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UPDATE 3-Williams-Sonoma's forecast disappoints investors
June 3, 2009 / 12:34 PM / in 8 years

UPDATE 3-Williams-Sonoma's forecast disappoints investors

* Q1 loss 14 cts/shr; Wall St expected loss of 21 cts

* Revenue fell almost 22 pct to $611.6 mln

* Maintains outlook for next three quarters

* Cautious view disappoints investors; stock down 9 pct (Adds company comments, background, analyst reaction, byline)

By Dhanya Skariachan

NEW YORK, June 3 (Reuters) - Williams-Sonoma Inc (WSM.N) disappointed investors by not raising its forecast for the rest of the year, sending shares more than 9 percent lower, even though it posted a smaller-than-expected first-quarter loss.

The operator of Williams-Sonoma cookware stores and Pottery Barn furnishings outlets said it was holding down costs, helping to limit its loss, but its outlook was cautious due to uncertainties in the economy and the dismal retail climate.

“We are cognizant of the ongoing volatility in the economy and the potential for promotional pressure as the industry reduces inventory levels,” CEO Howard Lester said in a statement.

“The stock had rallied a lot ahead of earnings and I think people did expect them to raise their outlook and they didn‘t,” Cowen & Co analyst Laura Champine told Reuters. She has an “underperform” rating on the stock.

The upscale home furnishings chain said it was confident in its revenue forecasts for the second quarter and the rest of the year.

“The two areas where we believe that we have remained cautious in this guidance is in Pottery Barn and in the expense base and if we beat the numbers, I think that that will be in those two areas and the selling margin as well,” COO and CFO Sharon McCollam said on a conference call.

Home-goods retailers have wrestled with softer sales in the recession as consumers stuck to buying essentials as they faced plummeting home values and tighter credit. Several home-goods companies like Linens ‘n Things have gone out of business and the existing ones continue to struggle.

“The retail environment is still fragile,” CEO Lester said. “People want to shop, but haven’t quite got to the point that they’re comfortable doing it, either economically or emotionally.”

In the first quarter, Williams-Sonoma posted a net loss of $18.7 million, or 18 cents per share, compared with a year-earlier net profit of $10.4 million, or 10 cents per share.

Excluding asset impairment and early-lease-termination charges for closing underperforming stores, the loss was 14 cents per share. That was better than analysts’ average forecast of a loss of 21 cents, according to Reuters Estimates.

Williams-Sonoma reined in its advertising costs and managed inventories tightly in the first quarter.

Net revenue fell nearly 22 percent to $611.6 million. Sales at stores open at least a year fell 21 percent, with the steepest decline at the company’s outlet stores.

For the full year, the company expects results to range from a loss of 7 cents a share to a profit of 11 cents, before items, on revenue of $2.81 billion to $2.94 billion.

Analysts on average were expecting the retailer to post a full-year loss of 6 cents a share on revenue of $2.87 billion for the period.

Williams-Sonoma shares were down $1.39, or 9.5 percent, at $13.31 in afternoon trade on the New York Stock Exchange, after falling as low as $13.10 earlier in the session. (Reporting by Dhanya Skariachan; Additional reporting by Martinne Geller; Editing by Lisa Von Ahn, Maureen Bavdek, Gary Hill)

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