Williams-Sonoma Inc., the owner of the namesake, Pottery Barn and West Elm home-goods chains, fell the most in three years after saying profit may be less than it previously forecast because of holiday discounts.
The shares dropped 12 percent to $34.32 at the close in New York, for the biggest decline since January 2009. 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.