Williams-Sonoma Ups Its Brand Cachet -- By Shrinking

Williams-Sonoma (WSM) woke up and smelled the profits for its homeware brands -- and they're online. Grasping that the economy isn't rebounding anytime soon, the 630-store company said it plans to steadily close up to one-quarter of its stores over the next three years as leases expire, in markets where it has multiple units.

In other words, the chain has learned a hard lesson: one store in a market generates excitement, but multiple stores can mean overexposure, customer boredom and lower sales per-square-foot.

Williams-Sonoma's closure plan is smart for several reasons: It cuts overhead to match the new economic reality, drives customers toward more-profitable e-commerce purchasing, and returns the Williams-Sonoma and Pottery Barn brands to a more exclusive position that helps boost their brand cachet.

Given the gradual nature of the closures over such a long timeframe, the company could have said less, perhaps just announcing a year's worth of closures. The up-front discussion of the whole closure plan displays confidence that investors will understand what they're doing--and so far, they have.

Often, big chains are slow to react to changes in the marketplace. But Williams-Sonoma has proven a nimble competitor in the downturn, with a sharp eye for what's working. After sales slumped in 2008, the company took action, slashing 1,400 jobs and closing a distribution center and a call center. Sharpening up its merchandising and marketing, the company has dramatically improved sales and profits since. With the company's financials recovering, Williams-Sonoma could have stood pat on its store count, but it would have remained at higher risk with a bigger lease burden.

As it trims back on Williams-Sonoma and Pottery Barn stores -- including the high-end Williams-Sonoma Home concept -- the company will focus on its more-affordable West Elm home-goods concept, which has continued to show strong sales. With longtime CEO and chair Howard Lester preparing to retire in May, Williams-Sonoma is making bold moves now to ensure the company's stable of brands are sought-after by customers far into the future.

Photo via Flickr user hyku