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Why You Should Consider Buying Williams-Sonoma in its Post Earnings Dip

Stock MarketsNov 24, 2021 02:31PM ET
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© Reuters. Why You Should Consider Buying Williams-Sonoma in its Post Earnings Dip

The shares of renowned omnichannel specialty retailer Williams-Sonoma (NYSE:WSM) have dipped 2% in price since the company’s third-quarter earnings release on November 18. This is due to rising investor concerns regarding supply chain bottlenecks amid strong market demand. However, with substantial inventory in place, analysts expect the company’s sales and earnings to increase over the holiday season, indicating higher returns on investment in the company. Let’s discuss.Williams-Sonoma, Inc. (WSM), which is based in San Francisco, is the world’s largest digital-first, design-led and sustainable home retailer. Its famous brands include Pottery Barn, Williams Sonoma, and Rejuvenation. For its fiscal third quarter, ended October 31, 2021, WSM’s revenues increased 16% year-over-year to $2.05 billion. This can be attributed to a 67% rise in e-commerce sales. Its gross profit came in at $895.49 million, up 26.9% from its year-ago value. Its net earnings improved 23.7% from the prior-year quarter to $249.52 million, while its EPS increased 29.5% from the same period last year to $3.29, surpassing analyst estimates by 4.8%.

However, WSM shares have retreated 2% in price since the company’s quarterly earnings release on November 18, despite its reporting impressive financials. Rising investor concerns regarding supply chain bottlenecks as seasonal demand increases have caused the shares to slump.

Nevertheless, WSM is expected to maintain its growth streak regardless of the temporary headwinds, thanks to its substantial inventory levels and leading market share. The company’s merchandise inventory increased 13% year-over-year to $2.18 billion as of October 31. Furthermore, WSM’s merchandise inventory improved 24.6% from January 31, 2021, to October 31, 2021.

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Why You Should Consider Buying Williams-Sonoma in its Post Earnings Dip
 

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