Full Description

Williams-Sonoma, Inc. is a specialty retailer of products for the home. The retail segment of the Company’s business sells its products through five retail store concepts: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Williams-Sonoma Home. The direct-to-customer segment of the Company’s business sells similar products through its seven direct-mail catalogs and through six e-commerce Websites. The Company’s Williams-Sonoma stores offer a selection of culinary and serving equipment, including cookware, cookbooks, cutlery, informal dinnerware, glassware, table linens, specialty foods and cooking ingredients. The Company has two segments: retail and direct-to-customer. The catalogs reach customers in the United States, while the five retail concepts, as of February 1, 2009, operated 627 stores in 44 states.

Retail Stores

The retail segment has five merchandising concepts: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, and Williams-Sonoma Home. As of February 1, 2009, the Company operated 627 retail stores, located in 44 states, Washington, D.C., Canada and Puerto Rico. This represents 264 Williams-Sonoma, 204 Pottery Barn, 95 Pottery Barn Kids, 36 West Elm, 10 Williams-Sonoma Home and 18 Outlet stores, which carry merchandise from all merchandising concepts. The retail business complements the direct-to-customer business by building brand awareness. The Company’s retail stores serve as billboards for its brands.

Direct-to-Customer Operations

The direct-to-customer segment has six merchandising concepts: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm and Williams-Sonoma Home and sells products through the Company’s seven direct-mail catalogs: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Bed and Bath, PBteen, West Elm and Williams-Sonoma Home, and through six e-commerce Websites: williams-sonoma.com, potterybarn.com, potterybarnkids.com, pbteen.com, westelm.com and wshome.com. Of these six merchandising concepts, the Pottery Barn brand is the major source of revenue in the direct-to-customer segment. As of February 1, 2009, the Company estimated that approximately 40% of its Company-wide non-gift registry Internet revenues are incremental to the direct-to-customer channel and approximately 60% are driven by customers who have received a catalog. The direct-to-customer business complements the retail business by building brand awareness and acting as an advertising vehicle. In addition, the Company’s direct-mail catalogs and the Internet act as a means of testing market acceptance of products and brands.