Woeful Report From Williams-Sonoma

If there was any doubt lingering that multichannel merchants were in for a rough holiday, consider the comments of Howard Lester, CEO for kitchenware/home decor cataloger/retailer Williams-Sonoma.

“Over the past six weeks our sales trends have weakened dramatically, reflecting a significantly higher level of consumer concern over the events that have taken place in the global financial markets as well as the increasing likelihood of a prolonged recession,” Lester said in an Oct. 29 release. As such, the company is reducing its guidance for the third and fourth quarters of this year.

“Let me assure you that while we continue to believe strongly in both the short- and long-term potential of our brands, we are reacting aggressively to this rapid downturn and are committed to bringing our infrastructure and merchandise inventories in line with today’s level of business,” Lester said.

His comments accompanied an announcement of revised company guidance for the third and fourth quarters, and fiscal year 2008. “The decline in demand has affected both channels and all brands,” Lester added. The company’s brands include Williams-Sonoma, Williams-Sonoma Home, Pottery Barn, Pottery Barn Kids, PBteen and West Elm.

“While the Pottery Barn brands continue to be the most affected, in recent weeks, momentum has slowed significantly in all of our other brands. To put this in perspective, comparable store sales have declined from negative 14.0% in August to negative 20.1% in September to negative 26.6% thus far in October.”

Projecting holiday sales will be difficult, he noted, so the company is assuming that the year-over-year sales trends seen in October will continue through the rest of the year. “Accordingly, we are projecting net revenues for the year on a 52-week to 53-week basis to decline in the range of 15.2% to 17.0%, resulting in annual GAAP diluted earnings per share in the range of $0.25 to $0.47 per share.”

For the third quarter, Williams-Sonoma’s revised guidance shows net revenue in the range of $732 million to $742 million, compared to prior guidance of $802 million to $820 million. For the fourth quarter, net revenue is expected to range from $940 million to $1.0 billion compared to prior guidance of $1.17 billion to $1.22 billion.

For fiscal 2008, net revenue is expected to be $3.27 billion to $3.34 billion, compared to prior guidance of $3.57 billion to $3.64 billion

Last month, the company announced a decision to reduce catalog circulation by about 25% and cut page counts by 31%. These changes have reduced its advertising costs by about $40 million. Williams-Sonoma said then that it is shifting more of its marketing toward targeted e-mails.

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