolly, the chief marketing officer of Williams-Sonoma (NYSE: WSM  ) , provided an update and outlook for the company. Williams-Sonoma faces tough competition -- including Restoration Hardware (Nasdaq: RSTO  ) , Pier 1 Imports (NYSE: PIR  ) , Bed Bath & Beyond (Nasdaq: BBBY  ) , Cost Plus (Nasdaq: CPWM  ) , and even Target (NYSE: TGT  ) -- and a sluggish real estate market. However, Connolly still provided a bullish long-term assessment on Williams-Sonoma.

Connolly started off by focusing on the huge market opportunity; that is, Americans have "never been more interested in their homes." The major generations -- Baby Boomers, Gen X, and Gen Y -- are going through transition periods. For example, Gen Y is beginning careers and families. Baby Boomers, on the other hand, see their homes as a place for social gatherings.

The good news is that Williams-Sonoma has a multichannel approach to reach these customers, such as high-end retail locations, catalogs, and websites. In fact, during December, the company launched a new marketing database to leverage these channels (which have about 60 million names).

Unfortunately, over the past year, Williams-Sonoma has been struggling, as the stock price has gone from $42 to $35 per share. The big problem is Pottery Barn, which treaded water in 2006.

Connolly believes that growth can come back. To this end, the company is putting more resources into brand positioning, through channels such as public relations, partnerships, and advertising. The company also plans an aggressive launch of new merchandise in the first half of 2007. What's more, Williams-Sonoma will emphasize its low pricing -- at least relative to the high quality of its products.

No doubt, the company is focusing on its other brands, such as Pottery Barn Kids, West Elm, Hold Everything, and of course, Williams-Sonoma. However, the catalyst for shareholders will be Pottery Barn.

Actually, as indicated by its preliminary earnings report, Williams-Sonoma got some traction in the fourth quarter, as same-store sales increased 1.1% and overall sales improved by 3.6% to $900.4 million. Combined with stronger marketing and merchandising -- and perhaps an improved economy because of lower energy prices -- the company could bring better news to shareholders in 2007.

For more on the exploits of the home decor market, check out:

Bed Bath & Beyond had been recommended by both our Stock Advisor and Inside Value newsletters. No matter what your preference for investments, we have a stock newsletter for you. Click here to check them out and remember you can take a free 30-day trial of any one of them.

Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 1,623 out of more than 20,000 participants in Motley Fool CAPS.


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