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  • Williams-Sonoma Parent To Close Up to a Quarter of Brick-and-Mortar Stores

    Williams-Sonoma Parent To Close Up to a Quarter of Brick-and-Mortar Stores

    Home Furnishings Retailer To Open Two New Distribution Centers as Digital Sales Hit Record

    Home furnishings retailer Williams-Sonoma Inc. plans to close up to 25% of its stores, reflecting a widespread shift to e-commerce sales. (Getty Images)
    Home furnishings retailer Williams-Sonoma Inc. plans to close up to 25% of its stores, reflecting a widespread shift to e-commerce sales. (Getty Images)

    The parent company for upscale home furnishings retailers Williams-Sonoma, Pottery Barn and West Elm plans to open new distribution centers and to permanently close as much as one quarter of its stores, shifting its focus to e-commerce from brick-and-mortar sales.

    Williams-Sonoma Inc. is investing up to $250 million in technology and supply chain initiatives this year, most of which is earmarked for the opening of two fulfillment centers as online sales have skyrocketed to a record of more than 70% of the company's total revenue. As it steps on the gas to accommodate rising online demand, the retailer said it intends to close as many 145 stores as leases come up for renewal.

    "We're planning to shift our capital dramatically from brick-and-mortar to e-commerce," Williams-Sonoma Inc. CEO Laura Alber told investors of the retailer's continued push to capitalize on accelerating digital growth. "We used our stores mainly as distribution hubs last year, and our future growth will be driven predominantly by e-commerce."

    The company, based in San Francisco, oversees other popular brands such as Pottery Barn Kids and Rejuvenation. Its growth outlook represents an about-face for the company, which has long used its physical locations for cooking demonstrations, how-to events and other strategies to pull customers through the door.

    However, as with hundreds of other companies across the country, the pandemic accelerated the shift from physical to digital growth that has been unfolding over the past several years.

    Retailers around the world have been scrambling to adapt to changes in the past 12 months that have resulted in record-high online sales growth, new supply chain and shipping challenges, as well as new questions about the importance of physical retail space, much of which has been closed or operating at limited capacity because of the pandemic.

    For Williams-Sonoma, that translated to a record 48% increase in online sales in the fourth quarter of 2020 alone, while in-store sales slipped by 22.5% throughout the same time.

    "As the consumer and our business continue to shift more online, so has our e-commerce-related spend," Williams-Sonoma Inc.'s Chief Financial Officer Julie Whalen said, adding that more than 85% of the retailer's expenditures are now on digital growth. Just a few years ago, Whalen said the company spent less than 50% on its e-commerce operations.

    Bricks to Clicks

    Williams-Sonoma Inc. reported 581 stores across all its offshoot labels at the end of last year, a slight dip from the 614 it reported at the end of 2019.

    Most of the brick-and-mortar sales the company reported throughout that fourth quarter were buy-online-pick-up-in-store orders.

    "Stores are a competitive advantage for us," CEO Alber said, adding that the company experienced a 130% growth for orders placed online and then picked up at physical locations. "It's one reason we were able to fulfill the unexpected volume over the holidays, and having these stores as hubs around the country are obviously a huge differentiator for us."

    Williams-Sonoma Inc. reported a 25.7% hike in revenue to just shy of $2.3 billion in the fourth quarter of 2020. It said it is on track to surpass $10 billion in annual revenue within the next five years.

    Even so, it's not enough to retain its once expansive retail footprint. The retailer is part of a growing wave of other companies planning to cut down or completely eliminate their brick-and-mortar portfolios.

    Walt Disney Co., for example, said earlier this month it would be chopping its store fleet by 20% as part of a continued shift to online business. Gap Inc. is plowing ahead with a three-year plan to close 85% of its mall-based locations and 350 Gap and Banana Republic stores in pursuit of a similar mission.

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