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Williams-Sonoma (WSM) Q4 Earnings Beat on E-commerce Growth

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Williams-Sonoma Inc.’s (WSM - Free Report) shares jumped more than 12.3% in after-hour trading session on Mar 17, following solid fourth-quarter fiscal 2020 results. The company’s earnings and revenues handily beat the Zacks Consensus Estimate and significantly increased year over year, courtesy of strength across all brands and accelerated e-commerce growth.

Meanwhile, the company is committed to a quarterly dividend increase of 11.3%, effective with the next dividend payment. Also, the company’s board of directors initiated a new stock repurchase authorization of $1 billion.

Earnings & Revenues

Non-GAAP adjusted earnings of $3.95 per share surpassed the Zacks Consensus Estimate of $3.26 by 21.2%. The figure also increased 85.4% from $2.13 reported a year ago.

Revenues of $2,292.7 million beat the consensus mark of $2,117 million by 8.3% and grew 24.4% year over year. The better-than-expected revenues were driven by 47.9% acceleration in net comps growth in the e-commerce business. E-commerce penetration accounted for 70% of total revenues, buoyed by content-rich online experience and marketing strategies.

Comps increased 25.7% versus 24.4% growth in the fiscal third quarter and 7.6% in the year-ago period. Comps at Williams Sonoma increased an impressive 26.2% compared with 3.3% growth registered in the prior-year quarter. Comps in the Pottery Barn brand grew 25.7% compared with 6.7% growth in the prior-year quarter. Pottery Barn Kids and Teen’s comps rose 25.7% compared with 7.9% growth in the year-ago quarter. The West Elm brand’s comps rose 25.2% versus 13.9% growth in the year-ago quarter.

WilliamsSonoma, Inc. Price, Consensus and EPS Surprise

 

WilliamsSonoma, Inc. Price, Consensus and EPS Surprise

WilliamsSonoma, Inc. price-consensus-eps-surprise-chart | WilliamsSonoma, Inc. Quote

Operating Highlights

Non-GAAP gross margin was 42.1%, up 450 basis points (bps) from the year-ago period. The upside was primarily caused by higher merchandise and occupancy leverage in the quarter.

Non-GAAP selling, general and administrative expenses were 24.2% of net revenues compared with 26.1% in the year-ago quarter, reflecting an improvement of 190 bps. The upside was driven by robust top-line performance and ongoing financial and operational strategies. Furthermore, non-GAAP operating margin expanded 630 bps from the year-ago period to 17.9% for the quarter.

Financials

Williams-Sonoma reported cash and cash equivalents of $1,200.3 million as of Jan 31, 2021, compared with $432.2 million on Feb 2, 2020. It also reinstated the share repurchase program, repurchasing $150 million this quarter alone.

2020 Highlights

Net revenues in 2020 came in at $6,783.2 million compared with $5,898 million in 2019, up 15%.

In 2020, Non-GAAP gross margin moved up to 39% from 36.3% in 2019.

Total cash provided by operating activities increased to $1,274.8 million from $607.3 million in 2019.

Adjusted earnings per share in 2020 came in at $9.04 compared with $4.84 in 2019.

Fiscal 2021 Guidance

The company is optimistic about its business strength and anticipates recovery in retail traffic and inventory levels during fiscal 2021.

For fiscal 2021, the company expects revenues to grow mid-to-high single digit. It also expects operating margin expansion on a year-over-year basis.

Nonetheless, the company projects revenue acceleration toward $10 billion over the long term. Also, it expects operating margin to expand to 15% over the next five years.

Zacks Rank

Williams-Sonoma — which shares space with At Home Group Inc. (HOME - Free Report) , RH (RH - Free Report) and Fortune Brands Home & Security, Inc. (FBHS - Free Report) in the Zacks Retail - Home Furnishings industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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