Williams-Sonoma Falls After Cutting Forecast

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.

To contact the reporter on this story: Ashley Lutz in New York at alutz8@bloomberg.net Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.