Williams-Sonoma Stock Dives on Profit Warning

Williams-Sonoma Inc. said Monday that fiscal fourth-quarter profit will miss analysts’ estimates because of higher Internet and inventory costs, sending shares of the housewares retailer down 37%.

The San Francisco-based operator of the Williams-Sonoma, Pottery Barn and Hold Everything chains tumbled $11.38 to close at $19.50 on the New York Stock Exchange, its lowest level since October 1998. The stock decline wiped out about $674 million in market value.

The company said it spent more than expected in the fourth quarter to build up inventory, customer service and a reserve to cover the cost of returned merchandise at its catalog and fast-growing Internet business. Some analysts said they were surprised by the increased spending, prompting them to cut profit forecasts for this year.

“They have to do a better job of executing and controlling costs,” said Cary Schwartz, president of Blackhill Capital Inc., which owns 1.4 million shares.

Earnings for the quarter ended Jan. 30 will be 81 to 82 cents a share, the company said. The revised earnings included a 5-cent to 6-cent charge for the reserve, said analyst Shelly Hale of Banc of America Securities.

The average estimate of analysts polled by First Call/Thomson Financial was 94 cents a share. In the year-ago quarter, Williams-Sonoma earned $43.9 million, or 75 cents.

Company officials couldn’t be reached for comment.

Williams-Sonoma unveiled its first store on the Internet in November to supplement sales at its stores, catalogs and online wedding registry.

Williams-Sonoma operates 344 stores. The company is scheduled to report earnings March 15.