Williams-Sonoma Starts the Fiscal Year Strong, Raises Guidance

Williams-Sonoma(NYSE:WSM)announced better-than-expected fiscal first-quarter 2018 results on Wednesday after the market closed, highlighting accelerating e-commerce sales growth and solid growth across its core retail brands. Shares soared as much as 14% early Thursday before closing up nearly 6%. Let’s browse the aisles to get a better idea of what the home-furnishings specialist accomplished over the past few months, as well as what investors should be watching in the quarters ahead.

Interior of a Pottery Barn store with wood floors and ceiling beams

IMAGE SOURCE: WILLIAMS-SONOMA/POTTERY BARN.

Williams-Sonoma results: The raw numbers

Metric

Fiscal Q1 2018*

Fiscal Q1 2017

Year-Over-Year Change

Revenue

$1.203 billion

$1.112 billion

8.2%

GAAP net income

$45.2 million

$39.6 million

14.1%

GAAP earnings per diluted share

$0.54

$0.45

20%

DATA SOURCE: WILLIAMS-SONOMA. *FOR THE PERIOD ENDED APRIL 29, 2018.

What happened with Williams-Sonoma this quarter?
Adjusted for one-time items like acquisition expenses, Williams-Sonoma’s non-GAAPearningsgrew 31.4% year over year, to $0.67 per share. These results compared favorably to Williams-Sonoma’s latest guidance, which was provided last quarter and called for adjusted earnings per share of $0.55 to $0.60 on revenue of $1.135 billion to $1.170 billion. Comparable-brand revenue increased 5.5%, above the high end of guidance for a range of 2% to 5%. By retail concept, comparable-brand revenue grew 2.7% at Pottery Barn, 9% at West Elm, 5.6% at Williams Sonoma, and 5.3% at Pottery Barn Kids and Teen. E-commerce net revenue grew 11.3%, to $646 million, or 53.7% of total sales, up from 52.2% last quarter. Retail net revenue climbed 4.9%, to $557 million. The company repurchased 732,000 shares of stock for $38 million during the quarter at an average cost of $51.53 per share. That left $481 million remaining under its current repurchase authorization.

What management had to say

Williams-Sonoma CEO Laura Alber stated:

Following a robust fourth quarter, we saw continued strength in the first quarter. We achieved strong results against our guidance range across all metrics, with our e-commerce revenues outpacing to almost 54% of our total revenues. Our customer growth continued to trend positively for both new and existing customers, demonstrating the success of our balanced customer acquisition strategy. These results speak to the power of our established multi-channel model, distinctive brand portfolio and world-class customer service heritage – all of which are our company’s competitive strengths.

Looking forward

For the fiscal second quarter of 2018, Williams-Sonoma expects revenue in the range of $1.25 billion to $1.275 billion, assuming comparable-brand revenue growth of 3% to 5%. That should translate to adjusted earnings per share of $0.65 to $0.70.

As such, Williams-Sonoma boosted its full fiscal-year guidance to call for total revenue of $5.495 billion to $5.655 billion (an increase of $20 million from both ends of its previous range), and continues to expect comparable-brand revenue of 2% to 5%. On the bottom line, that should mean fiscal 2018 adjusted earnings per share in the range of $4.15 to $4.25, or a $0.03-per-share increase from both ends of its prior outlook.

In the end, there was nothing not to like in this quarterly beat-and-raise scenario from Williams-Sonoma. I think the market is right in bidding the stock up Thursdsay in response.