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Why Is Williams-Sonoma (WSM) Up 3.1% 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 added about 3.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Williams-Sonoma due for a pullback? 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 reported results for the fourth quarter of fiscal 2023 (ended Jan 28, 2024). In the quarter, earnings and net revenues beat the Zacks Consensus Estimate but declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands, including Pottery Barn, West Elm, and Pottery Barn Kids and Teen. The downtrend was driven by ongoing softness in the housing market and geopolitical uncertainties. Also, an increase in occupancy costs, along with employment and general expenses, added to the downtrend.
Nonetheless, Williams-Sonoma’s solid operating model partially offset the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service. Owing to the operational efficiencies and strong liquidity position, the company hiked its quarterly dividend payment by 26% to 23 cents per share ($1.13 per share annually). The amount will be paid out on May 24, 2024, to shareholders of record as of Apr 19.
Earnings, Revenue & Comps Discussion
Non-GAAP earnings per share (EPS) of $5.44 surpassed the Zacks Consensus Estimate of $5.06 by 7.5%. However, the metric declined 1.1% from $5.50 reported a year ago.
Net revenues of $2.28 billion topped the consensus mark of $2.21 billion by 3% and decreased 6.9% year over year.
In the fiscal fourth quarter, comps fell 6.8% compared with 0.6% in the year-ago period. Our model predicted comps to decline 7.6% in the quarter.
Comps at West Elm brand decreased 15.3% compared with 10.7% reported in the year-ago quarter. Comps at Pottery Barn dipped 9.6% against a 5.8% rise a year ago. Williams-Sonoma comps increased 1.6% against a 2.5% decline registered in the year-ago quarter. Pottery Barn Kids and Teens registered a comps decline of 2.5% against 4% growth reported in the year-ago quarter.
Operating Highlights
The gross margin was 46%, up 480 basis points (bps) from the year-ago period. The increase was due to higher merchandise margins and lower costs from supply-chain efficiencies, partially offset by a 2.1% year-over-year increase in occupancy costs.
Non-GAAP selling, general and administrative expenses were 25.9% of net revenues (above our projection of 24.4%), reflecting an increase of 460 bps year over year. Furthermore, the non-GAAP operating margin expanded 20 bps from the year-ago period to 20.1% for the quarter.
Sneak Peek at Fiscal 2023
For the fiscal year, Williams-Sonoma reported net revenues of $7.75 billion, down from $8.67 billion reported in fiscal 2022. Non-GAAP EPS of $14.85 was down from $16.54 reported a year ago.
The gross margin in fiscal 2023 was 42.7%, up from 42.4% reported in the prior year. Non-GAAP operating margin contracted 110 bps to 16.4% year over year.
Financials
As of Jan 28, 2024, Williams-Sonoma reported cash and cash equivalents of $1.26 billion, up from $367.3 million in the fiscal 2022 end. Net cash from operating activities totaled $1.68 billion in fiscal 2023 compared with $1.05 billion reported in the comparable period a year ago.
Fiscal 2024 Guidance Unveiled
Williams-Sonoma anticipates fiscal 2024 net revenues to be in the range of -3% to +3%. The company expects its operating margin to be between 16.5% and 16.8%. Comps for the year are expected to be in the range of -4.5% to +1.5%.
Further, for the long term, the company still projects mid-to-high-single-digit annual net revenue growth and an operating margin in the mid-to-high teens.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Williams-Sonoma has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 broadly 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) Up 3.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Williams-Sonoma (WSM - Free Report) . Shares have added about 3.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Williams-Sonoma due for a pullback? 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's Q4 Earnings & Revenue Beat Estimates
Williams-Sonoma reported results for the fourth quarter of fiscal 2023 (ended Jan 28, 2024). In the quarter, earnings and net revenues beat the Zacks Consensus Estimate but declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands, including Pottery Barn, West Elm, and Pottery Barn Kids and Teen. The downtrend was driven by ongoing softness in the housing market and geopolitical uncertainties. Also, an increase in occupancy costs, along with employment and general expenses, added to the downtrend.
Nonetheless, Williams-Sonoma’s solid operating model partially offset the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service. Owing to the operational efficiencies and strong liquidity position, the company hiked its quarterly dividend payment by 26% to 23 cents per share ($1.13 per share annually). The amount will be paid out on May 24, 2024, to shareholders of record as of Apr 19.
Earnings, Revenue & Comps Discussion
Non-GAAP earnings per share (EPS) of $5.44 surpassed the Zacks Consensus Estimate of $5.06 by 7.5%. However, the metric declined 1.1% from $5.50 reported a year ago.
Net revenues of $2.28 billion topped the consensus mark of $2.21 billion by 3% and decreased 6.9% year over year.
In the fiscal fourth quarter, comps fell 6.8% compared with 0.6% in the year-ago period. Our model predicted comps to decline 7.6% in the quarter.
Comps at West Elm brand decreased 15.3% compared with 10.7% reported in the year-ago quarter. Comps at Pottery Barn dipped 9.6% against a 5.8% rise a year ago. Williams-Sonoma comps increased 1.6% against a 2.5% decline registered in the year-ago quarter. Pottery Barn Kids and Teens registered a comps decline of 2.5% against 4% growth reported in the year-ago quarter.
Operating Highlights
The gross margin was 46%, up 480 basis points (bps) from the year-ago period. The increase was due to higher merchandise margins and lower costs from supply-chain efficiencies, partially offset by a 2.1% year-over-year increase in occupancy costs.
Non-GAAP selling, general and administrative expenses were 25.9% of net revenues (above our projection of 24.4%), reflecting an increase of 460 bps year over year. Furthermore, the non-GAAP operating margin expanded 20 bps from the year-ago period to 20.1% for the quarter.
Sneak Peek at Fiscal 2023
For the fiscal year, Williams-Sonoma reported net revenues of $7.75 billion, down from $8.67 billion reported in fiscal 2022. Non-GAAP EPS of $14.85 was down from $16.54 reported a year ago.
The gross margin in fiscal 2023 was 42.7%, up from 42.4% reported in the prior year. Non-GAAP operating margin contracted 110 bps to 16.4% year over year.
Financials
As of Jan 28, 2024, Williams-Sonoma reported cash and cash equivalents of $1.26 billion, up from $367.3 million in the fiscal 2022 end. Net cash from operating activities totaled $1.68 billion in fiscal 2023 compared with $1.05 billion reported in the comparable period a year ago.
Fiscal 2024 Guidance Unveiled
Williams-Sonoma anticipates fiscal 2024 net revenues to be in the range of -3% to +3%. The company expects its operating margin to be between 16.5% and 16.8%. Comps for the year are expected to be in the range of -4.5% to +1.5%.
Further, for the long term, the company still projects mid-to-high-single-digit annual net revenue growth and an operating margin in the mid-to-high teens.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Williams-Sonoma has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 broadly 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.