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Williams-Sonoma (WSM) Up on Q4 Earnings Beat, Hikes Dividend

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Williams-Sonoma Inc. (WSM - Free Report) reported impressive earnings for fourth-quarter fiscal 2021 (ended Jan 30, 2022). The company’s earnings beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands along with accelerated e-commerce growth.

Defying supply chain woes, material and labor shortages, and capacity limitations, revenues improved from the year-ago period on strong demand. Shares of this leading home furnishing retailer jumped 8.28% in the after-hours trading session on Mar 16.

Laura Alber, president and CEO of Williams-Sonoma, said, “We are immensely proud of our accomplishments, our record fiscal year results, and the outstanding work of our team. I am confident that we will continue to raise the bar and extend this momentum in fiscal 2022.”

WSM also announced a 10% hike in the quarterly cash dividend to 78 cents per share, payable on May 27, 2022, to stockholders of record as of Apr 22. Also, its board of directors has approved a new $1.5-billion stock repurchase authorization, which supersedes the outstanding balance of the current stock repurchase program of approximately $750 million.

Earnings & Revenues

Non-GAAP earnings of $5.42 per share surpassed the Zacks Consensus Estimate of $4.78 by 13.4%. The figure also increased 37.2% from $3.95 per share reported a year ago.

WilliamsSonoma, Inc. Price, Consensus and EPS Surprise

WilliamsSonoma, Inc. Price, Consensus and EPS Surprise

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

Revenues of $2.5 billion missed the consensus mark of $2.57 billion by 2.8% but grew 9.1% year over year. The impressive revenues were driven by strong growth across all brands.

Comps increased 10.8% versus 25.7% growth in the year-ago period. Comps at West Elm increased 18.3% compared with 25.2% growth registered in the prior-year quarter. Comps in the Pottery Barn brand grew 16.2% versus 25.7% growth in the prior-year quarter. Williams Sonoma brand’s comps rose 4.5% compared with 26.2% growth in the year-ago quarter. Pottery Barn Kids and Teen’s comps declined 6.1% versus 25.7% growth in the year-ago quarter.

Operating Highlights

Non-GAAP gross margin was 45%, up 290 basis points (bps) from the year-ago period. The upside was primarily caused by higher merchandise margins and occupancy leverage in the quarter.

Non-GAAP selling, general and administrative expenses were 24% of net revenues compared with 24.2% in the year-ago quarter, reflecting a decrease of 20 bps. Furthermore, non-GAAP operating margin expanded 310 bps from the year-ago period to 21% for the quarter.

Financials

As of Jan 30, 2022, Williams-Sonoma reported cash and cash equivalents of $850.3 million compared with $1,200.3 million at fiscal 2020-end. Net cash provided by operating activities totaled $1.37 billion compared with $1.27 billion in fiscal 2020.

Return on invested capital or ROIC in fiscal 2021 was 57.9% compared with 38.1% last year, driven by record earnings and inventory optimization. Williams-Sonoma returned nearly $1.1 billion to shareholders in the form of dividends ($188 million) and share repurchases (approximately $900 million).

Fiscal 2021 Highlights

Net revenues for fiscal 2021 came in at $8.25 billion compared with $6.78 billion in fiscal 2020, up 21.6%. Comps growth for fiscal 2021 was 22% compared with 17% in the year-ago period. Adjusted earnings per share came in at $14.85 compared with $9.04 a year ago.

Non-GAAP gross margin moved up to 44% from 39% in fiscal 2020. Non-GAAP operating margin also expanded 350 bps from the year-ago period to 17.7%.

Fiscal 2022 Guidance

The company remains optimistic about business strength and continued success of new initiatives and competitive advantages that are rooted in key differentiators like in-house design, digital-first channel strategy, and values.

WSM expects fiscal 2022 net revenues to grow in mid-to-high single digits. It also expects operating margin to be relatively in line with fiscal 2021.

Further, WSM projects revenue acceleration of $10 billion over the long term (by fiscal 2024).

Zacks Rank & Recent Releases

Williams-Sonoma currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fastenal Company (FAST - Free Report) — which currently carries a Zacks Rank #2 — ended 2021 on a solid note.

Fastenal’s fourth-quarter 2021 earnings and revenues not only beat the Zacks Consensus Estimate but also improved on a year-over-year basis, given the strong demand for manufacturing and construction equipment and supplies along with higher pricing.

Beacon Roofing Supply, Inc. (BECN - Free Report) — a Zacks Rank #3 (Hold) stock — reported solid results for calendar fourth-quarter 2021 or the transition period (Oct 1 to Dec 31, 2021).

The top and bottom lines surpassed their respective Zacks Consensus Estimate as well as improved significantly on a year-over-year basis. The solid results were mainly backed by strong net sales, gross margin expansion and operational improvement.

Builders FirstSource (BLDR - Free Report) — which currently carries a Zacks Rank #1 — ended 2021 on a solid note. The company reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed the Zacks Consensus Estimate as well as increased significantly year over year.

The results were driven by an increase in net sales and gross margin amid persistent raw material supply woes.