Williams-Sonoma Inc. (WSM) Tuesday said that employee separation charges dragged its first-quarter profit down, while adjusted earnings topped estimates with strong comparable brand growth in Pottery Barn and West Elm divisions. Going ahead, the Specialty home products retailer projects higher results in the second quarter and lifted fiscal 2012 earnings forecast.
President and Chief Executive Officer Laura Alber said, "Our first quarter fiscal 2012 financial results represent the best first quarter in the company's history, exceeding our expectations...We drove this earnings growth while simultaneously investing in our future growth strategies."
For the quarter, gross margin fell 60 basis points to 37.8 percent primarily driven by lower selling margins including increased shipping offers, partially offset by the leverage of fixed occupancy expenses due to increasing net revenues.
First-quarter net earnings decreased to $30.72 million from $31.62 million last year, while earnings per share improved to $0.30 from $0.29 a year earlier on lower share count.
Excluding $0.04 per share impact of employee separation charges, adjusted earnings per share climbed 13 percent to $0.34 from $0.30 in the prior-year quarter. On average, 26 analysts polled by Thomson Reuters expected earnings of $0.32 per share for the quarter. Analysts' estimates typically exclude one-time items.
Net revenues grew 6.1 percent to $817.61 million, beating Wall Street analysts' consensus estimate of $811.73 million. Both direct-to-customer and retail revenues increased in the quarter.
Comparable store sales increased 4.6 percent, and comparable brand revenue increased 5.4 percent boosted mainly by 9.1 percent increase in Pottery Barn and a 22.1 percent growth in West Elm.
Looking ahead to the second quarter, Williams-Sonoma anticipates earnings per share in a range of $0.38 to $0.41, higher than last year's $0.37 per share. Revenues are projected to grow 4 percent to 7 percent from last year to $850 million to $870 million, whereas analysts estimate second-quarter earnings per share of $0.40 and revenue of $865.05 million. Comparable brand revenue growth is projected in the range of 4 percent to 6 percent.
Alber noted that the company has good momentum entering the second quarter, and has made progress on strategic initiatives to help ensure that the strong start to the year leads to similar results for the year.
For fiscal 2012, Williams-Sonoma now sees earnings per share of $2.38 to $2.45 on a reported basis and $2.42 to $2.49 on an adjusted basis. Both expectations are higher than a year ago.
Total net revenues are currently anticipated to be between $3.95 billion and $4.02 billion, a growth of 6 percent to 8 percent. Previously, earnings per share were estimated to range between $2.37 and $2.47 and total net revenues of $3.93 billion to $4.02 billion. Analysts project earnings of $2.46 per share on $3.99 billion revenue for the full year.
For the year, comparable brand revenue growth is expected in the range of 4 percent to 6 percent, compared to previous forecast of between 3 percent to 5 percent.
Alber earlier had stated that the company would deliver continued sales growth in its brands through innovative product introductions and compelling marketing.
Williams-Sonoma shares closed Monday's regular trading session at $34.73, up $0.05 or 0.14 percent.
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