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Textiles buck negative trend at Pottery Barn

San Francisco– Third-quarter sales at Williams-Sonoma were up modestly – but profits were sharply down, and Pottery Barn division president Laura Alber said of her brand, “Revenues were negative in all key product categories except textiles.” Seasonal linens also helped prop up revenues in the Williams-Sonoma brand division.

Earnings per diluted share were $0.25, down 19.4% from $0.31 for the same period one year ago. Net revenues were $852.8 million, up 3.0% from $827.6 million.

The company is banking on massive promotional and direct-to-consumer activities to pump up sales in the fourth quarter, said chairman Howard Lester and other executives on this morning’s conference call. Comp sales have slumped from an anemic 1.3% and 1.2% in the first and second quarters to the third-quarter’s perfectly flat 0.0%. Guidance for the holiday term is from negative1.0% to positive 1.5%, yielding a fiscal 2006 guidance of 0.0% to 1.0% overall.

Lester was pleased with strong performance in the Williams-Sonoma, Pottery Barn Kids, and West Elm brands. He allayed the difficulty in the Pottery Barn unit (where third-quarter comps were down 2.5%) to the ease with which competitors knock off and heavily promote many core items, and to the “macro-economic” environment.

Alber noted that Pottery Barn Kids was a bright spot, with “net revenues up 9.8% on top of a 12.3% increase last year,” and again pointed to “particular strength in textiles” and decorative accessories. However, she said a key vendor bankruptcy undercut progress in the nursery category.

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