Finally, Williams-Sonoma shares plunged last week, sharing the spotlight with Tiffany
Williams-Sonoma cut its fourth-quarter earnings guidance to $1.10-$1.15 per share, versus its previous $1.15-$1.20 per share forecast. The retailer spent a lot on marketing and had to adjust to the highly promotional environment during the holiday season, leading the high-end home merchandise retailer to focus more on delivering value to its customers than delivering luxury.
Seriously, I'd imagine it is hard to peddle $40 tea strainers and $200 knife sharpeners in this economic environment. Tiffany also cut its outlook due to lackluster holiday-season spending on its pricey jewelry here and abroad.
Williams-Sonoma's growth hasn't been that bad despite consumers' new frugality. In the last 12 months, it grew total sales by 7.4% and reported $2.13 per share in earnings, and its margins have held steady at 44%. Discount retail powerhouse Wal-Mart
Furthermore, Williams-Sonoma's now trading at 13.5 times forward earnings, and sports a PEG ratio of 1.06. Those metrics are less expensive than luxury goods companies Tiffany (forward P/E: 14.7, PEG ratio: 1.14) and Coach
Still, I'm not ready to make a new, confident, bullish or bearish CAPScall on Williams-Sonoma right now. It may look like a reasonable idea to buy, but I'm still concerned that many consumers will balk at those $40 tea strainers and other nice-to-have, not need-to-have items. I'd just call Williams-Sonoma a hold at the moment.
What do you think? Let us know in the comments box below, add it to your Watchlist, or put your own CAPS rating on it. (You can check my CAPS track record here.) If you're looking for related reading, check out our free report on a retailer you may have never heard of: The Motley Fool's Top Stock for 2012.