Williams-Sonoma profit falls, forecast cut
ATLANTA (Reuters) - Retailer Williams-Sonoma Inc (WSM.N) reported a 29 percent drop in quarterly profit and sharply cut its full-year forecast as the U.S. housing slump hammered sales, and its shares fell as much as 12 percent to a seven-year low.
The seller of gourmet cooking supplies at its namesake stores, as well as upscale home furnishings at its Pottery Barn chain, also said on Thursday it plans to curb capital spending and store growth due to the weakened U.S. economy.
"We believe that we are in a cycle," Chief Executive Howard Lester said on a conference call. "But like those cycles, we believe it will pass and people's homes are still their most material assets."
Falling home sales and values have hurt many furnishings retailers as consumers face higher fuel and food costs. Linens 'n Things filed for bankruptcy protection in May, and Sears Holdings Corp (SHLD.O) also posted a lower profit on Thursday, saying the housing slump hurt appliance and tool sales.
But a steep sales decline at Pottery Barn shows Williams-Sonoma may have its own problems shoring up profit. Lester said any plans to cut back on store space would likely affect Pottery Barn the most.
"The differentials experienced in same-store sales between the Williams-Sonoma and Pottery Barn brands suggest greater internal errors are to blame at Pottery Barn than just pointing the finger at the macro-environment," Jesup & Lamont analyst Brian Postol said in a research note.
The company, whose brands also include West Elm, had net income of $18.4 million, or 17 cents a diluted share in the second quarter, down from about $26 million, or 23 cents a share, a year earlier.
Excluding a gain from the sale of corporate aircraft, profit was 8 cents a share, compared with the 7 cents expected by analysts, according to the average on Reuters Estimates.
Net revenue fell 4.6 percent to $819.6 million.
POTTERY BARN FARES WORSE
Sales at stores open at least a year fell 11.7 percent in the quarter. Pottery Barn and outlet stores, which had same-store sales declines of 16 percent and 12.6 percent, respectively, performed worse than Williams-Sonoma stores, where sales fell 4.5 percent.
To cope with the slowdown, Williams-Sonoma has reduced inventory levels and tried to hold down costs. Expenses fell about 9 percent in the quarter.
The retailer expects earnings of nil cents to 4 cents a share for the third quarter and $1.03 to $1.15 a share for the year. It had previously called for third-quarter profit of 17 cents to 23 cents a share and full-year profit of $1.45 to $1.58 a share.
Analysts, on average, had been expecting third-quarter earnings of 18 cents a share and full-year profit of $1.31 a share, according to Reuters Estimates.
Williams-Sonoma shares were off $1.50, or 8.1 percent, at $16.94 in late New York Stock Exchange trading after earlier touching $16.27, its lowest level since November 2001.
(Editing by Braden Reddall)
