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Williams-Sonoma boosts full year forecast, comparable sales slow

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Williams-Sonoma (NYSE:WSM) boosted its full year earnings guidance on Tuesday as second quarter profits rose nearly 28%, but revenues came in below estimates on slower comparable sales growth.

For the three months ending July 31, the home goods retailer posted net income of $39.3 million, or $0.37 per share, up from $30.8 million, or $0.28 per share, a year ago.

Revenues improved 5% to $814.8 million. Analysts had expected earnings of 36-cents, on $823.97 million in sales.

Williams-Sonoma increased its full year outlook, with the company now expecting revenues between $3.67 and $3.72 billion, and earnings in the range of $2.17 to $2.22 per share.

The San Francisco, California-based company had previously expected revenues between $3.66 and $3.73 billion, and earnings in the range of $2.13 to $2.21 per share.

During the second quarter, retail sales from the company's 586 locations decreased 0.7%, largely on a 4.6% drop in retail square footage from the closure of the Williams-Sonoma Home locations at the end of 2010. Excluding these closures, retail net revenues improved 0.9%.

Comparable store sales, or those of locations open at least one year, rose 1.4%, compared to a 6.7% increase in the year-ago quarter.

Direct-to-consumer sales, which include the company's six direct mail catalogs and six e-commerce web sites, rose 13% to $368.0 million, driven by improvement across all the company's brands. Sales from sites increased 18.4% to $317 million.

Comparable brand revenue, which includes comparable store sales and direct-to-consumer sales grew a slight 0.7% at the company's namesake stores, versus 6.6% growth a year earlier.

Meanwhile, the Pottery Barn, Pottery Barn Kids and PB Teen brands reported 3.6%, 8% and 20.4% growth, compared to 19.1%, 24.9% and 22%, respectively, in the second quarter of 2010. West Elm, the company's high-end home decor brand, posted 28.6% growth.

Gross margins improved 90 basis points to 37.9%, as the company was able to leverage expenses and increased revenues, it said.

Merchandise inventories at the end of the second quarter increased 7.3% to $557 million.

In other news, Williams-Sonoma repurchased and retired $31 million of its common stock during the period, and has roughly $63 million remaining under its $125 million stock buyback program.

Williams-Sonoma's shares on the New York Stock Exchange dropped 3.23% as of 11:20 am EDT, to trade at $29.06 per share.

Quick facts: Williams-Sonoma, Inc.

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Price: 182.92 USD

Market Cap: $13.6 billion

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