How Williams-Sonoma is staying ahead with its pricing strategy, AI efforts
While a swath of retailers and home goods stores struggled in 2023, Williams-Sonoma (WSM) has continued its momentum from the pandemic, partially due to its strategy to hold the line on pricing.
CEO Laura Alber made the decision to "stop the discounting" as physical retailers shuttered their doors due to COVID-19 mandates. Now, it's part of the company's operating model.
"It took us a little while to gain our courage, but now it's the way we run the business," Alber told Yahoo Finance's Brian Sozzi and Julie Hyman at the World Economic Forum in Davos, Switzerland.
The company does do markdowns "if there's something we buy too much of or it doesn't work," she said.
Williams-Sonoma's position on pricing, in addition to a "focus on generating better margins and profitability even as sales continue to struggle," is something Oppenheimer analyst Brian Nagel called "impressive" in a note to clients.
In the last quarterly results, the company's revenue fell 14.6% year over year. That's down 6.5% compared to two years ago, but still up nearly 35% compared to four years ago. It boasted an operating margin of 17%, and beat estimates with earnings per share of $3.66.
Investors applauded the home retailer, which also owns brands Pottery Barn and West Elm alongside its eponymous chain. Its shares are up over 65% in the past year — outpacing the S&P 500's (^GSPC) 21% gain — and have jumped more than 280% in the last five years. Nagel believes the company will continue to to push along amid a challenging environment.
"We remain optimistic that as industry headwinds, including excessive price promotions, ease, Williams-Sonoma will emerge an even stronger, better-positioned, more profitable, omnichannel–enabled operator in the broader higher-end home-related category," he wrote.
The company could also benefit from recent health trends, Alber said. "We all know that eating at home is the healthiest thing you can do when you make your own food ... it's exciting to see all [our] products that support that."
Alber said the company is looking to tap into artificial intelligence to boost sales and interaction with customers.
"There's a bunch of different things that you might be surprised to hear," she said of Williams-Sonoma's AI efforts. "The most obvious is tailoring our marketing messages to you .. .making it more relevant using patterns to do that."
During the company's latest earnings call, Alber said the team increased its spend from Q2, as it wants to ensure its marketing investments "[give] us the ability to test new formats, to connect with new customers and showcase its brand to its existing customers and 'brand loyalists.'"
AI could also be used to optimize its supply chain and reduce shipping time and cost, said Alber. Other use cases include customer service co-pilot software, which can generate insights and pull information to help representatives, and AI writing tools that aid in copywriting for the website.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
