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Williams-Sonoma (WSM) Q3 Earnings Top, Revenues Lag, Down Y/Y

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Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for the third quarter of fiscal 2023 (ended Oct 29, 2023). In the quarter, earnings beat the Zacks Consensus Estimate, but revenues missed the same. Also, both metrics declined year over year.

The quarterly results reflect low contributions from the company’s reportable brands driven by ongoing softness witnessed in consumer discretionary spending, especially on furniture. Also, elevated levels of promotional activity and current macroeconomic uncertainties added to the downtrend. That said, Williams-Sonoma’s solid operating model partially offset the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service.

Following the earnings release, shares of this multi-channel specialty retailer of premium quality home products gained 6.2% during the trading hours on Nov 16.

Earnings, Revenue & Comps Discussion

Non-GAAP earnings per share (EPS) of $3.66 surpassed the Zacks Consensus Estimate of $3.34 by 9.6%. However, the metric declined 1.6% from $3.72 reported a year ago.

Net revenues of $1.85 billion missed the consensus mark of $1.95 billion and decreased 15.5% year over year.

Williams-Sonoma, Inc. Price, Consensus and EPS Surprise

Williams-Sonoma, Inc. Price, Consensus and EPS Surprise

Williams-Sonoma, Inc. price-consensus-eps-surprise-chart | Williams-Sonoma, Inc. Quote

In the fiscal third quarter, comps fell 14.6% against 8.1% growth in the year-ago period. Our model predicted comps to decline 9.3% in the quarter.

Comps at West Elm brand decreased 22.4% versus 4.2% growth year over year. Comps at Pottery Barn dipped 16.6% against a 19.6% rise a year ago. Williams-Sonoma comps decreased 1.9% compared with the 1.5% decline registered in the prior-year quarter. Pottery Barn Kids and Teens registered a comps decline of 6.9%, up from the 4.8% decline reported in the prior-year quarter.

Operating Highlights

The gross margin was 44.4%, up 290 basis points (bps) from the year-ago period. The increase was due to lower shipping and freight costs, along with a 1% year-over-year decline in occupancy costs.

Non-GAAP selling, general and administrative expenses were 27.4% of net revenues (below our projection of 25.3%), reflecting an increase of 140 bps year over year. Furthermore, the non-GAAP operating margin expanded 150 bps from the year-ago period to 17% for the quarter.


As of Oct 29, 2023, Williams-Sonoma reported cash and cash equivalents of $698.8 million compared with $367.3 million at the fiscal 2022-end. Net cash from operating activities totaled $1.01 billion in the first nine months of fiscal 2023 compared with $588.5 million reported in the comparable period a year ago.

Fiscal 2023 Guidance Revised

Williams-Sonoma anticipates fiscal 2023 net revenues to decline between 10% and 12% compared with the prior expected range of 5%-10%. The company now expects its operating margin to be 16-16.5%, up from 15-16% expected earlier.

Further, for the long term, the company still projects mid-to-high-single-digit annual net revenue growth and an operating margin above 15%.

Zacks Rank

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.

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