US homewares retailer Williams-Sonoma, owner of retail banners such as Pottery Barn and West Elm, has revealed it will open three more stores in Australia by early next year despite the upfront costs of rolling out its brand in the region draining group earnings.
Part of a flood of foreign retailers to come to Australia recently, Williams-Sonoma has already turned the region into its biggest sales market outside its North American base, thanks mainly to its global e-commerce platform and an affinity local shoppers have for the brand.
However, a rapid global international expansion, which also takes in Britain, will rattle profits for the parent company with Williams-Sonoma chief executive Laura Alber telling investors the costs of new stores, IT infrastructure and building its warehouse-to-home supply chain were swelling.
"We expect the upfront costs to accelerate the build-out of our global infrastructure in Australia and the United Kingdom will be higher than originally anticipated and will therefore, put pressure on our earnings in the back half of the year," Ms Alber told analysts last week at an earnings update.
Ms Alber has stated she wants Williams-Sonoma to forge a base in Australia that had both a strong online presence as well as a thriving bricks-and-mortar base. This would require a great deal of capital expenditure to ensure a smooth and efficient supply chain that extended right to the customer's front door.
But this had come at a cost.
"We are incurring little bit higher than anticipated costs," said Williams-Sonoma CFO Julie Whalen, "but I think what's important to remember ... when we go into a country, unlike other retailers, we're not just going in with a retail store, we're actually building out an entire fulfilment centre.
"So we're actually going into Australia with full e-commerce capability and delivery."
The homewares group opened its first mega-store in May after taking over three retail floors in Bondi Junction and will open its second store, under the West Elm banner, in Melbourne's Chapel Street in three weeks.
It was expected WilliamsSonoma would quickly roll out as many as 10 stores here, with Ms Alber confirming its near-term growth plans in the region would see it open three more stores to take its tally to five by the close of its fiscal year - the end of January.
Its online site has been enormously successful in bonding Australians to its brands, wining them over even before Williams-Sonoma had a single store in the country, and the retailer is believed to have sales growth of 55 per cent since opening its first store in Bondi.
"The most exciting thing, I think, is that we are seeing a large per cent of our sales online, much larger than we expected," Ms Alber said.
Australia has turned into a happy hunting ground for overseas fashion brands. Spanish fast-fashion chain Zara has turned Australia into one of its most profitable regions. Other retailers soon to set up shop here include Japanese department store Uniqlo and Swedish store H&M.
British website ASOS said Australia was its largest single foreign market for the global fashion group. Hip American fashion brand Hollister, part of Abercrombie & Fitch with yearly sales of more than $US4 billion, has confirmed it is planning to expand into Australia.