West coast ports significantly affected results
“In the fourth quarter, we exceeded the high end of our expectations, despite challenges relating to the West Coast port disruption. The prolonged slowdown negatively impacted our results and will continue to impact us to an even greater degree in the beginning of this year.”
Holiday was super promotional, performance driven by multichannel model
“what our mindset was going into the holiday season. We knew it was going to be promotional, and it was, even more so than expected. We had strong performance because of our innovative exclusive products and our high service multichannel model.”
Inventory levels have deteriorated because of ports. We can’t get around it
” inventory levels available for sale have continued to deteriorate into 2015 from the ongoing impact of the West Coast port disruption. We began implementing strategies earlier last summer to prioritize receipts and divert shipments to other ports on both the east and west coasts, but given the size of our business and the type of merchandise we sell, there are limited options for mitigation.”
We’re one of the largest container importers in the US
“With our import levels amounting to approximately 30,000 containers each year, and with about 50% of these typically moving through the West coast ports alone, we are one of the 25 largest container volume importers in the United States.”
Had to ship across country in order to make sure things got to the customer on time
“Our number one priority has always been to serve our customer. To this end, we shipped merchandise across the country to our West Coast DC and incurred substantial incremental shipping expense to ensure that our customers’ orders would arrive in time.”
Targeting a dividend yield in line with the S&P 500
“We also announced in 2013 a commitment to pay dividends targeted at 35% to 40% of net income and in line with the S&P 500 dividend yield. Today, in support of this commitment, we announced a 6% increase in our quarterly dividend to $0.35 per share.”
58 year history
“This experience made me realize once again how far this company has come in its 58 year life and in the 20 years I’ve been with it. How fortunate we’ve been to attract such outstanding associates and supplier partners that have accepted the responsibility of stewardship of a great brand while constantly seeking ways to be relevant to the needs and desires of today’s consumer. ‘
West coast ports have affected different retailers differently depending on container volume
” want to make sure we’re all grounded on the fact this West Coast port disruption has impacted all retailers, all with varying impacts depending on the size of their container volume, the types of goods they sell and their levels of in stock and available for sale, inventory in particular, just prior to the disruption and during the disruption.”
Very low levels of inventory
“across the Pottery Barn brand, we saw the lowest levels of inventory on hand growth, and in the Pottery Barn brand, as I just mentioned, we had the negative 9% year over year growth of the inventory on hand, which has since deteriorated.”
A retailer needs a good landlord as a partner
“We’re so lucky to have such strong partners with very, very creative, forward thinking landlords, and we have 19 wonderful stores opening this year. And beyond that, we do have other stores that we’re working on.”
Mindset of continuous improvement. Currently focused on technology
“what could we have done better, you know, we always have a mindset of continuous improvement. And we are in the midst of a major multiyear technology transformation, which is focused largely on our supply chain. We know that our customer wants increased visibility of where their order is, and we also know that there’s a great opportunity to regionalize our assortments.’
All of our big projects for the year focus on improving supply chain
“We have put together our big, as we call them, rock projects for the year. And all of these help us remove blind spots in the supply chain, if you will. We have many of them focused on reducing cost and improving service, whether it’s scheduling, routing systems, communications delivery states.”
In marketing we’ve made strategic decisions to improve our conversion funnel
“In marketing, we’ve made, and you’ll see more of it this year, strategic decisions to drive customer acquisition across the entire conversion funnel. We’re shifting more of our marketing spend toward digital as we’re implementing the results of all of this marketing effectiveness work that we’ve talked to you about before, and increasing marketing messages.”
Our most important thing is to make the customer happy
“Regarding the gross margin, the reality is, what I was saying was it was lower selling margins, particularly in ecommerce, that drove that decline. The pure product margin was healthy. The lower selling margins were almost solely due to higher shipping costs, but there’s’ two reasons for that.
One is because we made a decision as a company to make sure to meet our customer demand and get them their product in time for the holidays. Nothing is more important to us than making sure to keep our customers happy. And so we made the decision, as the customer continues to order later and later in the peak, to ship things to them in whatever way possible to get it to them in time for the holidays. That’s one.”
West coast ports affect revenue
” It’s small, but we are seeing some order cancellations. The bigger issue is what is the lost customer demand that they never actually pushed the button to get it, because when they went through the chain, they were able to see that the back order is going to be longer than what they wanted, and/or there’s something in the category that they’re buying, one item is back ordered, they decided to not buy the whole category.”
Competitive environment is here to stay
“There’s no question all retail is still very promotional, and we don’t believe it’s going to change. So we have built some structural savings into our supply chain to offset it that make us more competitive, the first being the insourcing of our foreign agents, which is a big deal to us and allows us to both reduce cost, but also, where we need to, step up the competitive pricing to gain market share.”
When you have the best product you can protect price
“where we win is when we give our customers exclusive, innovative product at a great price with great service. That’s what we have been focused on. That’s what we are focused on. And when those things come together, and the customer buys from the retailer that has the best product, at the end of the day, and they want the price to be fair.”
When you’re buying for your home, you usually don’t compromise on quality
“We’re lucky to be in the business that we’re in. I mean, buying for your home is a considered purchase. It’s very important. There’s really nowhere to hide on quality”
