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Q3 2008 DESIGN WITHIN REACH INC Earnings Conference Call (Fireside Chat) - Final.

Article Excerpt
OPERATOR: Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Design Within Reach, Incorporated Third Quarter Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions)

I would now turn the program over to Andrew Greenbaum with ICR. Please go ahead.

ANDREW GREENBAUM, SENIOR MANAGING DIRECTOR, INTEGRATED CORPORATE RELATIONS: Thank you. Good afternoon, ladies and gentlemen. Welcome to Design Within Reach's third quarter 2008 Fireside Chat conference call. On the call today is Ray Brunner, President and CEO, and John Hellmann, CFO. The Company's third quarter earnings release was issued last Thursday, November 6. It is available on the Investor Relations portion of Design Within Reach's website at www.dwr.com.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be place on them. We refer all of you to the risk factors contained in Design Within Reach's recent Form 10-K for the year ended December 29, 2007, the most recent quarterly report Form 10-Q which was filed on November 6, for more detailed discussions of the factors that could cause actual result to differ materially from those projected in any forward looking statements.

With that, I would like to turn the call over to Ray Brunner.

RAY BRUNNER, PRESIDENT AND CEO, DESIGN WITHIN REACH: Thank you, Andrew. Good afternoon, everyone, and thank you for joining us today. The agenda for today's call will be somewhat different from our previous calls. Instead of reviewing our third quarter financial results which were filed last Thursday, I plan to spend some time talking about current business conditions, what we are doing to manage in these unprecedented economic times. Then John and I will be available for your questions.

Since we last spoke in August the macroeconomic conditions have deteriorated significantly. The stock market has lost over $7 trillion in value and the impact on our clients has been profound. Luxury retailers have seen dramatic drops in sales overnight. While our clients are still fortunate, they are no longer feeling quite as certain of the future. As a result they are deferring major purchases and looking for some indication of a bottom for the current economic conditions. Whether they are deferring the purchase of new furniture or simply buying black coffee rather than a latte at Starbucks, they are cutting back.

This is true for both our residential and commercial clients. Traditionally our commercial clients represented approximately 30% of our sales. We are fortunate to have companies like Nordstrom, Neiman Marcus and Saks among our many commercial clients. Today these well-respected and well run retail organizations are facing the same decisions we all are, and they are cutting back on discretionary capital spending. As a result, we estimate that our commercial business is off well over 50% and will stay there for some time. This impacts our total performance by over 15%.

We believe these revenues are deferred spending rather than loss sales, and we applaud the companies that are taking the actions needed to steer a clear course in these times. The depth of our current financial challenge as a nation may be unprecedented. One result of this situation is a lack of clarity from management to forecast sales over the next...

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