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Why Is Williams-Sonoma (WSM) Down 4% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Williams-Sonoma, Inc. (WSM - Free Report) . Shares have lost about 4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First Quarter Fiscal 2017 Results
Williams-Sonoma reported earnings beat in first-quarter fiscal 2017. The company’s first-quarter fiscal 2017 adjusted earnings per share (after adjusting for severance costs and pretax expenses) of $0.51 beat the Zacks Consensus Estimate of $0.48 by 6.3%. Earnings, however, declined 3.8% from the year-ago level.
Net revenue of $1.112 billion was slightly above the Zacks Consensus Estimate of $1.107 billion. Net sales increased 1.2% year over year on strong growth at West Elm and Williams-Sonoma brands, along with newer businesses like Rejuvenation and Mark and Graham and international businesses.
Comparable Brand Revenues
Comparable brand revenues increased 0.1% in the quarter, significantly lower than the 4.5% increase recorded in the preceding quarter. Comparable brand revenues for all the brands declined, except West Elm and William Sonoma.
Williams-Sonoma’s comparable brand revenues were up 3.2%, lower than 3.5% growth recorded in the prior-year quarter.
West Elm’s comparable brand revenues increased 6%, compared with the 19% rise in the prior-year quarter.
Pottery Barn’s comparable brand revenues were down 1.4% against a 0.2% increase in the prior-year quarter, which management believes is due to inventory outages across several key categories. However, the figure improved sequentially.
Pottery Barn Kids’ comparable brand revenues decreased 5.7%, compared with 1.7% in the year-ago quarter.
PBteen’s comparable brand revenues decreased 14.3%, as against a 1.9% increase in the year-ago quarter.
Segment Details
E-commerce: The segment reported net revenue of $581 million in quarter, up 0.7% year over year.
Retail: The segment reported net revenue of $531 million in the reported quarter, up 1.8% year over year, primarily driven by West Elm and Pottery Barn.
Margin Details
Adjusted operating margin was 6.1% in the quarter, down 90 basis points (bps) from the year-ago quarter.
Adjusted selling, general and administrative (SG&A) expenses were 29.5% of net revenue or $329 million in the quarter, reflecting an increase of 70 bps year over year.
Financials
Williams-Sonoma has cash and cash equivalents of $93.9 million as of Apr 30, 2017, compared with $99.2 million as of May 1, 2016.
Cash returned to stockholders in the quarter totaled $72 million, comprising $38 million in stock repurchases and $34 million in dividends. As of Apr 30, 2017, the company had approximately $372 million remaining under the current stock repurchase authorization.
Second-Quarter Guidance
Williams-Sonoma expects second-quarter fiscal 2017 earnings per share in the band of $0.55 to $0.61.
The company expects net revenue in the range of $1.195 billion to $1.230 billion. Comparable brand revenues are likely to grow in the 2% to 5% range.
2017 Guidance
The company maintained its previously stated fiscal 2017 outlook.
Williams-Sonoma expects earnings in the range of $3.45–$3.65 per share.
Net revenue is projected in the range $5.165–$5.265 billion.
Comparable brand revenues are likely to grow in the 1–3% range. The company expects operating margin in the range of 9.4–9.6%. Income tax rate is projected between 36.5% and 37.5%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower. While looking back an additional 30 days, we can see even more downside. There have been eight moves down in the last two months.
At this time, Williams-Sonoma's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
While estimates have been moving downward, the magnitude of revision is net zero.Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Williams-Sonoma (WSM) Down 4% Since the Last Earnings Report?
It has been about a month since the last earnings report for Williams-Sonoma, Inc. (WSM - Free Report) . Shares have lost about 4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First Quarter Fiscal 2017 Results
Williams-Sonoma reported earnings beat in first-quarter fiscal 2017. The company’s first-quarter fiscal 2017 adjusted earnings per share (after adjusting for severance costs and pretax expenses) of $0.51 beat the Zacks Consensus Estimate of $0.48 by 6.3%. Earnings, however, declined 3.8% from the year-ago level.
Net revenue of $1.112 billion was slightly above the Zacks Consensus Estimate of $1.107 billion. Net sales increased 1.2% year over year on strong growth at West Elm and Williams-Sonoma brands, along with newer businesses like Rejuvenation and Mark and Graham and international businesses.
Comparable Brand Revenues
Comparable brand revenues increased 0.1% in the quarter, significantly lower than the 4.5% increase recorded in the preceding quarter. Comparable brand revenues for all the brands declined, except West Elm and William Sonoma.
Williams-Sonoma’s comparable brand revenues were up 3.2%, lower than 3.5% growth recorded in the prior-year quarter.
West Elm’s comparable brand revenues increased 6%, compared with the 19% rise in the prior-year quarter.
Pottery Barn’s comparable brand revenues were down 1.4% against a 0.2% increase in the prior-year quarter, which management believes is due to inventory outages across several key categories. However, the figure improved sequentially.
Pottery Barn Kids’ comparable brand revenues decreased 5.7%, compared with 1.7% in the year-ago quarter.
PBteen’s comparable brand revenues decreased 14.3%, as against a 1.9% increase in the year-ago quarter.
Segment Details
E-commerce: The segment reported net revenue of $581 million in quarter, up 0.7% year over year.
Retail: The segment reported net revenue of $531 million in the reported quarter, up 1.8% year over year, primarily driven by West Elm and Pottery Barn.
Margin Details
Adjusted operating margin was 6.1% in the quarter, down 90 basis points (bps) from the year-ago quarter.
Adjusted selling, general and administrative (SG&A) expenses were 29.5% of net revenue or $329 million in the quarter, reflecting an increase of 70 bps year over year.
Financials
Williams-Sonoma has cash and cash equivalents of $93.9 million as of Apr 30, 2017, compared with $99.2 million as of May 1, 2016.
Cash returned to stockholders in the quarter totaled $72 million, comprising $38 million in stock repurchases and $34 million in dividends. As of Apr 30, 2017, the company had approximately $372 million remaining under the current stock repurchase authorization.
Second-Quarter Guidance
Williams-Sonoma expects second-quarter fiscal 2017 earnings per share in the band of $0.55 to $0.61.
The company expects net revenue in the range of $1.195 billion to $1.230 billion. Comparable brand revenues are likely to grow in the 2% to 5% range.
2017 Guidance
The company maintained its previously stated fiscal 2017 outlook.
Williams-Sonoma expects earnings in the range of $3.45–$3.65 per share.
Net revenue is projected in the range $5.165–$5.265 billion.
Comparable brand revenues are likely to grow in the 1–3% range. The company expects operating margin in the range of 9.4–9.6%. Income tax rate is projected between 36.5% and 37.5%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower. While looking back an additional 30 days, we can see even more downside. There have been eight moves down in the last two months.
Williams-Sonoma, Inc. Price and Consensus
Williams-Sonoma, Inc. Price and Consensus | Williams-Sonoma, Inc. Quote
VGM Scores
At this time, Williams-Sonoma's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
While estimates have been moving downward, the magnitude of revision is net zero.Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.