With profits falling, Williams Sonoma redraws the line on luxury

Anyone who wanted to understand the changes in American society over the past year need look no further than Williams Sonoma (WSM). The premium kitchenware company recently reported a 90 percent drop in fourth-quarter profits and, as revenues continue to fall, is severely adjusting its market position.

Williams Sonoma's rise to retail prominence mirrored the massive increase in discretionary spending over the past 20 years. In the 1980s, most malls had one or two mid-market kitchen stores, where customers could buy reasonably priced, reasonably well-made cooking implements. Williams Sonoma differentiated itself from the Kitchen Bazaars and Lechters by offering very expensive, very well made tools. While its French porcelain ramekins and Italian copper pots often cost three or four times the price of comparable American-made items, the store could also claim that every one of its tools represented the best that the market had to offer.