Williams-Sonoma drives profits up in 4Q

SAN FRANCISCO— With sales climbing higher at a double-digit rate, and margins gaining strength, diversified retailer Williams-Sonoma Inc. lifted fourth-quarter profits by 14.9 percent, to $79.8 million from $69.4 million last year.

Lifted by strong same-store sales at two of its divisions — Williams-Sonoma and its outlet stores — sales improved by 10.4 percent, to $859.0 million from $778.0 million a year ago. Overall same-store sales grew by 2.7 percent, but segment results varied widely.

The strongest segment performers during the period were the outlet stores, up 4.3 percent; Williams-Sonoma, up 3.3 percent; and Pottery Barn, up 2.6 percent. But acting as a drag were Hold Everything, down by 5.4 percent; and Pottery Barn Kids, off 0.3 percent.

Boosting the bottom line, in addition to stronger sales, the retailer expanded its average gross margin by 100 basis points, or 1.0 percentage points, to 44.0 percent from 43.0 percent a year ago. Gross margin dollars, lifted mostly by the stronger sales, improved by 12.9 percent, to $378.1 million from $334.9 million.

Helped by the stronger sales and wider margins, operating profits jumped up by 13.5 percent, to $129.1 million from $113.8 million, generating a remarkably strong operating margin during the holiday quarter of 15.0 percent, up somewhat from 14.6 percent a year ago.

Shipping charges for the catalog and Internet segment were the single fastest-growing area of the company's sales in the period, rising by 18.3 percent, to $44.5 million from $37.6 million the previous year. Direct-to-consumer sales, by contrast, rose at a strong, but somewhat slower, pace of 9.3 percent, to $255.5 million from $233.5 million.

Strong as the results were, Williams-Sonoma stock took a drubbing, falling by 5 percent, when it said earnings for the quarter are expected to come in at $0.64 to $0.65 a share, beneath the $0.66 to $0.67 originally forecast, because of costs tied to the January departure of former ceo Dale Hilpert.