* Q3 EPS ex-items 16 cts; Wall St expected 5 cts
* Says early reads on holiday encouraging
* Raises FY outlook
* Shares up 4.5 pct
(Adds exec comments, byline)
By Dhanya Skariachan
NEW YORK, Nov 19 Home goods retailer
Williams-Sonoma Inc (WSM.N) raised its full-year outlook, as a
move to offer more lower-priced home decor items and improved
holiday merchandise resonated with shoppers.
The company, whose shares rose 4.5 percent, also posted a
much better-than-expected quarterly profit, citing improved
sales trends across all markets and a strong consumer response
to its fall and holiday merchandise assortments.
The operator of the Pottery Barn, West Elm and
Williams-Sonoma chains has updated its styles and slashed
prices on some items to woo shoppers in the economic downturn,
despite worries that the move might tarnish its image as a
"We are trying to retrain customer to buy things as they
come out versus waiting for the markdown," a Williams-Sonoma
executive said on a conference call with analysts.
Throughout the quarter, response to the company's
merchandise and marketing efforts was "progressively
stronger-than-anticipated," resulting in improved selling
margins, CEO Howard Lester said in a statement.
"The results are an indication that upper-income consumers
are spending a bit more, which is not surprising given the
rally in the stock market and the stabilization in the housing
market," Barclays analyst Michael Lasser said.
Lasser added, however, that the company's valuation already
reflected this, with shares rising more than 70 percent in the
last six months.
PROFIT BEATS EXPECTATIONS
Williams-Sonoma's net profit was $7.3 million, or 7 cents a
share, in the third quarter ended Nov. 1. That compares with a
year-earlier net loss of $11.0 million, or 10 cents a share.
Excluding one-time items, the company earned 16 cents a
share, beating the analysts' average forecast of 5 cents,
according to Thomson Reuters I/B/E/S.
Net revenue fell 3 percent to $729 million, but exceeded
analysts' average estimate of $686.1 million. Sales at stores
open at least a year rose 1.7 percent.
While the retailer saw revenues at its Pottery Barn and
West Elm chains rise in the quarter, those at Pottery Barn
Kids, Williams-Sonoma and Williams-Sonoma Home fell.
It continues to see sequential improvement in revenue at
its Pottery Barn segment and expects to gain market share as
more independent players exit the market in the tough economy.
Williams-Sonoma, like rivals Bed Bath & Beyond (BBBY.O) and
Pier 1 Imports (PIR.N), has suffered as consumers stuck to
buying essentials in the tough economy.
To combat weak demand, Williams-Sonoma has shut stores, cut
its advertising budget and managed inventory tightly. In
August, the company said it saw leaner inventories boosting
margins in the back half of the year.
While selling, general and administrative expenses fell 6.3
percent, total cost of goods sold declined about 6.9 percent.
For the full year, the company said it expected earnings of
25 cents to 34 cents a share. It had earlier forecast a profit
of 19 cents to 31 cents before one-time items.
Williams-Sonoma expects full-year net revenue of $2.98
billion to $3.04 billion, up from its prior outlook of $2.84
billion to $2.94 billion.
(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn and