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Williams-Sonoma (WSM) Q2 Earnings Top, Up on Margin Forecast
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Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for second-quarter fiscal 2023 (ended Jul 30, 2023). Earnings beat the Zacks Consensus Estimate but revenues missed the same. Both the metrics declined year over year. The downside was primarily due to the increasing promotional environment and softening industry metrics.
Shares of this leading home furnishings retailer gained more than 3% after the earnings release, most likely on the company’s improved expectation for 2023 operating margin.
Earnings, Revenues & Comps Discussion
Non-GAAP earnings per share (EPS) of $3.12 surpassed the Zacks Consensus Estimate of $2.72 by 14.7% but declined 19.4% from $3.87 reported a year ago.
Revenues of $1.86 billion missed the consensus mark of $1.97 billion and decreased 12.9% year over year.
Comps fell 11.9% versus 11.3% growth in the year-ago period. Our model predicted comps to decline 6% in the quarter.
Comps at West Elm brand decreased 20.8% versus 6.1% growth. Comps at Pottery Barn dipped 10.6% against a 21.5% rise a year ago. Williams-Sonoma comps decreased 0.7% against 0.5% growth registered in the prior-year quarter. Pottery Barn Kids and Teens registered comps decline of 9% against 5.3% growth reported in the prior-year quarter.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
Adjusted gross margin was 40.7%, down 280 basis points (bps) from the year-ago period. The decline was due to higher shipping and freight costs, as well as 190 bps increased occupancy costs during the reported period.
Non-GAAP selling, general and administrative expenses were 26.1% of net revenues (below our projection of 26.6%), reflecting an improvement of 30 bps. Furthermore, the non-GAAP operating margin contracted 250 bps from the year-ago period to 14.6% for the quarter.
Financials
As of Jul 30, 2023, Williams-Sonoma reported cash and cash equivalents of $514.4 million compared with $367.3 million at the fiscal 2022-end. Net cash from operating activities totaled $715 million in the first six months of fiscal 2023 compared with $383.6 million a year ago.
Guidance Updated
WSM anticipates fiscal 2023 net revenues to decline between 5% and 10%. The company now expects its operating margin to be 15-16% versus earlier expectations of 14-15%.
Further, for the long term, WSM still projects mid-to-high single-digit annual net revenue growth and an operating margin above 15% in the long term.
Zacks Rank & Key Picks
Williams-Sonoma currently carries a Zacks Rank #3 (Hold).
BJ's Restaurants currently sports a Zacks Rank of 1 (Strong Buy). BJRI delivered a trailing four-quarter earnings surprise of 121.2%, on average. Shares of the company have gained 15% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates growth of 5.6% and 435.3%, respectively, from the previous year’s reported levels.
Builders FirstSource currently sports a Zacks Rank of 1. BLDR has a trailing four-quarter earnings surprise of 52.2%, on average. Shares of the company have rallied 103.1% in the year-to-date period.
The Zacks Consensus Estimate for BLDR’s 2023 sales and EPS indicates a decline of 23.2% and 29.6%, respectively, from the previous year’s reported levels.
Domino's currently carries a Zacks Rank #2 (Buy).
DPZ delivered a trailing four-quarter earnings surprise of 4.8%, on average. Shares of the company have gained 9.6% in the year-to-date period. The Zacks Consensus Estimate for DPZ’s 2023 sales indicates a decline of 0.1%, while EPS indicates growth of 9.6% from the previous year’s reported levels.
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Williams-Sonoma (WSM) Q2 Earnings Top, Up on Margin Forecast
Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for second-quarter fiscal 2023 (ended Jul 30, 2023). Earnings beat the Zacks Consensus Estimate but revenues missed the same. Both the metrics declined year over year. The downside was primarily due to the increasing promotional environment and softening industry metrics.
Shares of this leading home furnishings retailer gained more than 3% after the earnings release, most likely on the company’s improved expectation for 2023 operating margin.
Earnings, Revenues & Comps Discussion
Non-GAAP earnings per share (EPS) of $3.12 surpassed the Zacks Consensus Estimate of $2.72 by 14.7% but declined 19.4% from $3.87 reported a year ago.
Revenues of $1.86 billion missed the consensus mark of $1.97 billion and decreased 12.9% year over year.
Comps fell 11.9% versus 11.3% growth in the year-ago period. Our model predicted comps to decline 6% in the quarter.
Comps at West Elm brand decreased 20.8% versus 6.1% growth. Comps at Pottery Barn dipped 10.6% against a 21.5% rise a year ago. Williams-Sonoma comps decreased 0.7% against 0.5% growth registered in the prior-year quarter. Pottery Barn Kids and Teens registered comps decline of 9% against 5.3% growth reported in the prior-year quarter.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
Williams-Sonoma, Inc. price-consensus-eps-surprise-chart | Williams-Sonoma, Inc. Quote
Operating Highlights
Adjusted gross margin was 40.7%, down 280 basis points (bps) from the year-ago period. The decline was due to higher shipping and freight costs, as well as 190 bps increased occupancy costs during the reported period.
Non-GAAP selling, general and administrative expenses were 26.1% of net revenues (below our projection of 26.6%), reflecting an improvement of 30 bps. Furthermore, the non-GAAP operating margin contracted 250 bps from the year-ago period to 14.6% for the quarter.
Financials
As of Jul 30, 2023, Williams-Sonoma reported cash and cash equivalents of $514.4 million compared with $367.3 million at the fiscal 2022-end. Net cash from operating activities totaled $715 million in the first six months of fiscal 2023 compared with $383.6 million a year ago.
Guidance Updated
WSM anticipates fiscal 2023 net revenues to decline between 5% and 10%. The company now expects its operating margin to be 15-16% versus earlier expectations of 14-15%.
Further, for the long term, WSM still projects mid-to-high single-digit annual net revenue growth and an operating margin above 15% in the long term.
Zacks Rank & Key Picks
Williams-Sonoma currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Retail-Wholesale sector are BJ's Restaurants, Inc. (BJRI - Free Report) , Builders FirstSource, Inc. (BLDR - Free Report) and Domino's Pizza, Inc. (DPZ - Free Report) .
BJ's Restaurants currently sports a Zacks Rank of 1 (Strong Buy). BJRI delivered a trailing four-quarter earnings surprise of 121.2%, on average. Shares of the company have gained 15% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates growth of 5.6% and 435.3%, respectively, from the previous year’s reported levels.
Builders FirstSource currently sports a Zacks Rank of 1. BLDR has a trailing four-quarter earnings surprise of 52.2%, on average. Shares of the company have rallied 103.1% in the year-to-date period.
The Zacks Consensus Estimate for BLDR’s 2023 sales and EPS indicates a decline of 23.2% and 29.6%, respectively, from the previous year’s reported levels.
Domino's currently carries a Zacks Rank #2 (Buy).
DPZ delivered a trailing four-quarter earnings surprise of 4.8%, on average. Shares of the company have gained 9.6% in the year-to-date period. The Zacks Consensus Estimate for DPZ’s 2023 sales indicates a decline of 0.1%, while EPS indicates growth of 9.6% from the previous year’s reported levels.