Williams-Sonoma Inc. (WSM), the owner of the namesake, Pottery Barn and West Elm home-goods chains, fell the most in more than three years after saying profit may be less than it previously forecast because of holiday discounts.
The shares dropped 12 percent to $34.58 at 9:49 a.m. in New York, after earlier falling 15 percent for the biggest intraday drop since Nov. 14, 2008. The San Francisco-based company’s shares gained 7.9 percent last year.
Chief Executive Officer Laura Alber said the Williams- Sonoma brand faced “greater challenges” because of discounting on nationally branded products. Sales at all stores open at least a year fell 0.3 percent in the two-month holiday period ended Dec. 26, compared with a 5 percent gain a year earlier, the company said in a statement. The retailer also lowered its fourth-quarter gross-margin projection.
“Softness in the Williams-Sonoma brand and weakening gross margin could weigh on investor sentiment,” Bradley Thomas, an analyst with Keybanc Capital Markets Inc., wrote in a note to clients today. “Looking ahead, we remain encouraged by management’s execution on growth initiatives such as e-commerce, international expansion, and repositioning the West Elm brand.”
Thomas, who is based in New York, recommends holding the shares.
The retailer cut its maximum quarterly gross-margin projection to 41 percent from 42.2 percent previously. Fourth- quarter profit will be as much as $1.15 a share, compared with an earlier projection of as much as $1.20, the company said today in the statement. The average of 21 analysts’ estimates compiled by Bloomberg was $1.19.
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