Williams-Sonoma's namesake and Pottery Barn stores continue to take the brunt of a declining housing market and overall economic decline, with the company providing guidance that suggests the rest of the year won't be much better.
Last quarter's dismal earnings featured decreasing cash and the sale of a corporate jet. Yep, that trend continued, with balance sheet cash dropping by more than 34% from last year, which is thankfully enough to cover long-term debt. Overall revenue declined by 4.6%, with a 30% drop in the bottom line.
Same-store sales decreases worsened dramatically over the period, from 8.6% in May to 14% in July. Pottery Barn's quarterly same-store sales decline of 16% contributed the bulk of this, along with Williams-Sonoma's quarterly decline of 4.5%, versus an increase of 1.1% for the second quarter of last year. The yearly guidance doesn't indicate any improvement in the near term, as same-stores sales are projected to fall as much as 12.5%.
Like many companies these days, online sales provided a bright spot for Williams-Sonoma, increasing by 11.7%. However, overall direct-to-consumer revenue dropped by 4.3%, meaning that increasing Internet sales aren't making up for the losses in catalog sales. With bricks-and-mortar sales steeply falling, you've got to wonder why the company is opening 54 stores this year, instead of focusing efforts on growing Internet sales.
That said, Williams-Sonoma is doing a decent job of managing cost of goods sold and selling, general, and administrative expenses (SG&A) through the revenue downturn. Even with the significant revenue decline, net earnings decreased only 80 basis points, to 1.8% of sales. However, given the slim margins the company faces, there's little room for any margin slimming.
Listen, it's tough out there right now. Sears Holdings
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