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Williams-Sonoma (WSM) Q3 Earnings Top, Comps Soft, Stock Down
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Williams-Sonoma Inc.’s (WSM - Free Report) shares plunged more than 13% in the after-hour trading session on Nov 15, despite reporting better-than-expected earnings in the third quarter of fiscal 2018. Presumably, lower-than-expected revenues along with weak comparable brand revenues (comps) have disappointed investors. Notably, revenues and comps were at the lower end of management’s guided range.
Williams-Sonoma reported non-GAAP earnings of 95 cents per share (at the higher end of the guided range), surpassing the Zacks Consensus Estimate of 94 cents. The figure also grew 13.1% year over year.
The company’s revenues of $1,357 million missed the consensus mark of $1,363 million but grew 4.4% year over year.
Comps increased 3.1% compared with 4.6% increase in the second quarter and 3.3% growth in the year-ago quarter.
Meanwhile, demand comps (total customer orders placed in the quarter) were 4.6%, higher than reported comps growth of 3.1%. The company highlighted that the gap between demand comps and reported comps was mainly due to unexpected delays in product receipts owing to port congestion of products imported out of China, as many U.S. importers enhanced shipments ahead of the Jan 1 tariff increase.
The company’s West Elm brand’s comps grew 8.3% compared with 11.5% growth in the prior-year quarter. Also, Pottery Barn’s comps were up 1.4% from negative 0.3% in the year-ago quarter. Meanwhile, Pottery Barn Kids and Teen’s recorded flat comps compared with 0.9% growth in the year-ago quarter. The company’s Williams Sonoma brand’s comps were 2.1%, down from 2.3% growth registered in the prior-year quarter.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
E-Commerce (55% of fiscal third-quarter revenues) segment reported net revenues of $746.7 million in the quarter, up 8.2% year over year.
Retail (45%) segment’s net revenues inched up 0.2% to $610.3 million in the reported quarter.
Operating Highlights
Non-GAAP gross margin was 36.5%, up 60 basis points (bps) from the year-ago figure. The upside was attributable to higher selling margins and occupancy leverage.
Non-GAAP selling, general and administrative (SG&A) expenses were 28.9% of net revenues or $391.7 million in the quarter, reflecting an increase of 100 bps year over year, owing to higher employment-related costs.
Non-GAAP operating margin was 7.6% in the quarter, down 90 bps year over year. Merchandise inventories increased 1.8% to $1.2 billion.
Financials
Williams-Sonoma reported cash and cash equivalents of $164.4 million as of Oct 28, 2018 compared with $390.1 million on Jan 28, 2018.
During fiscal third quarter, the company repurchased 742,508 shares of common stock at an average price of $61.15 per share and a total cost of approximately $45 million. As of Oct 28, 2018, Williams-Sonoma had approximately $299 million remaining under its present stock repurchase program.
Fiscal Fourth-Quarter Guidance
Williams-Sonoma currently expects non-GAAP earnings per share in the band of $1.89-$1.99.
The company expects net revenues in the range of $1,733-$1,833 million. Comps are likely to grow 0-5%.
Reaffirms Fiscal 2018 Guidance
Williams-Sonoma expects its total revenues in the $5,565-$5,665 million range. Comps are expected to grow in the range of 3-5%.
Williams-Sonoma expects non-GAAP earnings within $4.26-$4.36.
Non-GAAP operating margin is likely to be in the range of 8.4-9%. The company also retained its tax rate and capital expenditure guidance of 24-26% and $200-$220 million, respectively.
Zacks Rank & Key Picks
Currently, Williams-Sonoma carries a Zacks Rank #4 (Sell).
RH has an expected earnings growth rate of 150.2% for the current year.
Kohl's expected earnings growth rate is 30.8% for the current year.
Macy’s has an expected earnings growth rate of 6.9% for the current year.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Williams-Sonoma (WSM) Q3 Earnings Top, Comps Soft, Stock Down
Williams-Sonoma Inc.’s (WSM - Free Report) shares plunged more than 13% in the after-hour trading session on Nov 15, despite reporting better-than-expected earnings in the third quarter of fiscal 2018. Presumably, lower-than-expected revenues along with weak comparable brand revenues (comps) have disappointed investors. Notably, revenues and comps were at the lower end of management’s guided range.
Williams-Sonoma reported non-GAAP earnings of 95 cents per share (at the higher end of the guided range), surpassing the Zacks Consensus Estimate of 94 cents. The figure also grew 13.1% year over year.
The company’s revenues of $1,357 million missed the consensus mark of $1,363 million but grew 4.4% year over year.
Comps increased 3.1% compared with 4.6% increase in the second quarter and 3.3% growth in the year-ago quarter.
Meanwhile, demand comps (total customer orders placed in the quarter) were 4.6%, higher than reported comps growth of 3.1%. The company highlighted that the gap between demand comps and reported comps was mainly due to unexpected delays in product receipts owing to port congestion of products imported out of China, as many U.S. importers enhanced shipments ahead of the Jan 1 tariff increase.
The company’s West Elm brand’s comps grew 8.3% compared with 11.5% growth in the prior-year quarter. Also, Pottery Barn’s comps were up 1.4% from negative 0.3% in the year-ago quarter. Meanwhile, Pottery Barn Kids and Teen’s recorded flat comps compared with 0.9% growth in the year-ago quarter. The company’s Williams Sonoma brand’s comps were 2.1%, down from 2.3% growth registered in the prior-year quarter.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise | Williams-Sonoma, Inc. Quote
Segment Details
E-Commerce (55% of fiscal third-quarter revenues) segment reported net revenues of $746.7 million in the quarter, up 8.2% year over year.
Retail (45%) segment’s net revenues inched up 0.2% to $610.3 million in the reported quarter.
Operating Highlights
Non-GAAP gross margin was 36.5%, up 60 basis points (bps) from the year-ago figure. The upside was attributable to higher selling margins and occupancy leverage.
Non-GAAP selling, general and administrative (SG&A) expenses were 28.9% of net revenues or $391.7 million in the quarter, reflecting an increase of 100 bps year over year, owing to higher employment-related costs.
Non-GAAP operating margin was 7.6% in the quarter, down 90 bps year over year. Merchandise inventories increased 1.8% to $1.2 billion.
Financials
Williams-Sonoma reported cash and cash equivalents of $164.4 million as of Oct 28, 2018 compared with $390.1 million on Jan 28, 2018.
During fiscal third quarter, the company repurchased 742,508 shares of common stock at an average price of $61.15 per share and a total cost of approximately $45 million. As of Oct 28, 2018, Williams-Sonoma had approximately $299 million remaining under its present stock repurchase program.
Fiscal Fourth-Quarter Guidance
Williams-Sonoma currently expects non-GAAP earnings per share in the band of $1.89-$1.99.
The company expects net revenues in the range of $1,733-$1,833 million. Comps are likely to grow 0-5%.
Reaffirms Fiscal 2018 Guidance
Williams-Sonoma expects its total revenues in the $5,565-$5,665 million range. Comps are expected to grow in the range of 3-5%.
Williams-Sonoma expects non-GAAP earnings within $4.26-$4.36.
Non-GAAP operating margin is likely to be in the range of 8.4-9%. The company also retained its tax rate and capital expenditure guidance of 24-26% and $200-$220 million, respectively.
Zacks Rank & Key Picks
Currently, Williams-Sonoma carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Retail-Wholesale sector are RH (RH - Free Report) , Kohl's Corporation (KSS - Free Report) and Macy's, Inc. (M - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RH has an expected earnings growth rate of 150.2% for the current year.
Kohl's expected earnings growth rate is 30.8% for the current year.
Macy’s has an expected earnings growth rate of 6.9% for the current year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>