Williams-Sonoma Shares Fall on News of Exec’s Departure

Housewares mecca Williams-Sonoma Inc. saw its stock fall $7, or 19%, on Wednesday amid news that Chief Administrative Officer Dennis Chantland will step down three years after taking over the financial reins at the San Francisco-based company.

Chantland, 56, was hired in November 1995 to improve profit at the company, and during his tenure Williams-Sonoma’s annual earnings grew to $54 million from $19 million. He will retire July 1.

The company also reported Wednesday that fourth-quarter earnings were off a penny from Wall Street estimates, at 75 cents a share, from 61 cents the previous year. Profit was up 28%, to $43.9 million from $34.3 million a year earlier.

Williams-Sonoma owns kitchenware stores that bear its name, as well as Pottery Barn, Hold Everything, Gardeners Eden and Chambers catalogs and stores.

Analysts said the stock plunge was an emotional reaction to the upcoming departure of Chantland, a figure much admired by the investment community not only for his business acumen but also for his ability to communicate with Wall Street.

“Investors may have begun to think of Williams-Sonoma as Denny Chantland on the phone to them,� said Kevin Silverman, a retail analyst with ABN Amro in Chicago. “To the extent that they viewed Denny as a partner in the investment, I could see them wanting to be out of the stock--but to take $400 million out of the value of the company because of the resignation of anyone, I think, is overblown by a long way.�

Williams-Sonoma shares closed at $29 on the New York Stock Exchange, down $7--well off their 52-week high of $40.75 on Dec. 31.

The company has long been known for brilliant merchandising and product designs but had been bogged down several years ago by poor distribution and other logistical problems.

Enter Chantland, a longtime Dayton Hudson Corp. exec, who changed the purchasing, streamlined operations and moved the company’s shipping and fulfillment operations to Memphis, Tenn., where Federal Express’ main operation is located.

“He’s done a fabulous job in structuring the company for lower costs. Why should the wonderful changes he’s made and all the people he’s hired to implement them not be able to carry on without him?� said Otto Grote, a retail analyst with Derby Securities in New York.

Chief Executive W. Howard Lester said he has quibbles with reports that the company’s earnings were below estimates--the company has been on track all year, he said--and added that Wednesday’s stock performance was a result of a confluence of events that are likely to shake out in the short-term.

The first problem, he said, was that the company did not beat Wall Street earnings expectations but, in his view, merely met them. Next, he said, was the departure of Chantland, who left for personal reasons. And last was the rating change by Goldman, Sachs & Co. from a “buy� to a “market performer.�