Thursday, Williams-Sonoma Inc.’s stock dropped 9% after the high-end home goods store reported lower-than-expected sales in the fiscal second quarter and lowered its revenue guidance for the year.
CEO Laura Alber told analysts on a call that it’s clear that the unsure economy and slow housing market are making it hard for the home furnishings market. Home Depot Inc. HD -0.47% said last week and Lowe’s Cos. LOW -0.23% said this week that their customers are delaying plans to remodel.
What Alber said, as shown in a FactSet recording, made them think that they might not see the back-half acceleration they were hoping for, even with all the work they had done to improve their product offering and customer service.
“Because of this, we think it’s smart to lower our topline outlook for the rest of the year while still keeping our promises to make money,” she said.
WSM -7.24%, a business based in San Francisco, had a net income of $225.7 million, or $1.74 a share, for the quarter ending July 28. This was up from $201.5 million, or $1.56 a share, in the same time last year.
Added up, earnings per share were $1.74, which was higher than the $1.61 estimate set by FactSet.
But sales dropped from $1.863 billion a year ago to $1.788 billion, which was less than the $1.814 billion that FactSet predicted would be made. FactSet thought that same-store sales would drop by 2.5%, but they actually fell by 3.3%.
The business changed its sales forecast to reflect lower trends and higher margin expectations.
Now, the company thinks that sales will drop between 4% and 1.5% and that same-store sales will drop between 5.5% and 3%. Most people who work for FactSet think that income will go up by 0.2% and same-store sales will go down by 0.8%.
The company now thinks the operating margin will be between 17.4% and 17.8%, which is higher than the 17% to 17.4% figure they gave before.
Alber said that the company is making progress on the three main goals that were laid out in the first quarter earnings report: getting back to growth, improving customer service, and increasing profit.
The company’s main goals are to update its selection at reasonable prices and make the channel experience better. She said that during the quarter, it added more content to its website and made shopping better in-store by adding new items, keeping more in stock, and adding a new design tool that lets you make 3D images.
The same-store sales for Pottery Barn brands fell 7.1% in the quarter. This was better than the 10.8% drop seen in the first quarter.
“Our new summer furniture launches went well, and we’re excited about our soft version units, which will focus on our own designs and finishes,” Alber said.
West Elm’s same-store sales dropped 4.8%, which was more than the 4.1% drop seen in the first quarter. Same-store sales for the Williams-Sonoma name went down 0.8% after going up 0.9% in the first quarter.
It was India, Canada, and Mexico that did well in foreign business, she said.
The company bought the hardwired lighting products company Rejuvenation in 2011. For the fourth quarter in a row, same-store sales went up for the Rejuvenation name. Kitchens and bathrooms, cabinet and bath hardware, and lights all did well, which helped sales.
“Also, our growth categories did well, such as window hardware, textiles, home furnishings, and organization solutions, giving our customers the perfect finishing touches to make their spaces complete,” she said.
In the second half, the company will keep up its training efforts by teaching customers how to cook and giving them tips on how to have fun by doing things like setting the table, arranging flowers, and folding napkins.
As more students go back to college, the business has also seen a lot of demand for its dorm products. Creator-led material on YouTube, Tik Tok, and Meta has been used more by the company to reach younger people.
So far this year, the stock has gone up 30.4%, while the S&P 500 SPX -0.41% has gone up 17.8%.
