Williams-Sonoma Inc.
(
WSM
) has been consistently delivering positive earnings surprises for
the past four years. Keeping with this trend, this specialty
retailer of home products reported solid fiscal first-quarter 2012
earnings that beat the Zacks Consensus Estimate by 6.3% on a 5.4%
increase in same-store sales. The company's continued investments
in its long-term strategic growth initiatives should boost results
going forward.
This Zacks #2 Rank (Buy) is also focused on enhancing shareholder
value through share repurchases, and has a solid 2.5% dividend
yield.
Fiscal 2012 First-Quarter Results
On May 22, Williams-Sonoma reported fiscal first-quarter 2012
earnings per share of 34 cents, beating the Zacks Consensus
Estimate of 32 cents. This represented a 13% rise over the previous
year.
Net revenues rose 6.1% to $818 million, driven by a 5.4% increase
in same-store sales. The West Elm brand witnessed a 22.1% increase
in same-store sales while the Pottery Barn brand rose 9.1%. This
more than offset the decline in its other brands, including the
Williams-Sonoma brand (down 3.2%), Pottery Barn Kids (down 0.8%)
and PBteen (down 6.0%).
Meanwhile, operating income increased 6% as the operating margin
held steady at 6.9%.
Management provided encouraging guidance in its fiscal 2012
first-quarter press release. The company expects to earn between
$2.42 and $2.49 in 2012 on 4%-6% revenue growth.
Estimates on the Rise
In the last 60 days, the Zacks Consensus Estimate for fiscal 2012
has moved up 1.6% to $2.49, representing 11.2% growth over 2011.
The fiscal 2013 estimate is currently $2.76, up 1.5% in the last 60
days and implying year-over-year growth of 10.8%.
Strong Dividend
In addition to steady growth, Williams-Sonoma pays a solid
dividend. Since 2006, the company has increased its dividend 6
times at a compound annual rate of 14%. Currently, it pays a
quarterly dividend of 22 cents that yields a solid 2.5%, while the
payout ratio comes to 35.0%. The average five-year yield stands at
2.9%.
Reasonable Valuation
Valuation looks reasonable for this specialty retailer with shares
trading at 14.5x 12-month forward earnings, on par with its peer
group average. However, on a price-to-book basis, shares are
currently trading at 2.95x, a 50.5% premium to the peer group
average of 1.96x.
Nevertheless, the stock also looks attractive given a trailing
12-month ROE of 19.4%, which is higher than the peer group average
of 14.4%. The company's long-term estimated earnings per share
growth rate also remain strong at 13.1%.
Chart Shows Promise
The stock proves attractive for investors on grounds of encouraging
earnings growth forecasts, a history of positive earnings surprises
and the ability to sustain dividend increases. At a glance, the
price and consensus chart shows that the stock price line is
clearly below the fiscal 2012 and 2013 earnings estimate lines,
indicating that the stock is still undervalued.
Moreover, the historical trends demonstrate that the stock has
followed the growth in earnings estimates since the start of 2010.
This suggests that if the earnings estimates move further up, the
stock price is likely to follow along.
Closing Comments
With a solid start to fiscal 2012 and its growth strategies in
place, Williams-Sonoma remains fully poised to deliver strong
earnings growth through the rest of the year. The opening trends in
the second quarter point to incredibly positive customer response
to the company's core and seasonal merchandise assortments, which
are likely to continue going forward.
Founded in 1956 and headquartered in San Francisco, California,
Williams-Sonoma is a specialty retailer of high-quality products
for the home. The company sells its products under seven brands,
each representing a distinct merchandise strategy. It deals in
cookware, furniture including modern and luxury, kid's furniture,
wedding registry, bridal registry, baby registry, girls' and boys'
bedding, room decor, decorative accessories, lighting and hardware.
The company's brands include Williams-Sonoma, Pottery Barn, Pottery
Barn Kids, PBteen, West Elm, Williams-Sonoma Home and Rejuvenation.
The company has 575 stores throughout North America.
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WILLIAMS-SONOMA (WSM): Free Stock Analysis
Report
WILLIAMS-SONOMA (WSM): Free Stock Analysis
Report
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