Ladies and gentlemen, thank you for standing by. Welcome to the Williams-Sonoma, Inc., Fourth Quarter and Fiscal Year 2011 Earnings and Fiscal Year 2012 Guidance Conference Call. [Operator Instructions] This conference is being recorded. I would now like to turn the call over to Steve Nelson, Vice President of Investor Relations, to discuss non-GAAP measures and forward-looking statements.

Good morning. This morning's conference call should be considered in conjunction with the press releases that we issued earlier today. Our press releases and this call contain non-GAAP financial measures that exclude the impact of unusual business events. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, and an explanation of why these non-GAAP financial measures are useful, are discussed in Exhibit 1 and elsewhere in the earnings release. The forward-looking statements included in this morning's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operations, business initiatives, guidance, growth plans and prospects of the company in 2012 and beyond and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current press releases and SEC filings for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. I will now turn the conference over to Laura Alber, our President and Chief Executive Office -- Officer, to discuss our fourth quarter and fiscal year 2011 results and our outlook for 2011 -- for 2012.

Good morning, and thank you for joining us. With me today are Pat Connolly, our Chief Marketing Officer; and Julie Whalen, our Acting Chief Financial Officer. I'll begin by going over our fourth quarter results. Fourth quarter net revenues increased 6% and non-GAAP diluted earnings per share increased 8% to a record $1.17 per share. Throughout the quarter, the strength of our merchandising strategies and flexibility of our multi-channel operating model drove increased sales and profits despite a more promotional environment during the holiday period. Post holiday, we saw a progressively stronger retail environment, and through highly effective marketing and stronger-than-expected operational execution, we exceeded our revised January guidance on both the top and bottom lines. During the quarter, comparable brand revenues increased 7% and e-commerce revenues increased a better-than-expected 18%. Strong product assortments, including an increased gift assortment in each of our brands, were enhanced by highly targeted promotions and e-marketing initiatives in all channels. In our home furnishings business, total fourth quarter comparable brand revenues increased a robust 12%, including 35% growth in West Elm; 11% growth in Pottery Barn; 6% growth in Pottery Barn Kids; and 1% growth in PBteen. In Williams-Sonoma, comparable brand revenues declined 2.3% due in part to a 60 basis point impact from planned SKU reductions in the Williams-Sonoma Home business. Excluding that impact, Williams-Sonoma comparable brand revenues declined 1.7%. I would now like to review our full year results. Fiscal 2011 was a year of record earnings for Williams-Sonoma, Inc. It was a year where we saw increases in revenues and profitability and it was a year where we budgeted for and executed key elements of our long-term strategy to be the leading multi-channel retailer of home furnishings and housewares in the world. Through strong execution and a superior multi-channel strategy, we delivered record earnings and profitability in an unusually promotional retail environment, never losing sight of our mission to enhance our customers' lives at home. And as a result, we also continue to gain market share in the highly fragmented home furnishing segment. For the year, net revenues increased a better-than-expected 6%. Non-GAAP diluted earnings per share increased 15% to a record $2.24 per share and non-GAAP operating margin climbed 50 basis points to a record 10.3%. We ended the year with $503 million in cash after returning $263 million to shareholders through share repurchases and dividends and investing more than $25 million in the acquisition of Rejuvenation. During the year, we increased our dividend twice, for a total increase of 47%, and we announced share repurchases of $350 million. Comparable brand revenues increased 7%, with all brands delivering positive growth for the year, including Williams-Sonoma once we exclude the impact of planned SKU reductions in Williams-Sonoma Home. E-commerce revenues for the year increased a better-than-expected 18%, driving direct-to-customer revenues to 44% of total company revenues versus 41% last year. As we look forward to 2012, we continue to be laser focused on our customers, putting them at the center of everything we do so that we can continue to deliver increased revenue and profit while simultaneously investing in our future growth. Our key initiatives for 2012 are: to grow sales in each of our existing brands through innovative product introductions and compelling marketing; to invest in the competitive strengths of our multi-channel business to serve our customer anywhere, anytime and through any device or store; to invest in our supply chain to ensure that we have the highest service levels in the industry; to leverage our customer insights to fill white space by developing new businesses within and outside of our current framework of brands; to answer the worldwide demand for our products by expanding the global presence of our brands; and to invest in the technologies that underlie all these strategies in order to make it easy for our customers to decorate, entertain and cook at home. I will now elaborate on our multi-channel strategy. Unlike other retailers, we already have a large percentage of our business online. In 2011, we grew direct-to-customer sales to 44% of our total revenues, and e-commerce grew from 34% to 38% of total company revenue. We believe our direct-to-customer percentage will grow to more than 50% over the next 3 years as we become less reliant on retail store expansion to drive increased profitability and long-term growth. We recognize that although customers may purchase in one channel, they shop all channels. As the e-commerce channel continues to develop with the advent of new technologies and the roles of each channel transform over time, we'll continue to evolve our multi-channel strategy so we can increase mindshare and drive customer engagement. Our retail stores are living billboards for our brands. The in-store experience is dynamic and multi-sensory, drawing customers with food scents [ph]; decorating classes; toys to play with and friendly, knowledgeable associates. In 2012 and beyond, we will make the investments necessary to take our one-on-one service and retail store experience to new heights and continually raise the bar for customer experience. Similarly, our catalogs are also billboards for our brands. They showcase new seasons and new product launches and allow our customers to browse our assortment as they would a magazine, inspiring them with cooking, decorating, entertaining and remodeling ideas. Our catalogs drive retail and web sales and differentiate us from our competitors. Catalog mailings will remain an important part of our strategy, but the optimization of size and number of catalogs mailed will continue to be a priority as Internet adoption increases and more personalized and productive e-marketing alternatives become available. Our websites are our largest stores. They allow our customers to comparison shop and order with ease. Our digital marketing drives brand awareness, traffic to our sites and stores and new customer acquisitions. We are experiencing success with a wide range of digital marketing programs and see opportunities for significant expansion of these programs. Our goal remains to optimize all of our marketing efforts in order to continually increase return on our marketing investments. In 2012, we will enhance customer engagement in all channels by further investing in our holistic online customer experience. We believe that by providing innovative online design tools, easy-to-search databases of rich photography and recipes and easy-to-access communities of like-minded customers, we can make it easy and fun to decorate, entertain and cook. To enhance and improve our e-commerce performance in 2012, we are focused on back-end technology investments and leveraging multi-channel customer data to enhance the online shopping experience and simplify shopping for custom configuration and personalized items. In terms of technology investments, our 2012 plans are to develop a new e-commerce platform to enhance our testing capability and improve conversion; to implement a program to deliver automated, algorithmically driven product recommendations; to continue to meet the technical requirements of the growing base of customers interacting with our brands through tablet devices, smartphones and other new media; and to add video and close-up viewing to our product pages to further assist our online customers. We will leverage these technology enhancements along with our rich customer data to deliver a personalized web experience that anticipates the needs of our customers, elevates the overall online interaction and continuously improves site conversion. To further improve customer service and enhance profitability in 2012, we are focused on 3 main areas in our supply chain: one, the quality of goods we produce; two, the service we provide to our customers; and three, the cost of our infrastructure. In global sourcing and manufacturing, we will continue to build quality into every phase of the design process and manufacturing process. And we are committed to further reducing returns and replacements due to damage and defects. Our new sourcing offices in China, Vietnam and Singapore are critical to achieving these goals. We also commit to engineering value into our products while reducing waste. We believe that we can partially offset rising raw material and labor cost through improved packaging, design engineering and optimized transportation. This is an important tenet of our commitment to economic, social and environmental sustainability. Our first corporate responsibility report will be released next month and represents the beginning of an ongoing dialogue around the company's responsible business practices. We believe that increased transparency in our global supply chain and other operations will be important to our success as we expand outside of North America. And a focus on reducing our overall environment impact will help us to further reduce cost, in addition to being the right thing to do, for the communities in which we operate. 2012 will be the first full year we'll operate our consolidated East Coast operation on which we have installed a solar array that is the largest in New Jersey, providing 80% to 85% of the building's annual electricity needs, eliminating approximately 5 million pounds of CO2 emissions per year. 2012 will also be the first full year we operate our new state-of-the-art upholstered furniture manufacturing facility in North Carolina. This operation, which manufactures exclusively for our brands, has significantly increased our manufacturing capacity while reducing our total cost per unit. Additionally, in 2012, we will begin investing in the redesign, consolidation and modernization of our 29-year-old conveyable direct-to-customer fulfillment operations in Memphis, Tennessee. This consolidation will ultimately combine 4 existing fulfillment operations into 2 highly productive facilities and will represent the largest distribution operations cost-reduction project in the company's history. This project will incorporate state-of-the-art technologies for maximum efficiency and improved quality. It is expected to take 5 years and will be implemented in phases as existing building leases expire. New business development is another important component of our growth strategy. In 2012, we will continue to identify innovative and exclusive businesses, to develop internally or acquire, that we believe can expand our reach and drive sustained profitable growth. Rejuvenation is a great example of our acquisition strategy. It represents a significant opportunity to leverage our multi-channel and supply chain capabilities with the exclusive high-quality lighting and house parts that Rejuvenation manufactures in Portland, Oregon. Cultivate.com, which we announced last month, is another example of how we're approaching new business development. Cultivate.com is our own internally developed web-based initiative that offers inspiration, design help and resources for homeowners and design professionals. We will monetize this traffic through a combination of partnerships, lead generation and a unique advertising program that will allow high-end kitchen appliance and home furnishings vendors to reach their target market in an exciting new way. The largest new opportunity that we see in our future is global expansion. As we shop the world, it is evident there is no one doing what we do and there's considerable demand for our brands. We currently attract a significant number of foreign nationals to our stores and websites, who frequently encourage us to open in their communities. In 2012, we'll expand our international shipping capability from 75 countries to 99. We will also continue to expand our franchise presence in the Middle East from 13 stores at the close of 2011 to 18, including the first Williams-Sonoma, PBteen and West Elm stores outside of the Americas. In 2012, we will also begin investing in our multi-channel, fully integrated global IT platform. This is a multiyear project that will foundationally support our broader global strategy, which includes owning and operating our own global operations and working with the highest-quality franchise partners where appropriate. We will introduce new customers to our brands through a combination of beacon stores, e-commerce and selective catalog mailings. Our global IT platform is expected to be fully operational in 2014. We have built a detailed road map for the work ahead of us, with qualitative and quantitative checkpoints along the way. We are committed to expanding globally with the same inspiring multi-channel experience we offer today to introduce our brands and products to the world and to expand profitably. Our capital investment in fiscal 2012, including these strategies, is expected to be in the range of $200 million to $220 million versus $130 million last year. This increase will support 5 strategic initiatives: one, continued investment in our e-commerce capability; two, the multiyear development of our multi-channel, multi-brand global IT platform; three, the expansion of West Elm including 7 new stores; four, the remodel of high-profile stores in our current brands; and last, the multiyear replacement of our conveyable direct-to-customer fulfillment operations. In addition to the increased capital expenditures, $15 million to $20 million will also be invested in incremental SG&A in 2012 to support our long-term e-commerce global expansion and business development growth strategies. While these investments will impact earnings in fiscal '12, we expect them to begin to lever in 2013 and beyond just as our fiscal '11 investments are beginning to provide returns in fiscal '12. Including all of these investments, we expect 2012 to be another record financial year with total revenues increasing 6% to 8%, comparable brand revenues increasing 3% to 5% and non-GAAP diluted earnings per share increasing 6% to 10%. Also during fiscal '12, we expect to return more than $240 million to shareholders through share repurchases and dividends. I will now turn the conference call over to Julie for additional details on our 2011 performance and 2012 guidance. Welcome, Julie.

Thank you, Laura. And good morning. As Laura shared earlier, we did reach new milestones in financial performance in the fourth quarter. Net revenues increased 6% to $1.27 billion, with 14% growth in the direct-to-customer channel and 1% comparable store sales growth in the retail channel. Non-GAAP diluted earnings per share increased $0.09 to a record $1.17 versus $1.08 in the fourth quarter of 2010. Versus January guidance, stronger sales trends, favorable revenue recognition, higher-than-anticipated selling margins and strong expense management drove these better-than-expected results. Gross margin decreased 100 basis points to 41.3% versus last year. This decrease was driven by lower selling margins particularly in the Williams-Sonoma brands and a 40 basis point prior-year nonrecurring benefit related to Williams-Sonoma Home inventory cost recoveries, partially offset by 80 basis points of occupancy cost leverage. Non-GAAP occupancy costs in the fourth quarter declined $3 million to $127 million. Non-GAAP SG&A improved 90 basis points to 25.7%, driven by lower incentive compensation costs, reductions in other general expenses and greater advertising productivity, partially offset by higher employment costs associated with planned growth investments in e-commerce, global expansion and business development. Catalog circulation increased 1% and catalog pages circulated remained flat due to increase versioning. I would now like to comment on our fourth quarter non-GAAP operating margin in each of our business segments. At the total company level, our non-GAAP operating margin decreased 10 basis points versus last year to 15.6%. This decline was driven by a 70 basis point decrease in the retail segment to 20.4%, a 10 basis point decrease in the direct-to-customer segment to 22% and a 40 basis point improvement in the corporate unallocated segment to 5.4%. The 70 basis point decline in the retail segment was driven by lower selling margins, including a 50 basis point prior-year nonrecurring benefit related to Williams-Sonoma Home inventory cost recoveries and higher employment costs. These declines were partially offset by occupancy cost leverage and lower other general expenses. The 10 basis point decline in the direct-to-customer segment was driven by lower selling margins and higher employment costs associated with our e-commerce growth initiatives. These impacts were partially offset by higher advertising productivity, sales leverage of fixed occupancy costs and lower other general expenses. The 40 basis point improvement in the corporate unallocated segment was primarily driven by lower incentive compensation costs and a reduction in other general expenses, partially offset by higher employment costs associated with our planned growth investments. For the full year, 2011 net revenues increased 6% to $3.7 billion, with 12% growth in the direct-to-customer channel and 3.5% comparable store sales growth in the retail channel. Gross margin was unchanged at 39.2% as sales leverage of fixed occupancy costs offset lower selling margins. On a full year basis, non-GAAP occupancy cost declined $6 million to $500 million and leveraged 100 basis points. Non-GAAP SG&A decreased 50 basis points to 28.9% driven by lower incentive compensation costs, greater advertising productivity and reductions in other general expenses. Catalogs circulated during the year decreased 2%, and catalog pages circulated decreased 3% due to increased versioning. Non-GAAP diluted earnings per share increased 15% from $1.95 to $2.24. At the total company level, our fiscal 2011 non-GAAP operating margin increased 50 basis points to a record 10.3%. This increase was driven by a 50 basis point improvement in the direct-to-customer segment and a 10 basis point improvement in the corporate unallocated segment, which was offset by a 10 basis point decline in the retail segment. I would now like to discuss our fiscal 2012 guidance. Fiscal 2012 is expected to be another record earnings year as we begin leveraging our 2011 strategic growth initiatives while at the same time making new investments for 2012 and beyond. For the year, net revenue is expected to increase in the range of 6% to 8% and diluted earnings per share are expected to increase in the range of 6% to 10% to a record $2.37 to $2.47 per share. Non-GAAP operating margin is expected to be in the range of 10% to 10.4%. Included in this guidance are 2 items that are important to quantify and discuss. The first is the benefit of a 53rd week, which we expect will add approximately 2% in year-over-year revenue growth and $0.05 to $0.07 in EPS growth. The second, which more than offsets the benefit of the 53rd week, is the $15 million to $20 million or $0.09 to $0.12 per share increase in SG&A to support the strategic growth initiatives that Laura shared with you earlier. While, netted, these items are negatively impacting the 2012 operating margin by 30 to 40 basis points and the EPS by $0.04 to $0.05, it is the strength of our underlying business today that is driving this morning's 2012 revenue and EPS guidance to new levels. To deliver these results, comparable brand revenue on a 53-to-53 week basis is expected to increase 3% to 5%, including direct-to-customer growth of 8% to 11% and comparable store sales growth of 1% to 3%. We are also expecting to see ongoing sales leverage in our fixed occupancy costs, greater operational efficiencies in our supply chain and a higher percentage of total company revenues generated in the more profitable direct-to-customer channel, partially offset by higher stock-based compensation expense due to multiyear growth in the company's stock price, higher employee retention rates and increased stock-based grants to retain top talent. As we sit here today, we are encouraged by the momentum we are seeing in our business and are excited about the opportunities in the year ahead. While we remain cautious in our outlook on the macro environment, the strength of our brands and our proven track record of flexing our business in these less-certain economic times provide us with a strong confidence in our ability to deliver the guidance we have discussed today. I will now turn the call back over to Laura to discuss the Williams-Sonoma, Pottery Barn and West Elm brands.

Thank you, Julie. In the Williams-Sonoma brand, net revenues for 2011 were $994 million, including a comparable brand revenue decline of 0.3%. In the fourth quarter, comparable brand revenues declined 1.7% when we exclude the impact of planned SKU reductions in Williams-Sonoma Home. During the holiday season, the promotional environment was heavier than we anticipated. We take proactive measures to remain competitive and maintain our market share, but it put pressure on both the top and bottom lines. We saw the most promotional activity on nationally branded products particularly in the retail channel, with the greatest initial impact in cookware and cook's tools. As the season progressed, it expanded to other non-exclusive products as well. Where we had exclusivity on products and categories, our business was unquestionably stronger. In terms of customer engagement, our investments in the online customer experience and social media drove increased traffic to the brand. We also saw a strong performance from our Williams-Sonoma Reserve and co-branded Visa loyalty programs measured by the number of new customers in the programs, the frequency of the purchase, the average order size and the average annual spend. The brand's mission, to be the leading multi-channel retailer in cooking and entertainment world, has not changed. What has changed and what we want to outline for you today is how we will achieve our mission in 2012 and beyond given an increasingly competitive marketplace. The 3 areas of transformational change are product innovation, marketing and our in-store experience. Product innovation is at the core of our overall strategy. Customers shop our brands because we are the trusted authority in cooking. We recognize, however, that we cannot rely solely on our heritage to drive our future. Within product, we are intensely focused on 3 areas. The first is freshness and innovation. We will leverage trends and customer data to introduce new high-quality products throughout the year that are relevant to our customers' changing lifestyles and inspire them to cook and entertain in new ways. For 2012, we have a pipeline of products to launch that will illustrate this commitment. The second is exclusivity on branded products. Throughout the years, we have built our business with key vendors, and in many cases, we have participated in the development and launch of their products. In doing so, we have helped build some of the most important brands in the industry. We want to continue to offer the best of these products to our customer but we are making a strategic shift toward carrying exclusive products that we develop in conjunction with our vendors. And to the extent distribution is not limited in control [ph], we will reassess products and/or vendors as necessary. The third is Williams-Sonoma-branded products. To further enhance our exclusive mix, we will increase the level of Williams-Sonoma-branded products in our overall assortment. The quickest to market will be in entertaining and table top, but we will also increase and strengthen our offering in core and seasonal food. Other categories will follow in 2013 and beyond. To accelerate these new product initiatives, we made an exciting and strategic organizational change that we announced this morning. Monica Bhargava, our Head of Design for Pottery Barn, will be increasing her responsibility to include Williams-Sonoma product development with a particular focus on new lifestyle trends in cooking, food and entertaining. This change allows us to leverage our expansive, innovative and technical design capability with the design sophistication of the existing Williams-Sonoma team. Marketing is the next critical area of focus to clarify our premium positioning. We will market our products with a singular voice. We'll use our digital presentation, improve door signage and ongoing customer engagement to tell the unique stories behind our carefully selected products, highlighting the value, quality, origin and history of each one. Lifestyle merchandising is our competitive advantage, and we will communicate the stories we tell from the farm to the kitchen table seamlessly across channels. We will also leverage our multi-channel advantage more effectively using the catalog to inspire; the Internet becoming our largest store and information resource; and our stores as the face of the brand where customers can experience products first hand. Retail stores represent a significant competitive advantage and an opportunity to enhance the overall customer experience. Localized products and marketing and community events, including cooking classes and cookbook signings, will drive customer engagement beyond the sale. And new associate training programs and more sophisticated store scheduling tools will elevate products and culinary expertise for all store associates while ensuring that those with the most tenure are on-hand during critical selling periods. We're also rolling out our in-store clienteling initiative to Williams-Sonoma. This program strengthens the associate-customer relationship by offering one-on-one service both in store and in home and allowing the associate to anticipate and assist with the customer's future needs through personal interaction and online tools. The goal of these initiatives is to provide an unparalleled customer experience that ultimately results in a higher average order size and a higher number of transactions per customer per year. All of these initiatives have been tested and proven in our other brands and are driving strong growth. And for that reason, we believe they represent a significant opportunity for the Williams-Sonoma brand in 2012 and beyond. We will also continue to optimize our retail portfolio. In fiscal '11, we permanently closed 11 stores, and in fiscal 2012, we expect to close an additional 8 as we continue to attract, serve and retain an increasing number of customers online and in other stores and retail markets where stores have been closed. We will continue to measure the impact of our store closures and then drive increased retail profitability while keeping our store chain vibrant. We believe that all of these initiatives will allow us to take Williams-Sonoma brand, the assortment that it offers and the personal experience it provides to the customer to a new level in 2012 and beyond. In the Pottery Barn brand, net revenues for 2011 were $1.6 billion, including a comparable brand revenue increase of 8%. In the fourth quarter, comparable brand revenues increased 11%, on top of 14% last year, with strong results in both channels. From a merchandising perspective, the brand grew in all key categories, with particular strengths in furniture, home furnishings and table top. Innovative and relevant seasonal merchandise assortments and a strategic value proposition delivered these better-than-expected cross-category results. Of particular highlight was the superior execution of our gift-giving strategy. For the fourth quarter, operating margin reached record levels as the direct-to-customer revenues continue to grow as a percentage of total brand revenues. Traffic and conversion were key focuses, and we achieved very strong results from our highly targeted e-marketing and online promotional initiative. As we look forward to 2012, we will aim to achieve new levels of sales and profitability by executing against those strategies that are driving results in the brand today. Specifically, we will grow existing and new product categories by consistently introducing authentic and artisanal products at a great value. For example, we will introduce new categories to furnish those rooms in the house that are highly functional, such as the laundry room and closet. Our in-house team of highly talented designers provides us with a competitive advantage that is difficult to match in the marketplace. We will leverage and grow our capabilities and technology to allow our customers to interact with the brands anytime, anywhere and on any device. We'll also leverage technology to expand our in-store design services, making it easier for our customers to design and decorate. We will enhance our marketing initiatives in each channel, driving toward seamless messaging and the deliver of effective data-driven product recommendations to our customers in all channels. And we will continue to deliver a superior retail experience by elevating our service levels at every customer touch point in stores and at home. We believe that all these strategies will further establish Pottery Barn as the destination for casual and affordable interior design and the premier specialty home furnishings retailer in the world. In the Pottery Barn Kids brand, net revenues for 2011 was $522 million, including a comp brand revenue increase of 7%. In the fourth quarter, Pottery Barn Kids comparable brand revenues increased 6%, on top of 10% last year, with strong results in both channels. From a merchandising perspective, the brand grew in each major product category, with particular strengths in textiles, furniture and decorative accessories. An expanded products assortment, a compelling value proposition and an effective traffic-generating promotional calendar drove these better-than-expected results. As we look forward to 2012, we will continue to focus on those initiatives that drive results today. Specifically, we will introduce inspiring and innovative products at a great value. We'll attract new customers to the brand through targeted marketing, in-store service offerings and strategic partnerships like National Geographic and PBS. We will drive growth by making our e-commerce website the ultimate design resource for our customer. And we will deliver world-class service across channels that is engaging, personal, unique and seamless. I would now like to talk about the PBteen brand. In the fourth quarter, PBteen comparable brand revenues increased 1% on top of 23% last year. We saw a strong growth in furniture that was partially offset by decorative accessories and textiles. For the year, comparable brand revenues increased 7% to $212 million on top of 21% last year, and the brand delivered a record year in earnings. PBteen has a unique position in the marketplace as the only home furnishings brand dedicated solely to teens. As we look forward to 2012, we will continue to build on strategies that we believe will help us to increase sales and profitability of the brand. We will accelerate proprietary new product offerings, with the largest volume occurring in the back half of the year for the important gift-giving season. We will broaden the aesthetic to engage a wider range of teens. We will invest in and develop the best online design tools in the teen market. And we will engage the customer in new and exciting non-traditional retail experiences. We believe all these initiatives will allow us to take the PBteen brand to a new level of performance. Finally, I would like to talk about West Elm. West Elm delivered a record fourth quarter. Comparable brand revenues increased 35% on top of 29% last year, and earnings and profitability reached new heights. The brand grew in all key categories, with particular strengths in textiles, furniture and decorative accessories. New product and category introductions, a strong seasonal assortment, an enhanced value proposition and highly effective multi-channel marketing drove these impressive results in all channels. We are particularly pleased with the consistency of West Elm's performance through the past year as the brand has become a significant driver of our company-wide growth on both the top and bottom lines. As we look forward to 2012, our strategy is to profitably grow the West Elm brand by engaging with a broader base of customer and increasing engagement with our current customers. Products will be inspired by nature, global craft and artisanal traditions. We will diversify our assortments and deliver seasonal freshness and lower-priced pick-up items to promote purchase frequency. We will maintain our compelling value proposition, and we will also expand our DTC assortments in key categories. From a customer engagement perspective, we will deliver a completely integrated, truly immersive cross-channel brand experience to create a seamless connection with our customers. We will also be aggressively looking for more retail expansion opportunities as retail profitability continues to achieve new milestones. We believe all of these initiatives will improve our competitive positioning and allow us to profitably grow this brand. The future is bright for West Elm. In 2011, revenues reached $336 million, and we can clearly see a path to $1 billion in revenues over time. In summary, we believe that Williams-Sonoma, Inc., is entering a new phase of growth. Our financial performance is strong, and we have an exceptional leadership team with the right people in the right roles. We also have a winning strategy to grow our core brands, expand and develop new ones and expand globally. We believe this will allow us to deliver sustained profitable growth well into the future and provide predictable returns to our loyal, long-term shareholders. We look forward to sharing developments with you in the coming quarters and years. I would now like to open the call for questions. Thank you.

[Operator Instructions] Our first question today will come from Budd Bugatch with Raymond James.

Julie, good luck to you on your role. And first, let me just thank Sharon for all of her help over the years and wish her well in her future endeavors, as with you. Just my question really goes to the guidance and the operating margin. And recognizing that we've got an extra week next year and some of the initiatives going on, can you perhaps parse the competitive situation in Williams-Sonoma, particularly? Can you kind of give us some feel or color as to how gross margin will look year-over-year and what's incorporated into the guidance?

Thank you, Budd, for the question. I'm going to let Julie talk about our guidance for next year. We have, as you may have noticed, stopped guiding our margin. We believe that it is competitive to give the specifics on gross margin and SG&A because they signal pricing strategies and advertising intentions. And we believe we provided you the best metrics for evaluating our businesses and brands, including sales by brand now. We also know that sometimes these small variances to our previous guidance metrics have created a little unwarranted volatility in our stock with no correlation to actual performance. But I'm happy to have Julie talk to you about how we built our 2012 guidance.

So again, I think you alluded to it, but on the operating margin in particular. If you back out the benefit of the 53rd week and the impact of our growth investments, the operating margin guidance will actually be going up 30 to 40 basis points. And if you think about that, the -- what that's driven from is the continued sales leverage of our fixed occupancy costs; greater operational efficiencies in our supply chain, as Laura previously discussed; and a higher percentage of total company revenues being generated from more profitable direct-to-customer channel.

Our next question will come from Colin McGranahan with Bernstein & Company.

I guess I just kind of wanted to go to the elephant in the room here and hope that maybe you could provide a little bit more color on Sharon's departure. It was relatively abrupt and, I think, widely unexpected. So any help you can give us as to what her plans are and what your plans are, whether Julie is going to be the acting CFO or whether she's in line to be the permanent CFO, and just a little bit more color about the transition here.

Thanks for the question, Colin. It's an important question and I want to be very open about it. First, I want to begin by saying, as Budd did, that I represent the entire management team in thanking Sharon for her many contributions over the past decade: leadership, operational leadership, financial leadership. Sharon has made the decision to retire. She's taking some time and going to move to new things, and we all wish her the very best in her future endeavors. Our financial organization and leadership team is very strong across the brand and across the board in the financial area and also in the other areas that reported to Sharon. We have a team that has been with the company mostly over 10 years, and each of them can do more. We also have a company-wide mindset and process that is deeply ingrained to drive operational and financial excellence. And we are all aligned to pursue our winning strategy. I'm going to let Julie tell you about herself in a minute. Julie's been here for a long time and is extremely well-versed, as you will learn quickly, in our business and also very strategic about how she sees our future earnings being driven. And in terms of intention for new CFO, of course we will do a worldwide search for the best CFO possible, and of course, Julie is a candidate for that position as well. Julie, do you want to tell everybody a little bit about yourself?

Sure. Thanks, Laura. First of all, I'm thrilled to be on the call today. I couldn't be more excited to be here at Williams-Sonoma at this time to help drive continued strong financial performance and a successful execution of our strategy. My 10.5 years of experience here at Williams-Sonoma in planning as a controller, treasurer, give me a comprehensive picture of our financials. And I'll use all of my skills and experience, including my public accounting experience with KPMG, my law degree, CPA, to drive operational excellence in our finances. I look forward to meeting you.

Our next question will come from Matthew Fassler with Goldman Sachs.

My question relates to the CapEx and the incremental SG&A. I guess this is the second year in a row that you ramped up SG&A investment kind of in an isolated way. And your CapEx was higher this year, too. So is this -- are these investments going to be recurring investments? In other words, does this investment go away? And similarly, what is the long-run run rate for CapEx, is it closer to the $130 million that we saw in 2011 or the $220 million that we're seeing in 2012?

Sure. It's Laura. And I want to say again that we are committed to investing in future growth and supply chain optimization initiatives for at least the next 3 years. And we believe that they will be within this range and that this year's level of investment will continue. As I said earlier, the investment is in 5 areas: e-commerce, the multiyear development of our global IT supply chain in retail networks, retail expansion of West Elm, remodel of high-profile stores in our current brands and a multiyear replacement of our conveyable mail order distribution fulfillment operations.

Our next question will come from Brian Nagel with Oppenheimer.

I have a question -- more of a philosophical question around the guidance. Williams-Sonoma is, I think, known amongst most investors as typically providing conservative, or guidance with an air of conservatism in it. If you will look at today and the multiple announcements you've made, obviously with the significant management change, the reacceleration in spending. A 2-part question for me. One is, is there an extra error [ph] of conservatism in the guidance given maybe some of the shifts at Williams-Sonoma and within the business model and the spending? And then second off, Sharon, who -- how instrumental was she in putting together this guidance?

I'm going to let Julie take the first piece about our guidance that we have provided.

We, we're confident about the guidance we have provided today. Our guidance, as you know, is based on our brand opportunities that Laura spoke to earlier. And of course, takes into consideration the macro environment we see today and there are uncertainties over which we have no control. But at this point, we feel very confident about the guidance we have provided today. I think the other thing you have to take into consideration throughout as you're looking at this guidance, as we said in our prepared remarks, is the net impact of the benefit from the 53rd week and our incremental SG&A spend for our planned growth initiatives. If you take those 2 into consideration, our operating margin guidance would actually be 30 to 40 basis points higher and our EPS would be at 8% to 13% growth versus 6% to 10%.

And in regards to Sharon and her role, Sharon did a lot of wonderful things for the company. We have an incredible team of people here who've been here a long time. I'm hoping to have you all meet some of them over time, including Dean Miller, who runs our supply chain logistics transportation and who has driven so many of our company's supply chain initiatives and cost reduction programs, as well as many others in the brands who are both focused on the creative and innovative part of our business but also highly disciplined financial executives who are very focused on profitability.

We'll move on to Joe Feldman with Telsey Advisory Group.

Congratulations, Julie, in the new role for now. The question about -- as you've reduced the stores this year and continue to do so going forward, I know in the past you've given us some examples how you've been able to maintain and even expand market share in some markets, and I'm just wondering, are you still seeing that trend, for one? And two, with the shift, is the operating margin expansion that we have been seeing or should see still because of the shift to Internet? Or is it because more of the cost control efforts that you've done? Or is it because of the leverage on occupancy that you've had?

Sure, Joe. The company has a very disciplined approach to our real estate, as you know. We set very high profitability levels for each store and we regularly conduct market-by-market reviews of our fleet. This has resulted in a very profitable real estate portfolio over the years, and it's ongoing process. As I said earlier, this year we plan to permanently close 16 stores and we're going to remodel 13. And we will continue to conduct these market-by-market reviews to optimize our portfolio as opportunities present themselves. The second part of the question, I just wanted to have you clarify again, if you would, what you're asking.

I guess, just on the margin side of things as you've closed stores. The -- I know we've seen the occupancy leverage, but that's kind of somewhat fleeting, right, when you get the leverage for the year. And I guess, on an ongoing basis, it's there, but does it really drive the expansion, I guess, of the margin that you are shifting to the direct channel?

Yes, as we said earlier, the operating margin improvement assumes continued sales leverage of our fixed occupancy costs, so that will continue. But we also have greater operational efficiencies in our supply chain and the fact that we have a higher percentage of the total company revenues generated in the DTC channel. So it's all of those combined.

Our next question will come from Neely Tamminga with Piper Jaffray.

I just feel compelled to also add my thanks to Sharon for the years of partnership with the investment community. She definitely leaves a legacy of integrity. So all the best to her and her move towards retirement. And welcome, Julie. I was wondering a little bit more if we could get some of the puts and takes on some of the key cost components. I'm particularly interested in gas price levels and what that can mean to fuel surcharges as well as your freight outlook for 2012. If you could give us a little bit more detail around that, that'd be really helpful. [Technical Difficulty]

I'm sorry, it's hard to hear in the call. Steve, can you turn the call up?

Sure.

I'm sorry to ask you again, Neely. I heard, like, the cost components -- what?

It's okay, Laura. Just the key costs we're looking for especially with gas price activity being on in the press these days. Just wondering what the fuel surcharges might be, if that's already been going on, just your freight outlook in general for 2012.

All of that is inherent in our guidance.

We'll move on to the next question from Matt McGinley with International Strategy & Investment Group.

I have a question about how you manage your brand portfolio and the investments that you make in that. How do you think about the investment required to support or fix the Williams-Sonoma brand versus the investment you're going to spend in new concepts like West Elm or some of the more mature concepts like Pottery Barn? Where is your investment, going forward in 2012, focused on?

It's a great question. We have a mindset to build a strategy, have a road map to execute the strategy and then to measure, measure, measure the whole way through to make sure that we're on the right path. I think the best example of that was what we did with West Elm. In the beginning, you remember, when we were not pleased with our performance, that we laid out the strategy and we said we're going to really make sure that we're identifying and diagnosing the right problems and the right solutions before we just go full bore. We have a very important brand, Williams-Sonoma, with high customer satisfaction and a very profitable model. And while we were not pleased with the decline that we saw over the holidays period, negative, very low digit, is not exactly reason for to believe that it's a crisis. It is a opportunity, as we see it, to compete even more effectively and grow this brand into the future. And so similar to the approach that we had on West Elm, we have the 3 key areas I talked about: product strategy, marketing transformation, in-store experience. And we have been working on this for a while now. If you go back and listen to previous calls, we hinted at some of it. We didn't lay it out as clearly as we did today. But because we have been working on it, you're going to see the pipeline of these projects -- the pipeline of products and these projects coming through, and we will continue to tell you about our progress on each of them. And based on the results, we will fund immediately more investment where we're getting the return.

Our next question will come from Alan Rifkin with Barclays.

This is actually Helen Pan filling in for Alan Rifkin. I just wanted to follow up on the West Elm concept and dig a little deeper into why you're planning for the 4 store closures, slash, remodels for 2012 and if you have any further updates on the unit economics for the concepts as well.

Sure. We are always looking for the best locations. So there are some locations where we want to be in the town but we don't want to be in that exact spot. And we have found opportunities to improve our fleet. And we are always looking for in-store fixture pack [ph], remodel pack [ph] that drives real results, and so that is what we're doing in West Elm. And West Elm just continues to have momentum beyond what we planned. Or as I said earlier, we see a very bright future for West Elm and we are going to continue to aggressively grow it.

Your next question will come from Christine Rapalje with SunTrust Robinson Humphrey.

My question is just more general about the current mood that you're seeing with the customer. A lot in the past year, you've emphasized having to maintain a strong value message. I was just wondering if you're sensing any kind of lift there, any increased confidence by the consumer maybe, a move upscale, et cetera.

Yes, I think it's a little early to call that. There's still a lot of uncertainty out there. There's good news, there's bad news on any given day, but the strength of our brands and our proven track record in flexing our business in times that are choppy gives us confidence in our ability to drive our business and deliver the guidance that we provided today.

Our next question will come from Anthony Chukumba with BB&T Capital Markets.

Somewhat a related question to the last one. Was just wondering if you could comment at all on the promotional environment. I know you've said earlier that you're seeing increased promotional activity among some of the big box stores and some of the department stores, and I was just wondering what you've seen post holiday and also post fourth quarter.

It's -- I'll answer the question a little bit differently this time to give you guys some more insights on how we think about it. We're very lucky to have a portfolio of brands. Each of them has different positioning, Williams-Sonoma being more premium and West Elm being a more value-driven brand. And so our promotional plans for this year are -- it's hard to generalize them because they are different by brand. And so of course you see the least amount of promotions in Williams-Sonoma and you will continue to see more in West Elm. And we also believe and are committed to driving traffic and growing our brands through planned promotions that complement our innovative and exclusive product introductions. And to the extent that the macro environment becomes more promotional, we will adjust our strategy.

Our next version will come from Scot Ciccarelli with RBC Capital Markets.

It's Scot Ciccarelli. Can you talk about -- you were -- it was fortunate that we -- you broke out revenue by brand. Can you talk about how different that mix is particularly for the Williams-Sonoma brand in the fourth quarter? I'm also curious why you broke out the $15 million to $20 million of spending as a separate line item during the year.

Thanks, Scot. We did make the decision after we really listened to everyone in the investment community that it would be helpful for us to give brand revenues, and I hope that it is and it's -- it puts everything -- it helps you understand why we're so confident in growing this business dramatically over the next 3 to 5 years. In terms of going through it by quarter, I think that's highly competitive, and I'm sorry but I'm not going to go through that now. We've always, when we had a bigger-than-expected investment year, tried to make that really clear to you, which we did this year, so you could look at the strength of our underlying business.

And our next question will come from Brad Thomas with KeyBanc Capital Markets.

This is actually Jason sitting in for Brad today. I was wondering if you can comment a little on the long-term potential of the West Elm brand. I mean, you're rolling unit growth this year double digit. I was wondering where you see that long-term kind of retail footprint. Does that approach something like the Pottery Barn, or is that going to be more limited?

It's a great question. We believe and can see clearly a path to $1 billion by growing both direct and retail, both store expansion and also comp store sales growth. And as we go into -- when we go to markets with multi-stores, we need to understand better how -- the evolving retail opportunity and whether we can have less stores in a market than we did previously and drive more profitable growth online. And so for me to break it out by channel might be premature because we're continuing to use our data to understand exactly how many we can see and open profitably. But $1 billion is our sight domestically, that is, for West Elm. And I'll say that, of all of our brands, we believe that West Elm probably has one of the biggest international opportunities because of its aesthetic, its value proposition and the small-scale size of its furniture which is very appropriate for a lot of the global markets, as you know.

We'll move on then the queue to Peter Benedict with Robert W. Baird.

Just first, a clarification, Laura, just the expectation for $15 million to $20 million of additional SG&A this year. Did I hear you correctly in saying that you should -- we should be expecting something similar in each of the next 3 years and that CapEx should remain above $200 million for the next 3 years? That's just kind of a clarification. And then my question is, the stock-based compensation outlook for this year's up a bunch from last year. Is there anything in there for Sharon, exit costs or anything on those lines, and if not, are there any costs associated with Sharon's retirement that we should be aware of?

Sure, let me take all those. So first, the clarification. I was referring to CapEx when I was talking about expecting it to be within this level, not on the SG&A side. And so we didn't give any -- I didn't give any outlook for that for the next 3 years. On stock-based compensation, Sharon's separation agreement is not in that number that we have announced today. We have filed an 8-K that you can review.

And that will be non-recurring and non-GAAP.

And our last question today will come from Kate McShane with Citi Investment Research.

I was wondering if you could walk us through just a little bit more on your Williams-Sonoma brand strategy, going forward. And I know you've already given a lot of details for some new initiatives, but I wondered if you could quantify a little bit more what the strategy will be for. How much Williams-Sonoma product will be increasing as a percentage of mix? And also, it's with -- in light of the price promotions, will there be a new value message as well for the Williams-Sonoma banner being conveyed?

Sure, I'll take the question. It's Laura. And the Williams-Sonoma strategy, as I said before, is focused on 3 areas: product, marketing and in-store experience. And we have a pipeline of products and marketing strategies and retail store initiatives, systems support as well as store of the future initiatives that we will be launching and this you will see [ph] both this year and beyond. It is a multiyear strategy. In terms of pricing, we are sitting in a very premium position. We carry the best of everything. That doesn't mean we're expensive. It means that we don't carry -- if there's a large range of KitchenAid products, we only carry the top of the range; or All-Clads; or any of the branded products. As it relates to percentages branded, exclusive, non-exclusive, it's highly competitive. As I said earlier, the area that you can affect most quickly is in the private label area and increasing that mix as a percent of total. And then you'll also see us launch branded products that are exclusive for longer periods of time and indefinitely. And then you will also see us launching more specifically Williams-Sonoma-branded outside of the table top and entertaining areas throughout the next quarters and coming years.

And that concludes our question-and-answer session for today. I'll now turn the conference back over to Ms. Alber for any additional or closing remarks.

Well, I want to thank you all for joining us and for your continued support.

Thank you. And that does conclude our conference for today. We thank you for your participation. You may now disconnect.