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What's in Store for Williams-Sonoma (WSM) in Q2 Earnings?
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Williams-Sonoma, Inc. (WSM - Free Report) is slated to report second-quarter fiscal 2017 results on Aug 23, after the market closes. Last quarter, this multi-channel specialty retailer of premium quality home products delivered a positive earnings surprise of 6.25%.
The company surpassed earnings estimates in each of the trailing four quarters, the average beat being 3.05%.
Williams-Sonoma has been witnessing soft comparable brand revenues for quite some time now. The rate of increase of comparable brand revenues has decreased significantly from 7.1% in 2014 to 3.7% in 2015 and 0.7% in 2016. Comparable brand revenues inched up 0.1% in the first quarter of fiscal 2017, significantly lower than the 4.5% rise in the preceding quarter. The rate of comparable brand revenue increase has softened across all the brands over the years.
However, Williams-Sonoma is focused on enhancing customer experience through improved and innovative marketing techniques. In the first quarter of fiscal 2017, the company increased its digital advertising spend, which led to strong growth across all brands. To enhance customer experience, the company is using web tools that utilize augmented reality, creating videos on social media sites and making digital advertisements. This will help the company to generate higher sales in the to-be-reported quarter. The company will continue to strengthen its competitive advantages through innovation in e-commerce in the upcoming quarters.
The company expects net revenue in the range of $1.195-$1.230 billion against $1.159 billion reported in the prior-year quarter. Comparable brand revenues are likely to grow in the 2% to 5% range (higher than 0.6% growth seen in the prior-year quarter). Finally, the company expects earnings per share between 55-61 cents in the second quarter of fiscal 2017 (against 58 cents reported in the prior year quarter).
The Zacks Consensus Estimate for fiscal second-quarter earnings has been stable at 59 cents per share over the past 60 days. This reflects a year-over-year increase of 1.2%. Further, analysts polled by Zacks expect revenues of $1.2 billion for the said quarter, reflecting a 3.7% increase from a year ago.
Earnings Whispers
Our proven model does not conclusively show that Williams-Sonoma is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -0.08%.
Zacks Rank: Williams-Sonoma currently carries a Zacks Rank #2. Although a Zacks Rank #2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Ross Stores, Inc. (ROST - Free Report) reported solid second-quarter fiscal 2017 results, wherein both the top and the bottom lines topped estimates and improved year over year.
L Brands, Inc. came up with eighth straight quarter of positive earnings surprise, as it reported second-quarter fiscal 2017 results. However, the company’s revenues lagged the Zacks Consensus Estimate for the fourth quarter in row.
Urban Outfitters Inc. (URBN - Free Report) reported better-than-expected results for second-quarter fiscal 2018 after missing the estimates in the preceding three quarters.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Image: Bigstock
What's in Store for Williams-Sonoma (WSM) in Q2 Earnings?
Williams-Sonoma, Inc. (WSM - Free Report) is slated to report second-quarter fiscal 2017 results on Aug 23, after the market closes. Last quarter, this multi-channel specialty retailer of premium quality home products delivered a positive earnings surprise of 6.25%.
The company surpassed earnings estimates in each of the trailing four quarters, the average beat being 3.05%.
The chart below depicts the surprise history.
Williams-Sonoma, Inc. Price and EPS Surprise
Williams-Sonoma, Inc. Price and EPS Surprise | Williams-Sonoma, Inc. Quote
Factors at Play
Williams-Sonoma has been witnessing soft comparable brand revenues for quite some time now. The rate of increase of comparable brand revenues has decreased significantly from 7.1% in 2014 to 3.7% in 2015 and 0.7% in 2016. Comparable brand revenues inched up 0.1% in the first quarter of fiscal 2017, significantly lower than the 4.5% rise in the preceding quarter. The rate of comparable brand revenue increase has softened across all the brands over the years.
However, Williams-Sonoma is focused on enhancing customer experience through improved and innovative marketing techniques. In the first quarter of fiscal 2017, the company increased its digital advertising spend, which led to strong growth across all brands. To enhance customer experience, the company is using web tools that utilize augmented reality, creating videos on social media sites and making digital advertisements. This will help the company to generate higher sales in the to-be-reported quarter. The company will continue to strengthen its competitive advantages through innovation in e-commerce in the upcoming quarters.
The company expects net revenue in the range of $1.195-$1.230 billion against $1.159 billion reported in the prior-year quarter. Comparable brand revenues are likely to grow in the 2% to 5% range (higher than 0.6% growth seen in the prior-year quarter). Finally, the company expects earnings per share between 55-61 cents in the second quarter of fiscal 2017 (against 58 cents reported in the prior year quarter).
The Zacks Consensus Estimate for fiscal second-quarter earnings has been stable at 59 cents per share over the past 60 days. This reflects a year-over-year increase of 1.2%. Further, analysts polled by Zacks expect revenues of $1.2 billion for the said quarter, reflecting a 3.7% increase from a year ago.
Earnings Whispers
Our proven model does not conclusively show that Williams-Sonoma is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -0.08%.
Zacks Rank: Williams-Sonoma currently carries a Zacks Rank #2. Although a Zacks Rank #2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Releases in the Retail-Wholesale Sector
Ross Stores, Inc. (ROST - Free Report) reported solid second-quarter fiscal 2017 results, wherein both the top and the bottom lines topped estimates and improved year over year.
L Brands, Inc. came up with eighth straight quarter of positive earnings surprise, as it reported second-quarter fiscal 2017 results. However, the company’s revenues lagged the Zacks Consensus Estimate for the fourth quarter in row.
Urban Outfitters Inc. (URBN - Free Report) reported better-than-expected results for second-quarter fiscal 2018 after missing the estimates in the preceding three quarters.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>