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Sales up, profits down in Williams-Sonoma Q1

With stockpiles and costs both climbing higher, first-quarter profits at Williams-Sonoma Inc. fell by 12.8 percent, even though sales climbed higher at a double-digit pace, rising by 12.2 percent.

Earnings came in far better than expected, helped by stronger sales in the catalog business. Fully diluted earnings of $0.11 per share came in sharply above the company's earlier forecast of an $0.08 per-share profit.

Sales at the diversified retailer rose by 12.2 percent, to $536.8 million from $478. 4 million last year.

Inventories rose by 47.5 percent, to $372.5 million from $252.5 million during the same period a year ago, an increase of $120 million, as the retailer improved its in-stock position on core merchandise in the Williams-Sonoma, Pottery Barn and Pottery Barn Kids brands in a drive to improve customer service and sales.

Costs increased by 16.7 percent, to $182.8 million from $156.7 million. As a percentage of sales, costs climbed higher by 130 basis points, or 1.3 percentage points, to 34.1 percent from 32.8 percent a year ago.

Williams-Sonoma Inc.

Qtr. 5/4 (x000) 2003 2002 % change
Sales $536,840 $478,379 12.2
Oper. income (EBIT) 21,781 24,964 -12.8
Net income 13,395 15,353 -12.8
Per share (diluted) 0.11 0.13 -15.4
Average gross margin 38.1% 38.0%
SG&A expenses 34.1% 32.8%

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