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Williams-Sonoma Sees Net Income Climb 30%

The home furnishings seller says Internet, catalog and Pottery Barn sales boosted fiscal third-quarter profit.

November 18, 2005|From Bloomberg News

Home furnishings retailer Williams-Sonoma Inc. on Thursday reported the biggest quarterly profit gain in a year on catalog, Internet and Pottery Barn sales. The company said it wouldn't open new Hold Everything stores and was considering "the future" of the chain.

Fiscal third-quarter net income climbed 30% to $37.1 million, or 31 cents a share, from $28.5 million, or 24 cents, a year earlier. Revenue for the period ended Oct. 30 increased 15% to $827.6 million, the San Francisco-based company said.

Analysts surveyed by Thomson Financial expected profit of 30 cents a share.

Catalog and online sales surged 17% and Pottery Barn's comparable sales rose 5.5% after the company better managed the inventory of sofas, chairs and bedding. Chief Executive Edward Mueller said he would suspend expansion of the storage and shelving chain Hold Everything after its revenue tumbled 14% this year through September.

Shares of Williams-Sonoma fell 37 cents to $40.98.

The company Thursday cut its fourth-quarter profit forecast and raised the annual forecast. For the quarter, Williams-Sonoma said it would earn as much as $1.09 a share, less than the $1.11 previously estimated. It will earn $1.86 to $1.88 a share in fiscal 2005 after earlier forecasting profit of $1.84 to $1.88.

"Based on our outlook on the economy and the retail environment overall, we believe that it is prudent to remain cautious at this time," Mueller said.

William-Sonoma increased same-store sales -- a key measure of retail health -- 4.4% as it opened the first three Williams-Sonoma Home stores in the quarter.

Same-store sales rose 3.8% at Pottery Barn Kids and 1.3% at Williams-Sonoma stores. At Hold Everything, where the company has been changing merchandise, they fell 7.4% in the quarter. The company has 11 Hold Everything stores.

The retailer opened its first Williams-Sonoma Home store -- a concept that was introduced by catalog in 2004 -- in West Hollywood in September, featuring premium furniture, lighting, tableware and imported bedding that have "European-designs with California styles," the company said.

"This consumer is expected to be somewhat older and more established than a core Pottery Barn consumer," analyst Claire Armstrong Gallacher wrote in a report Monday.

Williams-Sonoma's net income has increased an average 16% in the last four quarters.

Among 27 analysts tracked by Bloomberg, 11 rate Williams-Sonoma shares "buy," 14 rate them "hold" and two, "sell."

The Williams-Sonoma chain sells items for the kitchen. The company's West Elm chain sells modern apartment furnishings.

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