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Williams-Sonoma (WSM) Q3 Earnings Top, Revenues Lag, Down Y/Y
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Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for the third quarter of fiscal 2023 (ended Oct 29, 2023). In the quarter, earnings beat the Zacks Consensus Estimate, but revenues missed the same. Also, both metrics declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands driven by ongoing softness witnessed in consumer discretionary spending, especially on furniture. Also, elevated levels of promotional activity and current macroeconomic uncertainties added to the downtrend. That said, Williams-Sonoma’s solid operating model partially offset the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service.
Following the earnings release, shares of this multi-channel specialty retailer of premium quality home products gained 6.2% during the trading hours on Nov 16.
Earnings, Revenue & Comps Discussion
Non-GAAP earnings per share (EPS) of $3.66 surpassed the Zacks Consensus Estimate of $3.34 by 9.6%. However, the metric declined 1.6% from $3.72 reported a year ago.
Net revenues of $1.85 billion missed the consensus mark of $1.95 billion and decreased 15.5% year over year.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
In the fiscal third quarter, comps fell 14.6% against 8.1% growth in the year-ago period. Our model predicted comps to decline 9.3% in the quarter.
Comps at West Elm brand decreased 22.4% versus 4.2% growth year over year. Comps at Pottery Barn dipped 16.6% against a 19.6% rise a year ago. Williams-Sonoma comps decreased 1.9% compared with the 1.5% decline registered in the prior-year quarter. Pottery Barn Kids and Teens registered a comps decline of 6.9%, up from the 4.8% decline reported in the prior-year quarter.
Operating Highlights
The gross margin was 44.4%, up 290 basis points (bps) from the year-ago period. The increase was due to lower shipping and freight costs, along with a 1% year-over-year decline in occupancy costs.
Non-GAAP selling, general and administrative expenses were 27.4% of net revenues (below our projection of 25.3%), reflecting an increase of 140 bps year over year. Furthermore, the non-GAAP operating margin expanded 150 bps from the year-ago period to 17% for the quarter.
Financials
As of Oct 29, 2023, Williams-Sonoma reported cash and cash equivalents of $698.8 million compared with $367.3 million at the fiscal 2022-end. Net cash from operating activities totaled $1.01 billion in the first nine months of fiscal 2023 compared with $588.5 million reported in the comparable period a year ago.
Fiscal 2023 Guidance Revised
Williams-Sonoma anticipates fiscal 2023 net revenues to decline between 10% and 12% compared with the prior expected range of 5%-10%. The company now expects its operating margin to be 16-16.5%, up from 15-16% expected earlier.
Further, for the long term, the company still projects mid-to-high-single-digit annual net revenue growth and an operating margin above 15%.
Restaurant Brands International, Inc. (QSR - Free Report) reported third-quarter 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The bottom line declined, but revenues grew year over year.
The top line’s growth reflects a rise in system-wide sales at Tim Hortons, Burger King, Popeyes and Firehouse Subs. During the quarter, global system-wide sales grew 10.9% year over year.
The Wendy's Company (WEN - Free Report) reported third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues lagging the same. The top and bottom lines increased on a year-over-year basis. Solid same-restaurant sales and strength in digital momentum aided the company’s performance.
Also, a rise in franchise royalty revenues and advertising fund revenues added to the upside. In the quarter under review, Wendy’s inaugurated 51 restaurants globally, reflecting an increase of 20 net new units.
Shake Shack Inc. (SHAK - Free Report) reported third-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues met the same. Moreover, both metrics increased year over year. The bottom line beat the consensus estimate for the fourth straight quarter.
The company’s earnings reflect growth in sales, driven by digital marketing strategies, sequentially improving traffic and the strong execution of its 2023 Strategic Priorities. However, weather headwinds, seasonality demand patterns and the lap of a strong limited-time offering launch later in October partially offset the aforementioned tailwinds.
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Williams-Sonoma (WSM) Q3 Earnings Top, Revenues Lag, Down Y/Y
Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for the third quarter of fiscal 2023 (ended Oct 29, 2023). In the quarter, earnings beat the Zacks Consensus Estimate, but revenues missed the same. Also, both metrics declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands driven by ongoing softness witnessed in consumer discretionary spending, especially on furniture. Also, elevated levels of promotional activity and current macroeconomic uncertainties added to the downtrend. That said, Williams-Sonoma’s solid operating model partially offset the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service.
Following the earnings release, shares of this multi-channel specialty retailer of premium quality home products gained 6.2% during the trading hours on Nov 16.
Earnings, Revenue & Comps Discussion
Non-GAAP earnings per share (EPS) of $3.66 surpassed the Zacks Consensus Estimate of $3.34 by 9.6%. However, the metric declined 1.6% from $3.72 reported a year ago.
Net revenues of $1.85 billion missed the consensus mark of $1.95 billion and decreased 15.5% year over year.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
Williams-Sonoma, Inc. price-consensus-eps-surprise-chart | Williams-Sonoma, Inc. Quote
In the fiscal third quarter, comps fell 14.6% against 8.1% growth in the year-ago period. Our model predicted comps to decline 9.3% in the quarter.
Comps at West Elm brand decreased 22.4% versus 4.2% growth year over year. Comps at Pottery Barn dipped 16.6% against a 19.6% rise a year ago. Williams-Sonoma comps decreased 1.9% compared with the 1.5% decline registered in the prior-year quarter. Pottery Barn Kids and Teens registered a comps decline of 6.9%, up from the 4.8% decline reported in the prior-year quarter.
Operating Highlights
The gross margin was 44.4%, up 290 basis points (bps) from the year-ago period. The increase was due to lower shipping and freight costs, along with a 1% year-over-year decline in occupancy costs.
Non-GAAP selling, general and administrative expenses were 27.4% of net revenues (below our projection of 25.3%), reflecting an increase of 140 bps year over year. Furthermore, the non-GAAP operating margin expanded 150 bps from the year-ago period to 17% for the quarter.
Financials
As of Oct 29, 2023, Williams-Sonoma reported cash and cash equivalents of $698.8 million compared with $367.3 million at the fiscal 2022-end. Net cash from operating activities totaled $1.01 billion in the first nine months of fiscal 2023 compared with $588.5 million reported in the comparable period a year ago.
Fiscal 2023 Guidance Revised
Williams-Sonoma anticipates fiscal 2023 net revenues to decline between 10% and 12% compared with the prior expected range of 5%-10%. The company now expects its operating margin to be 16-16.5%, up from 15-16% expected earlier.
Further, for the long term, the company still projects mid-to-high-single-digit annual net revenue growth and an operating margin above 15%.
Zacks Rank
Williams-Sonoma currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Retail-Wholesale Releases
Restaurant Brands International, Inc. (QSR - Free Report) reported third-quarter 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The bottom line declined, but revenues grew year over year.
The top line’s growth reflects a rise in system-wide sales at Tim Hortons, Burger King, Popeyes and Firehouse Subs. During the quarter, global system-wide sales grew 10.9% year over year.
The Wendy's Company (WEN - Free Report) reported third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues lagging the same. The top and bottom lines increased on a year-over-year basis. Solid same-restaurant sales and strength in digital momentum aided the company’s performance.
Also, a rise in franchise royalty revenues and advertising fund revenues added to the upside. In the quarter under review, Wendy’s inaugurated 51 restaurants globally, reflecting an increase of 20 net new units.
Shake Shack Inc. (SHAK - Free Report) reported third-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues met the same. Moreover, both metrics increased year over year. The bottom line beat the consensus estimate for the fourth straight quarter.
The company’s earnings reflect growth in sales, driven by digital marketing strategies, sequentially improving traffic and the strong execution of its 2023 Strategic Priorities. However, weather headwinds, seasonality demand patterns and the lap of a strong limited-time offering launch later in October partially offset the aforementioned tailwinds.