It has been about a month since the last earnings report for Williams-Sonoma (WSM). Shares have lost about 6.7% 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 drivers.
Williams-Sonoma’s Q1 Earnings & Revenues Beat Estimates
Williams-Sonoma Inc. reported impressive earnings for first-quarter fiscal 2022 (ended May 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 accelerated e-commerce growth.
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, “As we look to the balance of the year, we remain confident and committed to our guidance of mid-to-high single digit comps with operating margins relatively aligned to fiscal 2021. We have a solid line-up of growth initiatives and operational improvements planned for the balance of the year. And, as we look further, we are confident in our path to be a $10 billion company by 2024.”
Earnings & Revenues
Non-GAAP earnings of $3.50 per share surpassed the Zacks Consensus Estimate of $2.99 by 17.1%. The figure also increased 19.5% from $2.93 per share reported a year ago.
Revenues of $1.89 billion beat the consensus mark of $1.83 billion by 3.3% and grew 8.1% year over year. The impressive revenues were driven by strong growth across all brands.
Comps increased 9.5% compared with 40.4% growth in the year-ago period. Comps in the Pottery Barn brand grew 14.6% compared with 41.3% growth in the prior-year quarter. Comps at West Elm increased 12.8% compared with 50.9% growth registered in the prior-year quarter. Williams-Sonoma brand’s comps declined 2.2% compared with 35.3% growth in the year-ago quarter. Pottery Barn Kids and Teen’s comps declined 3.1% compared with 27.6% growth in the year-ago quarter.
The gross margin was 43.8%, up 80 basis points (bps) from the year-ago period. The upside was primarily caused by higher merchandise margins and occupancy leverage in the quarter.
Non-GAAP selling, general and administrative expenses were 26.7% of net revenues compared with 27.1% in the year-ago quarter, reflecting a decrease of 40 bps. Furthermore, the non-GAAP operating margin expanded 120 bps from the year-ago period to 17.1% for the quarter.
As of May 1, 2022, Williams-Sonoma reported cash and cash equivalents of $324.8 million compared with $850.3 million at fiscal 2021-end. Net cash provided by operating activities totaled $184.5 million compared with $238.9 million in the year-ago quarter.
Williams-Sonoma rewarded shareholders in the form of dividends ($58 million) and share repurchases (more than $500 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 operating margin to be relatively in line with fiscal 2021.
Further, WSM projects revenue acceleration of $10 billion in the long term (by fiscal 2024).
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Williams-Sonoma has a strong 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.
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.