Luxury retailer Williams-Sonoma
You might be tempted to give credit for Williams-Sonoma's profits to higher margins and same-store sales of an impressive 14%. By some metrics, Williams-Sonoma is cleaning up. Gross margins increased from 32% to 37%, a result of fewer markdowns and lower occupancy expenses. However, it did face easy comparisons. That 14% increase in same-store sales is just a rebound from last year's equally impressive 15% drop.
What management isn't pointing out is that part of the increase in margins came from a 20% increase in higher-margin direct-to-customer sales. Those direct sales, represented 42% of total revenue versus 40.5% in the year-ago quarter.
And that's where Williams-Sonoma's strength signals broader economic weakness. Bringing in a higher percentage of sales from catalogs implies the retailer needs to use more aggressive tactics. Gone are those halcyon days when it could rely on the unprompted whims of a flush customer.
Meanwhile, business really is booming at Dollar Tree. For the quarter, sales increased 12.7%, led by sales of food, health and beauty products, and party supplies, according to management. In the first half of 2010, the company has increased its store count by 3.4%, adding 130 stores and expanding another 68. It saw solid performance from existing outlets, too, with same-store sales up 6.6%.
That same-store sale gain is all the more impressive, given that deflation is eating away at other supermarkets. Both Safeway
What we're seeing is those two customer groups moving even more toward the ends of the spectrum. The Williams-Sonoma customer is slowly starting to buy luxury again, though perhaps with a bit of prodding, but the value-oriented customer is viewing even stores like Safeway as somewhat too pricey. Some customers are starting to live just one dollar a time, and that's troubling.
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Fool contributor Jacob Roche thinks a penguin-shaped water carbonator really classes up a joint. He holds no position in any of the companies mentioned. Whole Foods Market is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.