A month has gone by since the last earnings report for Williams-Sonoma (WSM). Shares have added about 26.6% 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 the most recent earnings report in order to get a better handle on the important drivers.
Williams-Sonoma (WSM) Q4 Earnings Beat on E-commerce Growth
Williams-Sonoma Inc.’s (WSM) earnings and revenues handily beat the Zacks Consensus Estimate and significantly increased year over year, courtesy of strength across all brands and accelerated e-commerce growth.
Meanwhile, the company is committed to a quarterly dividend increase of 11.3%, effective with the next dividend payment. Also, the company’s board of directors initiated a new stock repurchase authorization of $1 billion.
Earnings & Revenues
Non-GAAP adjusted earnings of $3.95 per share surpassed the Zacks Consensus Estimate of $3.26 by 21.2%. The figure also increased 85.4% from $2.13 reported a year ago.
Revenues of $2,292.7 million beat the consensus mark of $2,117 million by 8.3% and grew 24.4% year over year. The better-than-expected revenues were driven by 47.9% acceleration in net comps growth in the e-commerce business. E-commerce penetration accounted for 70% of total revenues, buoyed by content-rich online experience and marketing strategies.
Comps increased 25.7% versus 24.4% growth in the fiscal third quarter and 7.6% in the year-ago period. Comps at Williams-Sonoma increased an impressive 26.2% compared with 3.3% growth registered in the prior-year quarter. Comps in the Pottery Barn brand grew 25.7% compared with 6.7% growth in the prior-year quarter. Pottery Barn Kids and Teen’s comps rose 25.7% compared with 7.9% growth in the year-ago quarter. The West Elm brand’s comps rose 25.2% versus 13.9% growth in the year-ago quarter.
Non-GAAP gross margin was 42.1%, up 450 basis points (bps) from the year-ago period. The upside was primarily caused by higher merchandise and occupancy leverage in the quarter.
Non-GAAP selling, general and administrative expenses were 24.2% of net revenues compared with 26.1% in the year-ago quarter, reflecting an improvement of 190 bps. The upside was driven by robust top-line performance, and ongoing financial as well as operational strategies. Furthermore, non-GAAP operating margin expanded 630 bps from the year-ago period to 17.9% for the quarter.
Williams-Sonoma reported cash and cash equivalents of $1,200.3 million as of Jan 31, 2021 compared with $432.2 million on Feb 2, 2020. It also reinstated the share repurchase program, repurchasing $150 million during the quarter alone.
Net revenues for 2020 came in at $6,783.2 million compared with $5,898 million in 2019, up 15%.
For 2020, non-GAAP gross margin moved up to 39% from 36.3% in 2019.
Total cash provided by operating activities increased to $1,274.8 million from $607.3 million in 2019.
Adjusted earnings per share for 2020 came in at $9.04 compared with $4.84 in 2019.
Fiscal 2021 Guidance
The company is optimistic about business strength, and anticipates recovery in retail traffic and inventory levels during fiscal 2021.
For fiscal 2021, the company expects revenues to grow in mid-to-high single digits. It also expects operating margin expansion on a year-over-year basis.
Nonetheless, the company projects revenue acceleration toward $10 billion over the long term. Also, it expects operating margin to expand to 15% over the next five years.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 58.33% due to these changes.
Currently, Williams-Sonoma has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Williams-Sonoma has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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