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Williams-Sonoma (WSM) Q4 Earnings: E-Commerce Holds Key

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Williams-Sonoma, Inc. (WSM - Free Report) is slated to report fourth-quarter fiscal 2018 results on Mar 20, after market close. In the last reported quarter, earnings topped the Zacks Consensus Estimate by 1.1% but revenues lagged the same by 0.7%. In fact, its earnings surpassed estimates in all the trailing four quarters, with the average being 8.7%.

In the fiscal third quarter, earnings and revenues increased 13.1% and 4.4%, respectively, on a year-over-year basis.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate has been revised upward over the past 60 days to $1.97 per share. This reflects an increase of 17.3% from the year-ago earnings of $1.68 per share. Revenues are expected to be $1.8 billion, up 7.2% year over year.

Williams-Sonoma, Inc. Price and EPS Surprise

 

Williams-Sonoma, Inc. Price and EPS Surprise | Williams-Sonoma, Inc. Quote

Factors at Play

Williams-Sonoma is expected to witness higher revenues in the fiscal fourth quarter, courtesy of its multi-channel multi-brand platform, strong e-commerce growth, solid execution of strategic initiatives and digital leadership, product innovation, retail transformation, and operational excellence across business. The company’s investment in merchandising of its brands, efficient catalog circulations and digital marketing are expected to boost e-commerce revenues. This is evident from 9.4% revenue growth in its e-commerce channel in the first nine months of fiscal 2018.

Importantly, sales from e-commerce channel, accounting for 55% of its total revenues, are an important source of revenues. For the to-be-reported quarter, the Zacks Consensus Estimate for e-commerce revenues of $836 million indicates an increase from $610 million in the last reported quarter and $803 million in the year-ago period.

Meanwhile, the Zacks Consensus Estimate for the company’s Retail segment (comprising 45% of the total revenues) revenues is pegged at $963 million compared with $747 million reported in the fiscal third quarter and $877 million in the year-ago period.

Overall, Williams-Sonoma expects net revenues in the range of $1,733-$1,833 million in the fiscal fourth quarter compared with $1,630 million reported a year ago.

That said, Williams-Sonoma’s revenue growth is expected to be offset by a decline in store count. Meanwhile, its comparable brand revenues are likely to grow 0-5% compared with 5.4% growth in the year-ago quarter.

Higher revenue growth, lower tax rate and share repurchases are likely to support bottom-line growth. However, the improvement will be partly offset by a contraction in its operating margin. Increased digital advertising investments, higher labor costs and implementation of the new revenue recognition standard are expected to offset some of the above-mentioned positives. Williams-Sonoma expects non-GAAP earnings per share in the band of $1.89-$1.99 for the to-be-reported quarter.

What the Zacks Model Says

Our proven model does not show that Williams-Sonoma is likely to beat estimates in the quarter to be reported. 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: Williams-Sonoma currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) 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.

Stocks Worth a Look

Here are a few stocks in the Zacks Retail-Wholesale sector, which have the right combination of elements to beat estimates in their respective quarters to be reported.

MarineMax, Inc. (HZO - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #2.

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +1.32% and a Zacks Rank #3.

Group 1 Automotive, Inc. (GPI - Free Report) has an Earnings ESP of +2.26% and a Zacks Rank #3.

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