Williams-Sonoma Inc., the owner of the Pottery Barn and Williams-Sonoma stores, said Tuesday that first-quarter profit would tumble because of slowing sales growth and spending on a new catalog catering to teens.
The San Francisco-based company said net income will fall to 7 cents to 8 cents a share this quarter, lower than the 13 cents earned a year ago and about half the 15-cent forecast of analysts surveyed by Thomson First Call. The retailer, however, posted a 15% rise in fourth-quarter profit.
Williams-Sonoma said the new catalog, PBTeen, will target an untapped market by featuring furniture and linens for 10- to 19-year-olds. It debuts in April.
At the same time, the company warned that costs would rise as it increases circulation of some catalogs and spends more on inventory.
Investors and analysts said slow consumer spending may crimp Chief Executive Edward Mueller's plan to boost annual sales as much as 16%.
Shares of Williams-Sonoma dropped $1, or 4.5%, to $21.20 on the New York Stock Exchange.
The fourth-quarter results included a $4-million expense associated with the January departure of CEO Dale Hilpert after the company decided it needed new leadership and installed Mueller, a member of Williams-Sonoma's board since 1999, as his successor.
Mueller told investors on a conference call that the company would deliver on its 2003 profit forecast of $1.20 to $1.24 a share.
Williams-Sonoma said it was able to exceed analysts' forecasts during the fourth quarter as it controlled spending and more than doubled the number of its Pottery Barn Kids locations to 56 from 27 a year earlier.
Fourth-quarter earnings rose to $79.8 million, or 67 cents a share, from $69.4 million, or 59 cents. Revenue was up 10% to $859 million from $778 million.
Analysts expected Williams-Sonoma to earn 66 cents in the three-month period.