By Dhanya Skariachan
Aug 28 Upscale home furnishings chain
Williams-Sonoma Inc on Wednesday reported a drop in
quarterly gross margin on bigger discounts and its outlook
pointed to weaker sales trends in the back half of the year.
The news overshadowed better-than-expected results in the
second quarter and pushed its shares down 4 percent. The stock
had already risen 36 percent before Wednesday.
"The promotional activity that we saw during the month of
July was up a lot year-over-year," said Wedbush analyst Joan
Storms, who prefers shares of rivals Pier 1 and Bed Bath
& Beyond over Williams-Sonoma heading into the holiday
season mostly due to valuation.
The operator of Williams-Sonoma cookware stores and Pottery
Barn furnishing stores reported net earnings rose to $48.9
million, or 49 cents a share, in the fiscal second quarter ended
Aug. 4, from $43.4 million, or 43 cents a share, a year earlier.
Analysts were looking for a profit of 47 cents a share,
according to Thomson Reuters I/B/E/S.
Sales rose 12.3 percent to $982 million and topped the
analysts' average estimate of $940 million as Americans spent
more on their homes.
Comparable brand revenue rose 8.4 percent in the second
quarter. Despite the strong number, the company did not raise
its earlier outlook calling for a 4 to 6 percent increase in
comparable brand revenue for the year.
Comparable brand sales includes sales at established stores
open at least a year operated by the company and
direct-to-customer sales, as well as shipping fees, sales
returns and other discounts associated with current period