Circ Cuts Yield Savings for Sonoma

Kitchenware/home decor cataloger/retailer Williams-Sonoma has launched a catalog circulation optimization strategy to reduce costs and refine its marketing focus. And it’s working.

At the Thomas Weisel Partners Consumer Conference (Sept. 22-23) in New York, Williams-Sonoma officials discussed their decision to reduce catalog circulation by about 25% and cut page counts by 31%. These changes have reduced the company’s advertising costs by approximately $40 million.

“We know that the pages we would have mailed would not have yielded a profitable return,” Patrick Connolly, the company’s executive vice president/chief marketing officer, said at the conference.

What’s more, Williams-Sonoma is shifting more of its marketing toward e-mails, which are more targeted and can be tailored to specific types of customers. The company’s brands include Williams-Sonoma, Williams-Sonoma Home, Pottery Barn, Pottery Barn Kid, Pbteen and West Elm.

During the conference call, Connolly said the company is focusing on electronic direct marketing. “We are really focusing on both our search engine marketing in terms of both SEM and paid search and in natural search,” he said. “Our SEM revenue is up significantly this year.”

When contacted by Multichannel Merchant, Connolly declined further comment regarding the company’s catalog circulation optimization strategy.

The company’s second-quarter financial results revealed disappointing numbers, largely due to the incredibly weak economy. Direct-to-consumer sales for Williams-Sonoma fell 4.3%, to $356.4 million in the second quarter. Same-store sales sank 14%.

Net revenue for the second quarter decreased 4.6%, to $819.6 million compared to $859.4 million for the 13-week second quarter of fiscal year 2007. But Internet revenue rose 11.7%, to $265.1 million, compared to  $237.4 million in second quarter f 2007. Net income fell nearly 30%, to $18.4 million, compared to $26.0 million in the second quarter last year.

During the company’s Aug. 28 conference call announcing its second quarter financial results, CEO Howard Lester said: “In direct marketing, we continued to implement our catalog circulation optimization strategy and the results to date are affirming that the circulation decreases we have made are accretive to earnings. Therefore, we will continue to look for ways to expand this strategy over the next several quarters.”

Lester said next year the company plans to reduce its retail lease square footage growth from 7% in ’08 to 4% to 5% in ’09. It will cut capital spending from $200 million to $220 million in ’08 to $145 million to $170 million in ’09, as well as continue to reduce inventory levels through managed receipt flow and turn optimization initiatives.