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Williams-Sonoma (WSM) Q2 Earnings In Line, Revenues Lag
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Williams-Sonoma Inc.’s (WSM - Free Report) fiscal second-quarter 2016 adjusted earnings (excluding one-time items) of 58 cents per share came in line with the Zacks Consensus Estimate. Earnings were within the company’s expected range of 54 cents to 60 cents per share and remained flat year over year.
Net revenue of $1.159 billion missed the Zacks Consensus Estimate of $1.169 billion by 0.8%. Net sales rose 2.8% year over year driven by higher comparable brand revenues. Sales were within the company’s expected range of $1.145 billion to $1.175 billion. The strong sales in West Elm and newer businesses were partially offset by weakness in the Pottery Barn brand.
Comparable Brand Revenues
Comparable brand revenues grew 0.6% in the quarter, significantly lower than 6.3% increase recorded in the prior-year quarter. Comps missed the company’s estimated range of 1% to 4% increase. All the brands, except West Elm reported soft comparable brand revenues.
Williams-Sonoma brand’s comparable brand revenues were flat, better than 0.3% decline in the prior-year quarter, as strong sales in cookware, and Williams-Sonoma Home were offset by weakness in food, electrics, and cook tools.
Pottery Barn’s comparable brand revenues were down 4.8% as against a 6.4% increase in the prior-year quarter. The current quarter’s decrease was due to weak sales trends in tabletop and decorative accessory.
Pottery Barn Kids’ comparable brand revenues increased 0.1%, lower than 3.3% growth in the year-ago quarter, due to softness in the textiles category.
West Elm’s comparable brand revenues increased 15.8% compared with 15.7% rise in the prior-year quarter, as the brand delivered strong performance core furniture business.
PBteen’s comparable brand revenues decreased 5.2% as against 3.9% increase in the year-ago quarter, owing to weakness in the textile category.
Segment Details
E-commerce (formerly Direct Store Delivery) Segment: The segment reported net revenues of $600 million in the second quarter of 2016, up 5.2% year over year, driven by strength in West Elm and Williams-Sonoma. It contributed 51.7% of revenues in the second quarter of 2016.
Retail: The segment reported net revenue of $559 million in the reported quarter, up 0.4% year over year.
Margin Details
Adjusted operating margin was 7.2% in the quarter, down 20 bps from the year-earlier quarter, owing to lower gross margins and softer retail revenue growth.
As a percentage of revenues, adjusted selling, general and administrative (SG&A) expenses were 28.2%, an improvement of 50 basis points (bps), driven by a decline in overall expenses.
Third-Quarter 2016 Outlook Soft
Williams-Sonoma expects third-quarter 2016 earnings per share in the range of 75 cents to 80 cents.
The company expects net revenue for the quarter in the range of $1.24 billion to $1.29 billion. Comparable brand revenues are expected to increase in the range of 0% to 4%.
2016 Outlook
Williams-Sonoma has lowered its guidance for 2016, owing to a softer retail environment. The company expects 2016 earnings per share in the range of $3.35- $3.55, lower than the prior expectation of $3.50–$3.65.
The company also lowered its full year revenue guidance. Net revenue is expected to range between $5.08 billion – $5,23 billion, lower than the prior expectation of $5.15 billion and $5.25 billion.
Comparable brand revenues are expected to grow in the 1%-4% range, lower than the prior expectation of 3% to 6% range. The company expects adjusted operating margin in the range of 9.4% – 9.8%, lower than the prior expectation of 9.8%-10%. Income tax rate is expected between 37% and 38%.
Williams-Sonoma carries a Zacks Rank #3 (Hold). Stocks to Consider
Some better-ranked stocks in the retail sector include Tempur Sealy International Inc. (TPX - Free Report) Haverty Furniture Companies Inc. (HVT - Free Report) and Fortune Brands Home & Security, Inc. . While Tempur Sealy International sports a Zacks Rank #1 (Strong Buy), Haverty Furniture Companies and Fortune Brands carry a Zacks Rank #2 (Buy).
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Williams-Sonoma (WSM) Q2 Earnings In Line, Revenues Lag
Williams-Sonoma Inc.’s (WSM - Free Report) fiscal second-quarter 2016 adjusted earnings (excluding one-time items) of 58 cents per share came in line with the Zacks Consensus Estimate. Earnings were within the company’s expected range of 54 cents to 60 cents per share and remained flat year over year.
Net revenue of $1.159 billion missed the Zacks Consensus Estimate of $1.169 billion by 0.8%. Net sales rose 2.8% year over year driven by higher comparable brand revenues. Sales were within the company’s expected range of $1.145 billion to $1.175 billion. The strong sales in West Elm and newer businesses were partially offset by weakness in the Pottery Barn brand.
Comparable Brand Revenues
Comparable brand revenues grew 0.6% in the quarter, significantly lower than 6.3% increase recorded in the prior-year quarter. Comps missed the company’s estimated range of 1% to 4% increase. All the brands, except West Elm reported soft comparable brand revenues.
Williams-Sonoma brand’s comparable brand revenues were flat, better than 0.3% decline in the prior-year quarter, as strong sales in cookware, and Williams-Sonoma Home were offset by weakness in food, electrics, and cook tools.
Pottery Barn’s comparable brand revenues were down 4.8% as against a 6.4% increase in the prior-year quarter. The current quarter’s decrease was due to weak sales trends in tabletop and decorative accessory.
Pottery Barn Kids’ comparable brand revenues increased 0.1%, lower than 3.3% growth in the year-ago quarter, due to softness in the textiles category.
West Elm’s comparable brand revenues increased 15.8% compared with 15.7% rise in the prior-year quarter, as the brand delivered strong performance core furniture business.
PBteen’s comparable brand revenues decreased 5.2% as against 3.9% increase in the year-ago quarter, owing to weakness in the textile category.
Segment Details
E-commerce (formerly Direct Store Delivery) Segment: The segment reported net revenues of $600 million in the second quarter of 2016, up 5.2% year over year, driven by strength in West Elm and Williams-Sonoma. It contributed 51.7% of revenues in the second quarter of 2016.
Retail: The segment reported net revenue of $559 million in the reported quarter, up 0.4% year over year.
Margin Details
Adjusted operating margin was 7.2% in the quarter, down 20 bps from the year-earlier quarter, owing to lower gross margins and softer retail revenue growth.
As a percentage of revenues, adjusted selling, general and administrative (SG&A) expenses were 28.2%, an improvement of 50 basis points (bps), driven by a decline in overall expenses.
Third-Quarter 2016 Outlook Soft
Williams-Sonoma expects third-quarter 2016 earnings per share in the range of 75 cents to 80 cents.
The company expects net revenue for the quarter in the range of $1.24 billion to $1.29 billion. Comparable brand revenues are expected to increase in the range of 0% to 4%.
2016 Outlook
Williams-Sonoma has lowered its guidance for 2016, owing to a softer retail environment. The company expects 2016 earnings per share in the range of $3.35- $3.55, lower than the prior expectation of $3.50–$3.65.
The company also lowered its full year revenue guidance. Net revenue is expected to range between $5.08 billion – $5,23 billion, lower than the prior expectation of $5.15 billion and $5.25 billion.
Comparable brand revenues are expected to grow in the 1%-4% range, lower than the prior expectation of 3% to 6% range. The company expects adjusted operating margin in the range of 9.4% – 9.8%, lower than the prior expectation of 9.8%-10%. Income tax rate is expected between 37% and 38%.
WILLIAMS-SONOMA Price, Consensus and EPS Surprise
WILLIAMS-SONOMA Price, Consensus and EPS Surprise | WILLIAMS-SONOMA Quote
Williams-Sonoma carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the retail sector include Tempur Sealy International Inc. (TPX - Free Report) Haverty Furniture Companies Inc. (HVT - Free Report) and Fortune Brands Home & Security, Inc. . While Tempur Sealy International sports a Zacks Rank #1 (Strong Buy), Haverty Furniture Companies and Fortune Brands carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>