The flat comparable store sales for the eight-week holiday period compared with a 3.7% increase for the eight-week holiday period last year. The 7.3% increase in overall sales "was below our expectations for the holiday period," according to Ed Mueller, CEO of the company. He cited a number of factors, pointing out that the retailing chain had listed its misgivings about the prospect of flat comparable sales and lower overall sales growth in a previous announcement. Among the concerns listed were the volatility of sales trends and the overall retail environment, and according to Mueller's remarks Tuesday, that turned out to be true. "The majority of our shortfall was driven by a weaker than expected consumer response to the holiday merchandising strategies in the Pottery Barn brand," Mueller said.

In addition, a significant year-over-year increase in pre-holiday gift card sales and a greater than expected shift in retail sales into the week after Christmas both contributed to the short fall, Mueller said. He noted that the pre-holiday gift card sales and the shift in retail sales into the week after Christmas were not included in the eight-week reporting period for which results were released Tuesday.

Despite lowering its sales expectations for the fourth quarter, Williams-Sonoma is sticking with its fourth quarter and fiscal year 2004 diluted earnings per share guidance, which is in the range of 93 cents to 97 cents per share for the quarter and $1.58 to $1.62 per share for the year. One caveat the company cited was that approximately 29% of its fourth quarter sales and 40% of its fourth quarter catalog circulation actually occurs in the month of January, and that volatility continues to be a concern in the emerging brands that make up much of the anticipated January sales.