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Why Is Williams-Sonoma (WSM) Down 22.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Williams-Sonoma (WSM - Free Report) . Shares have lost about 22.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Williams-Sonoma due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Williams-Sonoma Inc. reported impressive earnings for second-quarter fiscal 2022 (ended Aug 1, 2022). The company’s earnings and revenues beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands, along with the success of growth initiatives.
Defying supply-chain woes, material and labor shortages and capacity limitations, revenues improved from the year-ago period on strong demand.
Laura Alber, president and CEO of Williams-Sonoma, said, “I am very proud of this performance especially given the macroeconomic backdrop and the strong compares we were up against, all while delivering an impressive 41.1% comp on a two-year basis. And it is this continued outperformance that gives us the confidence to reiterate our 2022 guidance and longer-term outlook today.”
Earnings & Revenues
Non-GAAP earnings of $3.87 per share surpassed the Zacks Consensus Estimate of $3.54 by 9.3%. The figure also increased 19.4% from $3.24 per share reported a year ago.
Revenues of $2.14 billion beat the consensus mark by 5.2% and grew 9.7% year over year. The impressive revenues were driven by strong growth across all brands.
The company’s total comps increased 11.3% compared with 29.8% growth in the year-ago period. Comps in the Pottery Barn brand grew 21.5% compared with 29.6% growth in the prior-year quarter. Comps at West Elm increased 6.1% compared with 51.1% growth registered in the prior-year quarter. Pottery Barn Kids and Teen’s comps grew 5.3% versus 18% growth in the year-ago quarter. Williams-Sonoma brand’s comps improved 0.5% compared with 6.4% growth in the year-ago quarter.
Operating Highlights
The gross margin was 43.5%, down 60 basis points (bps) from the year-ago period. The downside was primarily caused by higher shipping and freight costs, partially offset by merchandise margin expansion.
Non-GAAP selling, general and administrative expenses were 26.4% of net revenues compared with 27.3% in the year-ago quarter, reflecting a decrease of 90 bps. Furthermore, the non-GAAP operating margin expanded 40 bps from the year-ago period to 17.1% for the quarter.
Financials
As of Jul 31, 2022, Williams-Sonoma reported cash and cash equivalents of $124.9 million compared with $850.3 million at fiscal 2021-end. Net cash provided by operating activities totaled $383.6 million during the first six months of 2022, down $475.7 million in the year-ago quarter.
Williams-Sonoma rewarded shareholders in the form of dividends (more than $54 million) and share repurchases (more than $265 million) during the quarter.
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 the operating margin to be relatively in line with fiscal 2021.
Further, WSM projects revenues to increase by $10 billion over the long-term (by fiscal 2024).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.33% due to these changes.
VGM Scores
At this time, Williams-Sonoma has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Williams-Sonoma has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Williams-Sonoma (WSM) Down 22.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Williams-Sonoma (WSM - Free Report) . Shares have lost about 22.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Williams-Sonoma due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Williams-Sonoma Q2 Earnings & Revenues Beat Estimates
Williams-Sonoma Inc. reported impressive earnings for second-quarter fiscal 2022 (ended Aug 1, 2022). The company’s earnings and revenues beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands, along with the success of growth initiatives.
Defying supply-chain woes, material and labor shortages and capacity limitations, revenues improved from the year-ago period on strong demand.
Laura Alber, president and CEO of Williams-Sonoma, said, “I am very proud of this performance especially given the macroeconomic backdrop and the strong compares we were up against, all while delivering an impressive 41.1% comp on a two-year basis. And it is this continued outperformance that gives us the confidence to reiterate our 2022 guidance and longer-term outlook today.”
Earnings & Revenues
Non-GAAP earnings of $3.87 per share surpassed the Zacks Consensus Estimate of $3.54 by 9.3%. The figure also increased 19.4% from $3.24 per share reported a year ago.
Revenues of $2.14 billion beat the consensus mark by 5.2% and grew 9.7% year over year. The impressive revenues were driven by strong growth across all brands.
The company’s total comps increased 11.3% compared with 29.8% growth in the year-ago period. Comps in the Pottery Barn brand grew 21.5% compared with 29.6% growth in the prior-year quarter. Comps at West Elm increased 6.1% compared with 51.1% growth registered in the prior-year quarter. Pottery Barn Kids and Teen’s comps grew 5.3% versus 18% growth in the year-ago quarter. Williams-Sonoma brand’s comps improved 0.5% compared with 6.4% growth in the year-ago quarter.
Operating Highlights
The gross margin was 43.5%, down 60 basis points (bps) from the year-ago period. The downside was primarily caused by higher shipping and freight costs, partially offset by merchandise margin expansion.
Non-GAAP selling, general and administrative expenses were 26.4% of net revenues compared with 27.3% in the year-ago quarter, reflecting a decrease of 90 bps. Furthermore, the non-GAAP operating margin expanded 40 bps from the year-ago period to 17.1% for the quarter.
Financials
As of Jul 31, 2022, Williams-Sonoma reported cash and cash equivalents of $124.9 million compared with $850.3 million at fiscal 2021-end. Net cash provided by operating activities totaled $383.6 million during the first six months of 2022, down $475.7 million in the year-ago quarter.
Williams-Sonoma rewarded shareholders in the form of dividends (more than $54 million) and share repurchases (more than $265 million) during the quarter.
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 the operating margin to be relatively in line with fiscal 2021.
Further, WSM projects revenues to increase by $10 billion over the long-term (by fiscal 2024).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.33% due to these changes.
VGM Scores
At this time, Williams-Sonoma has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Williams-Sonoma has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.