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The well known specialty retailer of home products, Williams-Sonoma, Inc.’s (WSM - Analyst Report) net revenue grew 4.8% year over year to $1.014 billion during the nine week holiday period from Oct 29, 2012 to Dec 30, 2012. The comparable store sales rose 4.4% from the prior year quarter, driven by the company’s strong brand portfolio.

The company maintained the guidance for the fourth quarter and fiscal 2012, on the back of the solid business witnessed in the holiday period.

Fourth Quarter 2012 Outlook

The company expects adjusted EPS in the range of $1.21 to $1.28 for the fourth quarter 2012, up from the $1.17 in the prior year quarter. The Zacks Consensus Estimate of $1.28 is at the higher end of the expected range for the fourth quarter 2012.

Total revenue is expected to be in the range $1,360 to $1,400 million, up 2% - 4% year over year.  The comparable store sale is expected to rise in the range of 2% to 4%, lower than the 6.6% growth in the prior year quarter. Adjusted operating margin is expected to be in the range of 14.5% to 15.1%, compared to 15.6% in the prior year quarter.

Fiscal 2012 Outlook

The company expects adjusted EPS in the range of $2.45 to $2.52 for the fiscal 2012, up from the $2.24 in the fiscal 2011. The Zacks Consensus Estimate of $2.53 is a penny higher than expected range for the fiscal 2012.

Adjusted operating margin is expected to be in the range of 10.1% to 10.3%, compared to 10.3% in the prior year. The comparable store sale is expected to rise in the range of 5% to 6%, lower than the 7.3% growth in fiscal 2011. Total revenue is expected to be in the range $3,995 to $4,035 million, up 5% - 6% year over year.  

Restoration Hardware Holdings, Inc. (RH - Snapshot Report) and Williams-Sonoma carries a Zacks Rank #3 (Hold). On the other hand, Fortune Brands Home & Security, Inc. (FBHS - Snapshot Report) carries Zacks Rank #1 (Strong Buy) and Pier 1 Imports, Inc. (PIR - Snapshot Report) carries Zacks Rank #2 (Buy).

We are positive about Williams-Sonoma’s year-over-year top-line growth for the past couple of quarters and long term strategy of global expansion. However, we prefer to stay on the sidelines until there are further improvements in the global macroeconomic conditions.

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