Chairman to Resume Helm at Retailer

Williams-Sonoma Inc. said Tuesday that its chairman was retaking the reins of the San Francisco home-furnishings retailer, which is struggling with sluggish sales.

Howard Lester, 70, who bought a small chain of cookware stores in Northern California and turned it into a national powerhouse, will replace Chief Executive Ed Mueller, who the company said was retiring.

Lester, who has been chairman since 1986, was CEO of Williams-Sonoma from 1979 to 2001.

The company Tuesday raised its earnings forecast for the second quarter but also warned of slower-than-expected sales at Pottery Barn, its biggest brand. That, along with a cooling housing market and a slowdown in consumer spending, made investors jittery.

Williams-Sonoma’s stock hit a 52-week low Tuesday on almost four times its average daily volume. The shares fell 94 cents, or 2.8%, to $32.61 -- well off a January high of $45.09.

Mueller, a former telecommunications executive, had run Williams-Sonoma and its Pottery Barn and West Elm chains since 2003 and had been on its board since 1999. The company said that it would take a $5.7-million pretax charge related to his departure and that Mueller would remain a director at the company through May 2007.

Lester never fully stepped back from the day-to-day operations at Williams-Sonoma. Two years ago, the retailer announced that in addition to serving as chairman, Lester would take over as president of the Williams-Sonoma brand on an interim basis, with a new leader to be announced at the beginning of 2005. No replacement was named.

“I was there certainly during Ed’s time because Ed wanted me to be there,” Lester said Tuesday. “Having said that, do I know that it’s always hard for another CEO to have me around every day? Certainly it is.”

Williams-Sonoma generally has outperformed competitors, which have struggled along with consumers in an environment of higher interest rates, soaring gasoline prices and slowing housing turnover -- a particular hardship for home-furnishings companies that flourished during the real estate boom.

Part of the company’s success over the last few years has come from its launch of several niche brands: Pottery Barn Kids, catalog-and-Internet-only Pbteen, contemporary and lower-price chain West Elm, and the newest of the offshoots, Williams-Sonoma Home. In all, the company operates 569 stores, seven catalogs and five websites.

Pottery Barn has suffered in part because of a weakness in outdoor furnishings, said Joan Storms, an analyst at Wedbush Morgan Securities in Los Angeles. A leadership change might be just what the company needs, she added.

“Targeting these unique niches and the upscale consumer, and having the multichannel platform gives them a big competitive edge in this sort of environment,” said Storms, who rates the stock “buy.” “They realized they’re at a point now where they really do need more retail merchandising leadership at the helm of the company.”

In a note to clients, Goldman Sachs analyst Adrianne Shapira, who has a “neutral” rating on the stock, said she expected the stock to “drift lower” as sales slowed across the retail sector.

Two other promotions at the company are positive, she said: Pottery Barn President Laura Alber was given the additional role of company president, and Chief Financial Officer Sharon McCollam will serve as chief operating officer as well as CFO.

One of the two executives, Storm said, probably will lead the company when Lester retires.

Lester, the company’s second-largest shareholder, said his role this time really would be temporary. He has promised the board two years, he said. “Trying to get a succession plan in place has been my objective all along,” Lester said. “We knew we had a lot of great young people in the company. And in the last five years they’ve grown immensely.”

Williams-Sonoma reduced its second-quarter sales forecast to a range of $823 million to $837 million. It previously had forecast a range of $842 million to $856 million.

Sales at Pottery Barn stores open at least a year rose 1.1% in the first quarter

The company said it expected second-quarter profit of 27 cents to 29 cents a share excluding one-time items. For the year, Williams-Sonoma forecast revenue of $3.83 billion to $3.9 billion.

Bloomberg News was used in compiling this report.