The business stories that matter, by Fortune's Colin Barr
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January 15, 2008, 9:35 am

Williams-Sonoma losing its sizzle

The economy’s recessionary turn hasn’t been fun for Williams-Sonoma (WSM). The operator of the Pottery Barn and Williams-Sonoma chains trimmed its profit targets Tuesday after saying sales in established stores fell 0.4 percent from a year ago last month. The news comes as government’s measure of monthly retail sales posted its biggest drop in six months, signaling that everyone in the retail business is being tested.

CEO Howard Lester said the company had expected customer traffic to slow in December, but “traffic slowed even further than we anticipated, particularly in our home furnishings businesses.” The company now expects to make between $1.11 and $1.14 a share, down from its previous forecast of $1.19 to $1.25. Making matters worse, Williams-Sonoma said it now expects sales and 2008 profits to fallĀ from year-ago levels, as the “macro retail environment is going to be increasingly challenging.”

One bright spot is that the company isn’t planning to increase catalog circulation this year - so there may be a limit on the number of Pottery Barn Kids glossies in your mailbox. Even so, that isn’t going to make the 15 percent drop in Williams-Sonoma’s stock Tuesday morning any less painful for shareholders.

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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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