Wed Aug 25, 2004
By Emily Kaiser

CHICAGO (Reuters) - Williams-Sonoma Inc. (WSM.N: Quote, Profile, Research) on Wednesday posted a better-than-expected 55 percent increase in quarterly profit, sending its stock up 10 percent, as sales jumped at its Pottery Barn chain.

The San Francisco-based housewares retailer maintained its earnings forecasts for the rest of the year despite the strong quarterly performance, citing economic and "geopolitical" uncertainty.

The retailer has reported strong sales in recent years as the mortgage refinancing boom and "nesting instinct" following the Sept. 11 attacks on the United States prompted consumers to invest more in their homes.

Claire Gallacher, retail analyst with Caris & Co., said a 5 percent gain in sales at stores open at least a year -- a key retail measure known as same-store sales -- was better than analysts had expected and above the retailer's forecast for a 1 percent to 3 percent increase. A 60 percent jump in Internet sales also boosted profit, she said.

Same-store sales jumped 10.2 percent at Pottery Barn stores but fell 1.6 percent at the retailer's namesake housewares chain. Gallacher noted that the Williams-Sonoma chain generated a 12.1 percent same-store sales increase a year ago, when it introduced a new line of dishes and other "tabletop" items, so it was hard to top that mark.

Williams-Sonoma said big-ticket items such as furniture sold well in the quarter and now account for some 25 percent of total sales. Its new home furnishings catalog, Williams-Sonoma Home, will be mailed out soon. On a conference call with analysts, Williams-Sonoma said the initial mailing of 3 million catalogs marks its biggest launch of a new brand.

The catalog will feature furniture, linens and other products aimed at the middle market between luxury designer furniture and lower-priced contemporary, the retailer said.

Williams-Sonoma said it earned $27.6 million, or 23 cents per share, in the second quarter ended on Aug. 1, compared with $17.8 million, or 15 cents per share, a year earlier.

Analysts on average expected earnings of 19 cents per share, according to Reuters Estimates. That was the midpoint of the profit forecast that Williams-Sonoma gave in May.

Quarterly revenue, including shipping fees, rose 18.8 percent to $689.6 million, while retail net sales climbed 13.5 percent to $380.7 million.

The retailer kept its third-quarter earnings forecast of 21 cents to 23 cents per share and its fourth-quarter target of 95 cents to 99 cents.

Analysts expected 23 cents in the third quarter and 98 cents in the fourth, according to Reuters Estimates.

The stock climbed $3.03, or 9.6 percent, to $34.53 in midday trading on the New York Stock Exchange.

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