Williams-Sonoma (WSM) Q4 Earnings & Revenues Beat Estimates

Williams-Sonoma Inc. (NYSE:WSM) posted better-than-expected fourth-quarter fiscal 2019 results in the quarter under review. However, the company suspended its full-year guidance due to the global impact of coronavirus pandemic.

Nonetheless, West Elm — its biggest growth catalyst — continues to renew strength in Pottery Barn brands. Also, cross-brand initiatives such as The Key, Business-to-Business as well as in-home Design Crew are expected to become important growth drivers.

Non-GAAP earnings of $2.13 per share surpassed the Zacks Consensus Estimate of $2.05 by 3.9%. The figure also inched up 1.4% year over year.

Williams-Sonoma, Inc. Price, Consensus and EPS Surprise

Moreover, revenues of $1,843.6 million beat the consensus mark of $1,815 million by 1.5% and increased 0.4% year over year.

Comps increased 7.6% in fiscal fourth quarter compared with 5.5% growth in the preceding quarter and 2.4% in the year-ago quarter.

Comps in the West Elm brand increased 13.9% compared with 11.1% growth in the prior-year quarter. Pottery Barn’s comps rose 6.7% against 0.4% decline in the year-ago quarter. Comps in Pottery Barn Kids and Teen increased 7.9% compared with 1.6% growth registered in the prior-year quarter. Notably, the Williams (NYSE:WMB) Sonoma brand’s comps rose 3.3% against 2.1% decline in the preceding quarter and 0.1% growth registered in the year-ago quarter.

Operating Highlights

Non-GAAP gross margin was 37.6%, down 110 basis points (bps) from fourth-quarter fiscal 2018. The downside was primarily caused by lower occupancy leverage, higher shipping costs stemming from a greater mix of furniture sales and the impact of the implementation of China tariffs.

Non-GAAP selling, general and administrative expenses accounted for 26.1% of net revenues compared with 26.9% in the year-ago quarter, down 80 bps. The upside was driven by leverage across employment and advertising from higher sales as well as consistent cost-saving initiatives. However, non-GAAP operating margin contracted 30 bps to 11.6% in the quarter.

Financials

Williams-Sonoma reported cash and cash equivalents of $432.2 million as of Feb 2 compared with $339 million on Feb 3, 2019.

During fiscal fourth quarter, the company invested $65 million in the business and returned $74 million to its stockholders through dividend payouts as well as share repurchases. Notably, the company paid out $38 million worth of dividends and repurchased about $36 million shares.

Fiscal 2019 Highlights

Non GAAP earnings came in at $4.84 per share that exceeded the high-end of the guidance and increased 8.5% year over year. Comps growth was 6% (at the high-end of the guidance range), with positive comps growth across its brands, including West Elm at 14.4%, Pottery Barn at 4.1% as well as Pottery Barn Kids and Teen at 4.5%.

Total revenues were $5,898 million, up 4% from fiscal 2018 end.

Fiscal 2020 Guidance Suspended

Given the unpredictable effects of the coronavirus on consumer behavior and economic activity in general, the company decided to temporarily suspend its full-year guidance.

Zacks Rank & Other Key Picks

Currently, Williams-Sonoma — which shares its space with RH (NYSE:RH) in the Zacks Retail - Home Furnishings industry — carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the industry include At Home Group Inc. (NYSE:HOME) and The Lovesac Company (NASDAQ:LOVE) . While At Home sports a Zacks Rank #1 (Strong Buy), The Lovesac Company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

At Home and Lovesac’s have trailing four-quarter positive earnings surprise of 23.2% and 0.5%, on average, respectively.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>