It's always pleasurable to write about companies you can relate to, as is the case for me with the cooking part of Williams-Sonoma (NYSE:WSM). Please don't misunderstand me. My culinary prowess stops somewhere short of making peanut butter sandwiches effectively, but my local Williams-Sonoma is a store whose door I always enjoy darkening.
On Thursday, the company disclosed its results for the quarter ended Jan. 28. To use an esoteric financial term, the results were OK, albeit not great, with earnings of $121.1 million, or $1.06 per share, compared with $120.8 million, or $1.02, in the year-ago quarter. Excluding adjustments for various accounting costs, the company would have earned $1.08, down a penny from the similarly unadjusted results in the year-earlier quarter.
In assessing his company's performance for its 2006 fiscal year and looking at 2007, Chairman and CEO Howard Lester said, "Our key challenges during the year, beyond the housing-related macro environment, were in the Pottery Barn brand, and we assure you that revitalizing its performance is our highest priority as we enter fiscal 2007. How quickly can we react? Immediately, but the execution will take some time."
Despite a 3.2% increase in same-store sales growth at the company's Williams-Sonoma stores, an offsetting 5.3% decrease in Pottery Barn's same-store figure pulled the company's overall same-store revenues down by 0.6% for the quarter. At the same time, direct-to-customer sales increased by 2.5% in the quarter to constitute 37.4% of total net revenues.
Looking ahead, management expects earnings in fiscal 2007 to fall in the $1.76 to $1.84 per-share range, versus the $1.76 (adjusted) earned in 2006. For the first quarter, earnings are anticipated to be $0.11 to $0.15, compared with analysts' expectations of $0.17 per share.
So Williams-Sonoma is among a growing group of retail companies that have issued reports of either soft same-store sales or lackluster forward-looking projections. Others in this disparate group are Costco (NASDAQ:COST), Men's Wearhouse (NYSE:MW), and Wal-Mart (NYSE:WMT). In most cases, the disappointments or other softness have been written off as a reaction to the highly variable U.S. weather patterns during the past several months.
I'm not certain the causations are that simple, however. Rather, I'm inclined to also factor in a combination of a housing market spillover and energy prices that have almost quietly climbed higher of late. On that basis, we'll have a far better handle in another quarter as to whether the super-important consumer portion of the economy is still cooking or has slowed appreciably.
For related Foolishness:
Wal-Mart is a Motley Fool Inside Value recommendation. Is it a bargain today? All you have to do to find out is take a free 30-day trial so you can read all the other opportunities. Costco is a Stock Advisor pick.
Fool contributor David Lee Smith is more effective as an eater than a cook, and does not own shares in any of the companies mentioned. He welcomes your questions or comments.
