Williams-Sonoma's third-quarter 2014 adjusted earnings of $0.68 per share beat the Zacks Consensus Estimate by 7.9% and increased 17.2% year over year, due to top-line growth and operating margin increase. Net revenue of $1.14 billion beat the consensus mark by 1.8% and increased 8.7% year over year owing to improving comparable brand revenues. Earnings per share, revenues and comparable brand revenues exceeded the company's guidance. Owing to the better-than-expected results, the company increased its earnings per share guidance for fiscal 2014. We are encouraged by Williams-Sonoma's strong international presence and expanding e-commerce business. However, we remain on the sidelines as the earnings outlook for the fourth quarter 2014 was below market expectations. In addition, with U.S. macroeconomic recovery rather slow, the demand for William Sonoma's products could be hurt in the future quarters. We therefore have a Neutral recommendation on the stock.
Headquartered in San Francisco, CA, Williams-Sonoma, Inc. (WSM) is a multi-channel specialty retailer of premium quality home products. Incorporated in 1973, the company has retail stores in United States, Canada, Puerto Rico, Australia, and the United Kingdom. The company sells its products through retail stores, e-commerce websites and direct mail catalogs. The company also offers franchise of its brands to third parties in some of the countries in the Middle East.
The company has seven merchandising concepts, namely, Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen Rejuvenation and Mark and Graham.
Williams-Sonoma: It offers cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture and cookbooks under the brand Williams-Sonoma.
Pottery Barn is a multi channel home furnishing retailer, acquired by Williams-Sonoma in 1986. It is Williams-Sonoma's largest brand and offers premium products in the form of furniture, bedding, bathroom accessories, rugs, curtains, lighting, tabletop, outdoor and decorative accessories.
Pottery Barn Kids: Williams-Sonoma introduced Pottery Barn Kids in 1999 and offers products for putting up nurseries, bedrooms and play spaces.
West Elm: Williams-Sonoma introduced the West Elm brand in 2002. The brand offers personalized products designed by the company's team of artists and designers including West Elm branded furniture, bedding, bathroom accessories, rugs, curtains, lighting, decorative accessories, dinnerware, kitchen essentials, and gifts.
PBteen: Williams-Sonoma introduced the PBteen brand in 2003 in order to cater to the teenage population. The company offers furniture, bedding, lighting and decorative accents for various needs and preference of teens under this brand.
Rejuvenation: Williams-Sonoma offers premium quality lights, hardware, furniture and home d cor under the brand Rejuvenation. The designs of these products are inspired from history and are manufactured in facilities in Portland, OR.
Mark and Graham: The brand offers women's and men's accessories, small leather goods, jewelry, key item apparel, paper, entertaining and bar, home d cor and seasonal items. These products are meant for personalized gifting.
The company is organized into two business segments: Direct Store Delivery and Retail. The two segments complement each other by increasing brand awareness and attracting new consumers.
E-commerce (formerly Direct Store Delivery) Segment: (48.2% of consolidated net sales in fiscal 2013): The segment offers all the seven merchandising concepts through e-commerce websites and direct mail catalogs. The segment offers shipping from many of the company's brands to countries across the world. Pottery Barn contributes majority of the revenue to the segment.
Retail (51.8% of consolidated net sales in fiscal 2013): The segment offers five merchandising concepts, including Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation. These products are sold through 589 global stores and 27 franchised stores in the Middle East. The company expects to open stores in Philippines in 2014.