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Williams-Sonoma (WSM) Down 7.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Williams-Sonoma (WSM - Free Report) . Shares have lost about 7.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Williams-Sonoma’s (WSM - Free Report) Q1 Earnings Beat, View Up
Williams-Sonoma Inc. reported solid first-quarter fiscal 2021 results. The company’s earnings and revenues handily beat the Zacks Consensus Estimate as well as significantly increased year over year, courtesy of strength across all brands along with accelerated e-commerce growth.
Meanwhile, the company has lifted fiscal 2021 outlook, courtesy of solid start to the year and encouraging macro trends.
Laura Alber, President and Chief Executive Officer, said, “As we look ahead, we are confident in our runway for growth and profitability. The goals we have set are driving incremental growth faster than anticipated, our brand differentiators continue to accelerate, and favorable macro trends should continue to benefit our business for the long-term. We are the only home furnishings retailer that’s able to serve customers at scale online and provide the experience and convenience of physical retail with exclusive sustainable products – giving us the unique advantage to gain share for many years to come.”
Earnings & Revenues
Non-GAAP adjusted earnings of $2.93 per share surpassed the Zacks Consensus Estimate of $1.85 by 58.4%. The figure also increased 295.9% from 74 cents per share reported a year ago.
Revenues of $1,749 million beat the consensus mark of $1,508 million by 16% and grew 41.6% year over year. The better-than-expected revenues were driven by comparable brand revenue growth of 40.4%.
Also, e-commerce penetration accounted for more than 65% of total revenues, buoyed by content-rich online experience and marketing strategies.
Comps increased 40.4% versus 25.7% growth in the fiscal fourth quarter and 2.6% in the year-ago period. Comps at West Elm increased an impressive 50.9% compared with 3.3% growth registered in the prior-year quarter. Comps in the Pottery Barn brand grew 41.3% against a decline of 1.1% in the prior-year quarter. Williams Sonoma brand’s comps rose 35.3% compared with 5.4% growth in the year-ago quarter. Pottery Barn Kids and Teen’s comps rose 27.6% versus 8.5% growth in the year-ago quarter.
Operating Highlights
Non-GAAP gross margin was 43%, up 850 basis points (bps) from the year-ago period. The upside was primarily caused by higher selling margins and occupancy leverage in the quarter.
Non-GAAP selling, general and administrative expenses were 27.1% of net revenues compared with 28.1% in the year-ago quarter, reflecting an improvement of 100 bps. The upside was driven by robust top-line performance and ongoing financial and operational strategies, partly offset by higher advertising spending. Furthermore, non-GAAP operating margin expanded 950 bps from the year-ago period to 15.9% for the quarter.
Financials
Williams-Sonoma reported cash and cash equivalents of $639.7 million as of May 2, 2021 compared with $1,200.3 million at fiscal 2020-end. Notably, the company repaid $300-million term loan in full during the quarter. It also repurchased $315 million in the quarter alone.
Raised Fiscal 2021 Guidance
The company is optimistic about business strength, and anticipates recovery in retail traffic as well as inventory levels during fiscal 2021.
For fiscal 2021, Williams-Sonoma now expects revenues to witness low double-digit to mid-teen net revenue growth versus mid-to-high single-digit improvement expected earlier. It also expects operating margin expansion on a year-over-year basis.
Nonetheless, the company projects revenue acceleration to $10 billion over the long term. Also, it expects non-GAAP operating margin to expand to at least 15% over the next five years.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.36% due to these changes.
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. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 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. It comes with little surprise Williams-Sonoma has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Williams-Sonoma (WSM) Down 7.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Williams-Sonoma (WSM - Free Report) . Shares have lost about 7.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Williams-Sonoma’s (WSM - Free Report) Q1 Earnings Beat, View Up
Williams-Sonoma Inc. reported solid first-quarter fiscal 2021 results. The company’s earnings and revenues handily beat the Zacks Consensus Estimate as well as significantly increased year over year, courtesy of strength across all brands along with accelerated e-commerce growth.
Meanwhile, the company has lifted fiscal 2021 outlook, courtesy of solid start to the year and encouraging macro trends.
Laura Alber, President and Chief Executive Officer, said, “As we look ahead, we are confident in our runway for growth and profitability. The goals we have set are driving incremental growth faster than anticipated, our brand differentiators continue to accelerate, and favorable macro trends should continue to benefit our business for the long-term. We are the only home furnishings retailer that’s able to serve customers at scale online and provide the experience and convenience of physical retail with exclusive sustainable products – giving us the unique advantage to gain share for many years to come.”
Earnings & Revenues
Non-GAAP adjusted earnings of $2.93 per share surpassed the Zacks Consensus Estimate of $1.85 by 58.4%. The figure also increased 295.9% from 74 cents per share reported a year ago.
Revenues of $1,749 million beat the consensus mark of $1,508 million by 16% and grew 41.6% year over year. The better-than-expected revenues were driven by comparable brand revenue growth of 40.4%.
Also, e-commerce penetration accounted for more than 65% of total revenues, buoyed by content-rich online experience and marketing strategies.
Comps increased 40.4% versus 25.7% growth in the fiscal fourth quarter and 2.6% in the year-ago period. Comps at West Elm increased an impressive 50.9% compared with 3.3% growth registered in the prior-year quarter. Comps in the Pottery Barn brand grew 41.3% against a decline of 1.1% in the prior-year quarter. Williams Sonoma brand’s comps rose 35.3% compared with 5.4% growth in the year-ago quarter. Pottery Barn Kids and Teen’s comps rose 27.6% versus 8.5% growth in the year-ago quarter.
Operating Highlights
Non-GAAP gross margin was 43%, up 850 basis points (bps) from the year-ago period. The upside was primarily caused by higher selling margins and occupancy leverage in the quarter.
Non-GAAP selling, general and administrative expenses were 27.1% of net revenues compared with 28.1% in the year-ago quarter, reflecting an improvement of 100 bps. The upside was driven by robust top-line performance and ongoing financial and operational strategies, partly offset by higher advertising spending. Furthermore, non-GAAP operating margin expanded 950 bps from the year-ago period to 15.9% for the quarter.
Financials
Williams-Sonoma reported cash and cash equivalents of $639.7 million as of May 2, 2021 compared with $1,200.3 million at fiscal 2020-end. Notably, the company repaid $300-million term loan in full during the quarter. It also repurchased $315 million in the quarter alone.
Raised Fiscal 2021 Guidance
The company is optimistic about business strength, and anticipates recovery in retail traffic as well as inventory levels during fiscal 2021.
For fiscal 2021, Williams-Sonoma now expects revenues to witness low double-digit to mid-teen net revenue growth versus mid-to-high single-digit improvement expected earlier. It also expects operating margin expansion on a year-over-year basis.
Nonetheless, the company projects revenue acceleration to $10 billion over the long term. Also, it expects non-GAAP operating margin to expand to at least 15% over the next five years.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.36% due to these changes.
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. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 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. It comes with little surprise Williams-Sonoma has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.