Williams-Sonoma Profit Up but Sales Forecast Cut
Williams-Sonoma Inc. said Thursday that its quarterly profit surged on tighter inventory controls and fewer markdowns, but a conservative sales forecast weighed on the shares.
The San Francisco-based company, known for its high-end namesake stores and the Pottery Barn chain, cut its projections for third-quarter sales at stores open at least a year after a sluggish July. It kept its earnings estimate unchanged.
Williams-Sonoma’s stock fell $1.65, or 6%, to $25 on the New York Stock Exchange.
Chief Executive Dale Hilpert said the company would start bulking up inventories again after months of restraint amid skittish consumer behavior.
But it is approaching the rest of the year with caution, he said, citing uncertainty over how the anniversary of the Sept. 11 terrorist attacks and a shorter Christmas shopping season this year will affect business.
“We have to be nimble and responsive, but we’re not predicting a bad economy,” he said.
For the second quarter, Williams-Sonoma reported net income of $14.1 million, or 12 cents a share, up from $1.4 million, or 1 cent a share, a year earlier.
Revenue grew 16% to $495.6 million, helped by new stores. Sales at stores open at least a year, or same-store sales, were little changed from a year ago.
Along with cost controls and improved shipping processes, the company cited strength at its growing 151-store Pottery Barn chain, which has caught shoppers’ attention over the last year with its sleek-yet-homey housewares and furniture.
While Williams-Sonoma stores saw a 1.7% drop in same-store sales in the quarter, Pottery Barn’s crept up 1.3%.
The company, which runs 445 stores, expanded the number by about 13% over the last year as demand for home furnishings has flourished with lower mortgage rates fueling a U.S. housing boom.
It expects to add 30 more stores by the end of the fiscal year.
“What we’re seeing is these [home furnishings] companies continue to benefit from housing strength,” analyst Kristine Koerber of WR Hambrecht & Co. said.
In May, the retailer boosted its earnings forecast for the second quarter to 7 cents to 8 cents a share from 4 cents to 5 cents previously. Analysts then ratcheted up estimates to an average of 8 cents from 5 cents a share, according to Thomson First Call.
The company said it expected same-store sales growth of 2% to 4% in the third quarter, down from earlier estimates of 5% to 6.5%.
Analysts, on average, expect third-quarter earnings of 10 cents a share and full-year earnings of 99 cents a share, according to Thomson First Call.
