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The Associated Press January 12, 2012, 8:41AM ET

Williams-Sonoma cuts 4Q outlook; promotions hurt

Home goods seller Williams-Sonoma Inc. cut its fiscal fourth-quarter earnings guidance to a level below what analysts had expected because of holiday-season promotions.

Shares of the company, which also owns West Elm and Pottery Barn, dropped $4.44, or 11 percent, to $34.65 before the market open on Thursday.

Sellers of higher-end products like Williams-Sonoma have done better than other retail sectors in the recovery from the recession, as affluent shoppers continue to spend money. But the company, like many other retailers this holiday season, had to offer discounts to entice shoppers. Consumers spent more in the run-up to Christmas than they had in 2010, but many held out for deals at the last minute.

Williams-Sonoma said Thursday that it expects earnings in the key November-January quarter of $1.10 to $1.15 per share, down from its previous outlook of $1.15 and $1.20 per share.

Analysts were predicting earnings of $1.19 per share, according to a FactSet survey.

The San Francisco company also trimmed its revenue outlook to a range of $1.24 billion to $1.26 billion, still in line with analyst expectations of $1.26 billion. Williams-Sonoma had previously expected revenue as high as $1.27 billion.

In the eight weeks that ended on Dec. 25, Williams-Sonoma's revenue rose 4.2 percent to $901 million. Revenue from the company's websites, catalogs and at stores open at least a year, a key measure for retailers that excludes stores newly opened or closed, rose 4.9 percent, compared with 11.3 percent growth in the prior year.

The retailer's namesake store had a difficult time contending with heavy discounting during the holidays, said CEO Laura Alber said in a statement. West Elm and Pottery Barn fared better.

Williams-Sonoma had several markdowns on its website on Thursday, including discounts on blenders, tablecloths, and pots and skillets.

Williams-Sonoma also said Thursday that it is raising its quarterly dividend 29 percent to 22 cents per share from 17 cents per share and announced a new $225 million share buyback program.

Williams-Sonoma has 592 stores, seven catalogs and six web sites.

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