Williams-Sonoma profits near 60 percent

By Don Hogsett -- Home Textiles Today, 5/31/2004 12:00:00 AM

SAN FRANCISCO —

Helped by resurgent same-store sales, which bounded back from year-ago weakness, including a hefty double-digit gain at its Pottery Barn format, first-quarter profits at Williams-Sonoma Inc. skyrocketed 59.7 percent, to $21.4 million from $13.4 million last year.

Driving the big earnings gain was an across-the-board improvement in same-store sales, with every retail format doing better, and several rebounding from year-before declines. Overall same-store sales increased 6.8 percent, compared with a prior-year decline of 0.8 percent. The biggest gain was scored at the Pottery Barn segment, where comps shot up 10.2 percent, versus a year-ago slide of 4.4 percent, helped by strong sales of home furnishings.

Overall sales at the diversified retailer climbed 19.4 percent, to $640.9 million from $536.8 million. Sales in the core retail stores increased 15.3 percent, to $349.4 million from $303.1 million. The fast-track direct-to-customer segment, catalogs and Internet, moved ahead at an even faster pace, rising 24.2 percent, to $246.6 million from $198.6 million.

Ed Mueller, CEO, commented, "A strong merchandise assortment — enhanced by a renewed focus on core home furnishings in Pottery Barn — higher order fulfillment rates in both our retail and direct-to-customer businesses, and continuing benefits from successful supply chain and overhead cost reduction initiatives drove these strong results."

Providing a lift to the bottom line, in addition to stronger sales, average gross margin improved modestly, to 38.3 percent of sales from 38.1 percent a year ago, driven largely by a reduction in occupancy costs and freight-to-store expenses, as well increased shipping costs.

In another boost, operating costs narrowed to 32.9 percent of sales from 34.1 percent the prior year, a 120 basis-point reduction, or 1.2 percentage points, driven by lower payroll costs and catalog advertising expenses, partially offset by higher administrative and miscellaneous expenses.

Looking ahead to the second quarter, now in progress, the retailer forecast sales in the range of $669 to $685 million, a gain of 15 to 18 percent. Same-store sales are forecast to grow by 1 to 3 percent. Earnings per share are forecast in the range of $0.18 to $0.20 per diluted share, up 20 to 33 percent.

Williams-Sonoma Inc.

First quarter segment results