Williams-Sonoma Cuts Call Center as Priorities Shift
Williams-Sonoma is cutting back and one focus is its phone-in catalog business, demonstrating again that good retailers will take a hard look at operations during the recession.
Cutting the distribution center is part of a plan to run with leaner inventory in a period of declining sales. The elimination of the call center represents a change in priorities. The call center services consumers who want to order from the catalog over the phone, and they can be very loyal to their preferred way of doing business. In the bigger scheme of things, though, sales from those customers are waning in comparison to Internet-based activity. To some extent, a recession gives retailers the ability to close down services that are popular with some customers because they can blame the move on the economy. Under the circumstances, the hope is, call-in customers who have to wait longer for order processing will be patient.
Williams-Sonoma is forced to find ways to cope with a rough stretch. In its last fiscal quarter, stores suffered a net revenue decline of 14 percent. A significant part of that was based on slipping comparable store sales. Pottery Barn took the biggest comp hit, down 28 percent, but Pottery Barn Kids and William-Sonoma stores were off, too. Taken together, the company's comps were off by 21 percent.
However, combined catalog and Internet sales were hit even harder, sliding by 18 percent. That combination represents a big chunk of Williams-Sonoma's business, in fact, about 44 percent of the total sales generated in the third quarter. So, positioning that business for greater efficiency is critical, and the company already had what it terms a catalog circulation optimization strategy in place and yielding results, including advertising expense savings. Williams-Sonoma chairman and CEO Howard Lester said in a third-quarter conference call late last year that the company would look for more ways to reduce expenses related to catalog operations. Shutting down the call center is certainly one way to accomplish that.
Williams-Sonoma plans to take a charge of close to $15 million for its economizing effort, which also includes a relatively small cut in capital spending, but it expects to save about $75 million.
Holiday sales for Williams-Sonoma, were down 22 percent on a 24 percent comp decline at stores and a 23 percent slide in Internet/catalog sales. Still, analyst Joan Storms, who covers the company for Wedbush-Morgan, noted the results were at the high end of expectations, which she took as an indication that the company is getting on top of business trends. Beyond that, she pointed out that the company has a zero balance on the credit facility it maintains for operations and a solid cash position. Williams-Sonoma stores sell fancy housewares, so economic conditions that have consumers trading down don't suggest the company is set for significant gains right now. But, with the department stores and pricey catalogs that it has for competition getting hit by the economy, too, a leaner Williams-Sonoma may be in a position to make market share gains.