Williams-Sonoma Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of premium housewares retailer Williams-Sonoma (NYSE: WSM  ) were looking a bit tattered today as investors knocked them down more than 10% in intraday trading.

So what: To some extent, the declines in Williams-Sonoma's stock today seem a bit ridiculous. We've been seeing a lot of strong results in the luxury goods sector lately from the likes of Nordstrom (NYSE: JWN  ) , Saks (NYSE: SKS  ) , and Coach (NYSE: COH  ) , and Williams-Sonoma's results were no different. Sales were up 12% from last year on the strength of an 8.1% jump in comparable store sales. Adjusted earnings per share of $0.35 more than doubled from last year and were comfortably ahead of Wall Street's expectations.

Now what: So why the sour puss from Mr. Market? The company set its fourth-quarter earnings guidance in a range of $0.88 to $0.93, which put the midpoint a hair below the average analyst estimate and caused investors to freak out. And while that does seem a bit drastic given the company's strong results, it's worth noting that Williams-Sonoma shares have absolutely trounced the market over the past year, tacking on more than 50%. The shares now carry a premium valuation, and for that, investors expect premium results. The business at Williams-Sonoma appears to be doing quite well, but the stock may have gotten a little ahead of itself.

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