Williams-Sonoma, Inc. (WSM - Analyst Report), a well known specialty retailer of home products, reported adjusted earnings (excluding one-time items) of 41 cents per share in the first quarter of fiscal 2013, up 21% from the comparable prior-year quarter. The year-over-year surge in earnings was driven by strong top-line growth in the quarter.
Reported earnings beat the Zacks Consensus Estimate of 36 cents per share by 13.9%.
The company reported net revenue of $888 million in the first quarter of fiscal 2013, up 8.6% year over year, driven by high single-digit increase in comparable brand revenues. Net revenue beat the Zacks Consensus Estimate of $868 million by 2.3%.
Comparable brand revenues (including retail comparable store sales, direct-to-customer sales, and other adjustments like shipping fees, sales returns and other discounts associated with current period sales) grew 7.2% compared with a 5.4% increase in the prior-year quarter, as all the brands witnessed positive comparable brand revenues.
The company’s net revenue comprises direct-to-customer net revenue and retail net revenue. The direct-to-customers net revenue is generated from sales through e-commerce websites, catalogs and shipping fees. Retail net revenue is generated from sales in retail stores and shipping fees for home delivery of products.
During the first quarter of 2013, direct-to-customer net revenue was $419 million, up 11.9%, due to solid sales across all the brands, particularly in Pottery Barn, West Elm, Williams-Sonoma and Pottery Barn Kids. Retail net revenue grew 5.8% to $469 million in the quarter on the back of strong international franchise operations, which include Pottery Barn and West Elm.
Selling, general and administrative (SG&A) expenses increased 5.5% from the prior-year quarter to $267 million. However, as a percentage of revenues, SG&A improved 80 basis points to 30.1% in the quarter on the back of low advertising expenses. The company’s adjusted operating margin of 7.5% was up 60 basis points year over year on the back of significant increase in the direct-to-customer channel operating margin due to increased advertising leverage and enhanced selling margin.
During first quarter 2013, the company repurchased common stock worth $41 million. As of May 5, 2013, the company had $709 million of stock remaining under its $750 million stock repurchase program announced in Mar 2013.
For the second quarter of 2013, Williams-Sonoma expects to report adjusted earnings per share in the range of 43 cents to 46 cents. The company expects to generate net revenue in the range of $920 million to $940 million in the second quarter of 2013. Comparable brand revenues are expected to grow in the range of 4% to 6%.
For fiscal 2013, the company expects adjusted earnings in the range of $2.67 to $2.77 and net revenue in the range of $4.22 billion to $4.30 billion.
Williams-Sonoma carries a Zacks Rank #3 (Hold).
Some other retail wholesale stocks that are worth a look include Fortune Brands Home & Security, Inc. (FBHS - Snapshot Report) and Haverty Furniture Companies Inc. (HVT - Snapshot Report) carrying a Zacks Rank #1 (Strong Buy) and The Home Depot, Inc. (HD - Analyst Report) holding a Zacks Rank #2 (Buy).