Tuesday, Williams-Sonoma, Inc. (WSM), a specialty retailer of home products, said profit for the fourth quarter plunged 90% from last year, as comparable store sales declined 22.3% year-on-year. Looking ahead, the company expects a loss for the first quarter and sees same-store sales decline of up to 25%. The stock is trading higher by over 8%.
The San Francisco, California-based company reported net earnings of $12.19 million or $0.12 per share for the fourth-quarter, a plunge from $124.56 million or $1.15 per share reported in the previous year. The latest period had 13 weeks, while the year-ago period had 14 weeks.
Excluding charges primarily related to Infrastructure Cost Reduction Program and severance and lease termination costs associated with the program, earnings per share for the quarter declined to $0.31 from $1.15 reported last year.
On average, 20 analysts polled by Thomson Reuters expected fourth-quarter earnings of $0.16 per share. Analysts' estimates typically exclude special items.
The ongoing economic crisis has forced customers to rein in spending, while focusing more on absolute necessities. Massive job cuts by companies have added to the gloom. This has led to a decline in sales at many retailers. With the mortgage crisis, fewer people are changing homes, which mean difficult times for those selling home improvement items.
In January, the company announced a series of cost saving measures, including an 18% reduction in headcount and closure of the Pennsylvania call center, and said it expects fourth quarter earnings at the lower end of its prior guidance range. Williams-Sonoma also said at that time that it would incur a fourth quarter charge in the range of $0.08-$0.09 per share related to these actions.
The company's net revenues for the just concluded quarter decreased 26.7% to $1.008 billion from $1.374 billion in the year-ago period. On a comparable 13-week to 13-week basis, net revenues decreased 22.2%, including a comparable store sales decrease of 22.3%. The Street was looking for quarterly revenues of $975.61 million.
Retail net revenues in the fourth quarter decreased 24.2% to $641.32 million from $846.58 million in the prior year. On a comparable 13-week to 13-week basis, retail net revenues decreased 20.1%, driven by a 22.3% reduction in comparable store sales, partially offset by a 7.1% year-over-year increase in retail leased square footage that includes 27 net new stores. All brands had declining net revenues during the quarter, led primarily by the Pottery Barn, Williams-Sonoma, and Pottery Barn Kids brands.
For the latest quarter, direct-to-customer net revenues decreased 30.5% to $366.70 million from $527.77 million in the previous year. On a comparable 13-week to 13-week basis, direct-to-customer net revenues decreased 25.5%.
Quarterly internet revenues decreased 27.1% to $269 million from $369 million in the same period last year. On a comparable 13-week to 13-week basis, internet revenues decreased 21.9%.
Gross margin expressed as a percentage of net revenues was 33.7%, compared to 41.6% of net revenues in the previous year.
Howard Lester, chairman and chief executive officer, commented, While the fourth quarter ended better than we expected due to increased promotional activity and tight expense controls, the retail environment overall was very weak.
Among others in the industry, Bed Bath & Beyond Inc. (BBBY) said in January that third quarter earnings dropped 37% from last year, hurt by challenging macroeconomic environment and negative impact from the liquidation sales of major competitor Linens 'N Things. The company's net income for the third quarter was $87.7 million or $0.34 per share, compared to $138.2 million or $0.52 per share for the year-ago quarter. Net sales for the third quarter decreased 0.7% to $1.78 billion from $1.79 billion in the same quarter last year.
Williams-Sonoma's full year earnings, on a GAAP basis, plunged to $30.02 million or $0.28 per share from $195.76 million or $1.76 per share in the previous year. Excluding items, earnings dropped to $0.35 per share from $1.76 per share. Fiscal year ended February 1, 2009 had 52 weeks, while the previous fiscal year included 53 weeks.
Net revenues in fiscal year 2008 decreased 14.8% to $3.361 billion from $3.945 billion in the prior year. On a comparable 52-week to 52-week basis, net revenues decreased 13.2%, including a comparable store sales decrease of 17.2%.
Analysts expected full year earnings of $0.19 per share on revenues of $3.33 billion.
The company's Board of Directors has declared a quarterly cash dividend of $0.12 per common share. The company intends to maintain the dividend at its current quarterly level of $0.12 per share for the balance of the year, as long as there are no significant changes to its business plan and operating results are in line with the guidance.
Looking ahead to the first quarter of fiscal year 2009, on a GAAP basis, the company expects to report a loss of $0.20-$0.23 per share. Net revenues are estimated to be in the range of $600 million-$625 million. First-quarter comparable store sales are expected to decline 22%-25%.
Wall Street expects the company to report a loss of $0.09 per share for the first quarter on revenues of $649.23 million.
For the second quarter of 2009, the company expects GAAP loss to be in the range of $0.08-$0.14 per share and total revenues in the range of $650 million-$675 million.
For the third quarter of 2009, GAAP loss is expected to be in the range of $0.02-$0.08 per share and revenues in the range of $650 million-$690 million.
For the fourth quarter of 2009, which includes the holiday shopping period, the company expects GAAP earnings to be in the range of $0.27-$0.36 per share. Revenues are projected to be in the range of $900 million-$960 million.
For fiscal 2009, the company's bottom line is estimated to range between a loss of $0.15 per share and earnings of $0.05 per share. Full year net revenues are expected to range between $2.80 billion and $2.95 billion. Analysts look for earnings of $0.06 per share on revenues of $2.98 billion.
WSM is currently trading at $12.16, up $0.97 or 8.67%, on 156,671 shares. For the past year, the stock moved in the range of $4.35-$29.81.
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