May 20, 2010 / 12:25 PM / 8 years ago

Williams-Sonoma wins new shoppers; cautious on economy

NEW YORK (Reuters) - U.S. home-goods chain Williams-Sonoma Inc (WSM.N) reported a much better-than- expected quarterly profit and boosted its forecast for the year as its more affluent shoppers showed a willingness to buy again, sending its shares up 5 percent.

<p>A shopper passes by the Williams-Sonoma store in Broomfield, Colorado in this November 19, 2009 file photo. REUTERS/Rick Wilking</p>

Sales at home-goods chains had tumbled in the housing downturn, but pent-up demand and changes in pricing and merchandising, including the introduction of less-expensive items, were enticing shoppers who have warmed up to the idea of investing in their homes again.

The operator of Williams-Sonoma cookware stores and the Pottery Barn furnishings chain risked its high-end image and lowered prices on some items to win post-recession American shoppers.

That emphasis helped it win over aspirational customers, which in turn leads to the potential to sell additional products or higher-priced goods.

It also introduced a basic furniture collection, decided to focus its marketing efforts around “high-value” customers and promoted its private-label credit card.

The company reported net earnings of $19.5 million, or 18 cents a share, for the first quarter ended May 2, compared with a year-earlier net loss of $18.7 million, or 18 cents a share.

Excluding items, the company earned 23 cents a share, beating the analysts’ average estimate of 12 cents, according to Thomson Reuters I/B/E/S.

Net sales rose 17.3 percent to $717.6 million. Furniture sales accounted for about 30 percent of total revenue.

“The outsized gains at Pottery Barn and PB Kids is a function of the concepts’ higher average tickets and continued improvement in the PB Kids merchandise offering,” Raymond James analyst Budd Bugatch said.

Sales at stores open for at least a year rose 17 percent, much better than Bugatch’s estimate of a 10 percent rise.

The shares of rivals Bed Bath & Beyond Inc (BBBY.O) and Pier 1 Imports Inc (PIR.N) fell 1.5 percent and 4.4 percent, respectively.


On a conference call, Williams-Sonoma said it was winning new customers, both in stores and online.

For the year, it expects net revenue to rise 6 percent to 9 percent and earnings of $1.39 to $1.48 a share, before items.

The upscale retailer earlier forecast net revenue growth of 3 percent to 6 percent for this year, with earnings per share up 22 percent to 33 percent that some analysts roughly translated to $1.16 to $1.26 a share.

Despite the general optimism, the company warned of an uneven U.S. economic recovery in the next several quarters, as consumer spending is compared with significantly higher numbers in the back half of 2009.

It also warned that the recent European markets crisis and domestic stock market volatility were weighing on people’s minds and could hurt future spending patterns.

A new crop of disappointing economic data on Thursday showed U.S. jobless claims unexpectedly rising last week for the first time since early April, suggesting the labor market recovery has hit a stumbling block.

Reporting by Dhanya Skariachan; editing by Lisa Von Ahn, Maureen Bavdek and Andre Grenon

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