Shares of Williams Sonoma (WSM -7.32%) were forced to backtrack today after the high-end home furnishings company missed sales forecasts and reported declining comparable sales in its second-quarter report.

At 10:56 a.m. ET, the stock was down 8.5% following the news.

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Williams-Sonoma continues to face headwinds

Like most of its home furnishings competitors, Williams-Sonoma is struggling in the current environment as the sluggish real estate market depresses demand for furniture, home accessories and kitchenware.

As a result, comparable brand sales fell 3.3% for the quarter and total revenue fell 4% to $1.79 billion, below the $1.81 billion forecast.

However, gross margin improved 550 basis points to 46.2% due to higher trading margins and improved supply chain efficiency. Selling, general and administrative (SG&A) expenses also increased 390 basis points to 30% due to higher incentive compensation and advertising expenses.

As a result, operating margin increased 160 basis points to 16.2 percent and earnings per share (EPS) increased 12 percent to $1.74, beating estimates of $1.60.

CEO Laura Alber pointed to the “improved sales development, market share gains and the continued fulfillment of our commitment to profitability.”

Can Williams-Sonoma fight back?

Williams-Sonoma’s updated guidance was mixed, as full-year revenue guidance called for a decline of 1.5% to 4%, suggesting continued headwinds in the home furnishings space. However, the company raised its operating margin guidance to a range of 18% to 18.4%, maintaining its EPS guidance. Analysts expect EPS to improve from $7.28 to $8.21 for the year.

However, there is also good news for investors. At the next Fed meeting in September, interest rates are expected to fall, which should support the recovery of the housing market and help Williams-Sonoma to return to sales growth.

At the current price, the stock appears to be a solid investment with a P/E ratio of 16.3. If the real estate market recovers, Williams Sonoma stock should continue to rise.