Williams-Sonoma beats the Street

SAN FRANCISCO — Fueled by surging sales at its Pottery Barn and Outlet stores — which offset weakness in its namesake kitchenware units — West Coast housewares retailer Williams-Sonoma Inc. drove second quarter profits up 55 percent, well ahead of Wall Street expectations, to $27.6 million from $17.8 million.

Sales improved 18.8 percent, to $689.6 million from $580.4 million, aided by a strong 27 percent jump in catalog and Internet sales, which moved to $262 million from $206.3 million.

Providing much of the lift to sales and earnings, a resurgent Pottery Barn business pushed same-store sales up a heady 10.2 percent, improving on a year-before gain of 2.6 percent. Also strong were the retailer's Outlet stores, where same-store sales soared 19 percent after a 6.5 percent increase a year ago. Climbing back on track after earlier weakness, the Hold Everything unit pushed same-store sales up 7.1 percent, reversing a year-before slide of 2.5 percent.

The weak spot during the quarter was the core William-Sonoma kitchenware business, where same-store sales declined 1.6 percent, following a 12.1 percent increase a year ago. But that business was up against tough comparison with the prior-year period, when it launched new lines of tabletop products.

In addition to stronger sales, the bottom line was lifted by wider margins and lower costs. Average gross margin widened 50 basis points, or one half of one percent, to 37.6 percent from 37.1 percent a year ago. At the same time, costs were whittled 100 basis points, or one full percentage point, to 31.1 percent from 32.1 percent the preceding year.