Williams-Sonoma, Inc. (NYSE: WSM), parent of the eponymous chain for discerning chefs and the Pottery Barn brand of home furnishings and domestics, roared to a 10% drop in Tuesday's session after reducing its fourth-quarter and full-year earnings outlooks.

It appears as though the malaise that washed over American consumers in the 2007 holiday shopping season had an impact on WSM as well. Same-store sales in the nine-week holiday shopping period ended December 30 were down 0.4%, with notable weakness in the home-furnishings area. The company now expects same-store sales in the fourth quarter to be flat to down 1.5%, down from an earlier expectation for an increase of 0.5% to 2.5%. Reuters reported that company CEO, Howard Lester admitted "...the macro environment did weaken and traffic slowed even further than we anticipated" in the fourth quarter.

Naturally, sales numbers have a profound impact on the bottom line, so these sinking figures trickled down to effect per-share earnings expectations. WSM reduced its projected range for the fourth quarter to $1.11 to $1.14 per share, on revenue of $1.36 billion to $1.39 billion. This is below earlier expectations for per-share earnings of $1.19 to $1.25 on revenue of $1.39 billion to $1.42 billion. Based on these previous targets, analysts were estimating per-share results of $1.20 per share on $1.39 billion in sales, according to Reuters.
For the current fiscal year, WSM expects to bank $1.75 to $1.78 per share, including a 3-cents-per-share charge due to a higher tax rate. The new figure compares to previous estimates of $1.84 to $1.90 per share. And for the next fiscal year, Williams-Sonoma expects net earnings per share to decline at a mid-to-high single-digit percentage rate, as net revenue holds flat or suffers a low-single-digit decline.

In separate news, WSM announced a $150 million buyback arrangement. Unfortunately, this nugget of news did little to cushion the blow. The equity breached its 160-month moving average this month for the first time in more than a decade. Additionally, the stock is trading at lows not touched since December 2001.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.