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                                                                   EXHIBIT 10.78

Dear Jim:

       Williams-Sonoma, Inc. ("Williams-Sonoma") wishes to confirm its Agreement
with you as of May 8, 2001 (the "Agreement Date") with regard to certain aspects
of your employment by it as Chief Operating Officer of Williams-Sonoma.

       1. Employment. Williams-Sonoma has recently promoted you to the position
       of Chief Operating Officer. The purpose of this Agreement is to document
       certain specific terms and conditions of your employment in that
       capacity. In addition, you will continue to be employed pursuant to all
       other terms and conditions as have previously been agreed to between you
       and Williams-Sonoma.

       2. Areas of Responsibility. Your areas of responsibility will include
       store operations for all concepts, together with overall responsibility
       for the Williams-Sonoma, Hold Everything and Elm Street brands.

       3. Guaranteed Spread on Stock Options. As of the Agreement Date, you held
       certain unvested options to purchase shares of Williams-Sonoma stock
       which will vest on or before May 8, 2002 (the "First Unvested Options")
       and certain additional unvested options which will vest between May 9,
       2002 and May 8, 2003 (the "Second Unvested Options" and collectively "The
       Unvested Options"). In consideration of your agreement to continue to be
       employed by Williams-Sonoma for a period of from one to two years from
       the Agreement Date, Williams-Sonoma has agreed to pay you the relevant
       "Guaranteed Spread" under the conditions set forth in this section 3.

              (a) As used throughout this Agreement, the "Spread" as of any
       relevant date shall be the difference, if any, between: (i) the closing
       price of the Williams-Sonoma stock on the New York Stock Exchange on the
       date of exercise (the "Closing Price"), multiplied by the total number of
       shares covered by the Unexercised Options then exercisable ("Covered
       Shares"), minus (ii) the sum of the exercise prices of each Unexercised
       Option then exercisable ("Exercise Prices") multiplied by the Covered
       Shares. Stated algebraically:


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       Spread = (Closing Price x Covered Shares) - (Exercise Prices x Covered
       Shares)

              (b) From the first anniversary of the Agreement Date (the "First
       Anniversary Date") until the second anniversary of the Agreement Date
       (the "Second Anniversary Date"), the Guaranteed Spread shall be an amount
       equal to the difference, if any, between: (i) $39.09, multiplied by the
       total number of shares covered by the First Unvested Options ("First
       Covered Shares) and (ii) the Spread (the "First Guaranteed Spread").
       Stated algebraically:

       First Guaranteed Spread = (39.09 x First Covered Shares) - Spread

              (c) From and after the second anniversary of the Agreement ( the
       "Second Anniversary Date", the Guaranteed Spread shall be an amount equal
       to the difference, if any, between: (i) $39.81 multiplied by the total
       number of shares covered by the Unvested Options ("Total Covered Shares")
       and (ii) the Spread (the "Second Guaranteed Spread") Stated
       algebraically:

       Second Guaranteed Spread = (39.81 x Total Covered Shares) - Spread

              (d) At any time from the Agreement Date to the Second Anniversary
       Date, if (i) another person, firm or entity acquires substantially all of
       the assets of Williams-Sonoma or acquires more than 50% of its stock, or
       Williams-Sonoma merges with or into, or is otherwise acquired by, another
       person, firm or entity, or (ii) Howard Lester ceases to be a member of
       Williams-Sonoma's board of directors by reason of death, disability or a
       disagreement between him and Williams-Sonoma's board of directors or
       chief executive officer (any of which events is hereinafter referred to
       as a "Special Circumstance"), the Guaranteed Spread shall be determined
       pursuant to subparagraph (c) above and shall be deemed to be the Second
       Guaranteed Spread, and thereupon the unvested portion of all of the
       Unvested Options shall immediately vest in full.

              (e) If, at any time between the First Anniversary Date and the
       Second Anniversary Date, you voluntarily terminate your employment with
       Williams-Sonoma for any reason other than a Special Circumstance, you
       agree that, within ninety days of such termination, you will exercise in
       full all of the First Unvested Options. Upon such


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       exercise, Williams-Sonoma shall be obligated to pay you the difference,
       if any, between the First Guaranteed Spread and the Spread on the date of
       exercise. If you voluntarily terminate your employment with
       Williams-Sonoma based upon the occurrence of a Special Circumstance such
       termination shall be covered by subparagraph (f) below.

              (f) If, at any time after the Second Anniversary Date, you
       voluntarily terminate your employment with Williams-Sonoma for any
       reason, you agree that, within ninety days of such termination, you will
       exercise in full all of the Unvested Options. Upon such exercise,
       Williams-Sonoma shall be obligated to pay you the difference, if any,
       between the Second Guaranteed Spread and the Spread on the date of
       exercise.

              (g) If, at any time while this Agreement shall be in effect, your
       employment as Chief Operating Officer shall be terminated without Cause,
       (as defined below) or your duties shall be materially changed from those
       presently being performed by you or a Special Circumstance shall have
       occurred, and as a result of any of the foregoing, you terminate your
       employment, thereupon the unvested portion of all of the Unvested Options
       shall immediately vest in full. You agree that, within ninety days of
       such termination, you will exercise in full all of the Unvested Options.
       Upon such exercise, Williams-Sonoma shall be obligated to pay you the
       difference, if any, between the Second Guaranteed Spread and the Spread
       on the date of exercise. For purposes of this provision Cause shall mean:

                     (i) your conviction (or plea of guilty or nolo contendere)
              of any felony, or of any crime involving fraud, dishonesty or
              misappropriation, or moral turpitude;

                     (ii) your continued willful neglect of your duties and
              responsibilities as Chief Operating Officer or gross negligence in
              connection with such duties and responsibilities or the assets of
              Williams-Sonoma or any of its subsidiaries or affiliated
              companies;

                     (iii) your willful misconduct with regard to
              Williams-Sonoma or any of its subsidiaries or affiliated
              companies;


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                     (iv) your refusal to follow the written direction of the
              Chairman with regard to your duties and responsibilities.

              (h) If, at any time while this Agreement shall be in effect, your
       employment by Williams-Sonoma is terminated for Cause, then this
       Agreement shall become null and void and of no further force or effect,
       provided, however, that Williams-Sonoma shall have given you full notice
       and explanation of the reasons for such termination and a minimum of
       thirty days to cure the reasons causing such termination.

              (i) If, at any time prior to the First Anniversary Date, you
       employment shall be terminated by reason of your death or disability (as
       defined by Williams-Sonoma's policies with regard to disability), your
       estate or you, as the case may be shall be entitled to the First
       Guaranteed Spread as determined pursuant to subparagaph (b) above with
       respect to the First Unvested Options, and thereupon the unvested portion
       of the First Unvested Options shall vest in full.

              (j) You agree that, prior to the date of the termination of your
employment with Williams-Sonoma, without the written consent of Williams-Sonoma,
you will not exercise any of the Unvested Options.

       4. Arbitration. Any claim or controversy between the parties which the
parties are unable to resolve themselves, including any claim arising out of
your employment or the termination of that employment, and including any claim
arising out of, connected with, or related to the formation, interpretation,
performance or breach of this Agreement, and any claim or dispute as to whether
a claim is subject to arbitration, shall be submitted to and resolved
exclusively by expedited arbitration by a single arbitrator in accordance with
the employment rules and procedures of the American Arbitration Association then
in effect.

       5. Applicable Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California applicable to
contracts to be performed therein.


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                                        Sincerely,

                                        Williams-Sonoma, Inc.


                                        By: /s/ DALE W. HILPERT
                                           -------------------------------------


                                        Accepted and Agreed to:


                                         /s/ JAMES BOIKE
                                        ----------------------------------------
                                        James Boike