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Retailer said to be exploring options

January 24, 2007|From Reuters

Williams-Sonoma Inc., the owner of kitchenware stores and the Pottery Barn home decor retail chain, has hired Goldman Sachs to explore strategic options, which could include the sale of the company, people familiar with the matter said Tuesday.

Goldman declined to comment. San Francisco-based Williams-Sonoma didn't return several calls seeking comment.

Williams-Sonoma's contact with Goldman is seen to be in its early stages, and sources were not aware of any buyers at the doorstep. But sources said the company was expected to attract the interest of private equity firms drawn to its popular brand, cash flow and prime real estate.

Williams-Sonoma, which has a market capitalization of about $4 billion, has faced competition in its Pottery Barn chain as cheaper retailers such as Target Corp. and Wal-Mart Stores Inc. offer similar merchandise at lower prices.

The company faces pressure from the slowing housing market, which has damped consumer demand for high-ticket furniture and other household items. It also endured a difficult and price-competitive holiday shopping season.

Williams-Sonoma, which operates 582 stores, has been trying to revitalize its Pottery Barn chain.

The company, founded in 1956, also owns the Pottery Barn Kids, PBTeen and West Elm brands.

This month, Williams-Sonoma gave a "cautious" outlook for 2007 and said competitive pressure and the "home-related macroeconomic environment" may reduce profit and revenue growth.

The company's stock has fallen 15% in the last 12 months. Shares of Williams-Sonoma closed up 6 cents to $34.11 on Tuesday and rose more than 3% in after-hours trading.

Still, shares of Williams-Sonoma trade at about 19 times earnings, which outpaces the sector average of 17.5.

Although a sale is not definite, the move follows other retailers that have hired Goldman to explore options, hoping to take advantage of hungry private equity buyers and cheap capital sloshing around in the market.

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