Retail Winner Williams-Sonoma Outperforms Once Again
Williams-Sonoma (NYSE: WSM) has proven definitively that quality, branding, and eCommerce are the recipe for success in the post-pandemic environment. The company is only the latest in a string of pandemic winners to outperform the consensus in such a dazzling fashion the shares popped by double digits, but we don't think it will be the last. It certainly won't be the last quarter that this company delivers value to its shareholders and that includes share repurchases and dividend increases as well as growth. Pricetargets.com analyst sentiment data reveals there’ve already been seven (7) upgrades and/or price-target hikes, we expect to see more in the coming days and weeks.
"The momentum we are seeing in our business and our winning positioning set us up to continue to take share in a fractured market. We do not see any evidence that growth trends are waning, and in fact, we see favorability in the macro environment as more people prioritize their homes and home décor. We believe we are at the intersection of a transformative change that will accelerate the growth of our industry, and our market share within the industry. In addition, our growth strategies are gaining traction faster than we predicted, and our key differentiators are further distancing us from our competition,” says CEO Laura Alber.
This Is Why William-Sonoma Set A New High
Williams-Sonoma’s second-quarter revenue and earnings results were so strong the company was forced to raise its guidance for the second time this year. The company reported $1.95 billion in net consolidated revenue for a gain of 30.9% over last year. As stong as this number sounds, the real strength is seen in the 830 basis points of outperformance relative to the consensus estimate and the 42% gain versus 2019. On a comp-store basis, comps are up 29.8% across the network and 40.3% versus 2019.
On a segment basis, all segments saw robust growth with the flagship Williams-Sonoma brand lagging the group. That said, Williams-Sonoma’s 6% increase is on top of last year's 29% increase so strong any way you look at it. West Elm led the group at 51.1% growth followed by Pottery Barn at 29.6%, and Pottery Barn kids at 18%.
Moving down to the profitability portion of the report, the details are just as good. The company was able to improve both the GAAP and adjusted operating margins, adjusted operating margins by 360 basis points to 16.7%, and drive a substantial increase in bottom-line results. At the GAAP level, the $3.21 reported by the company beat the consensus by $0.63 and it's up 89% over last year. On an adjusted basis, the $3.24 reported by the company beat the consensus by $0.66 and is up 80% from last year.
Safe Haven Williams-Sonoma Increases Capital Returns
Williams-Sonoma has been a safe dividend payer for a long time and nothing has changed about that. What has changed is the company's ability to return capital to shareholders and management is acting on it. Williams-Sonoma increased its dividend by 20% making the third dividend increase in the last five quarters. The stock yields about 1.65% and that is compounded by the new share repurchase authorization. The company authorized $1.25 billion in share repurchases which is worth about 10% of the market cap at the time the report was issued.
The Technical Outlook: Williams-Sonoma Breaks To New Highs
Shares of Williams-Sonoma shot up more than 15% in the wake of the second-quarter report and broke out to a new all-time high. Intraday action gives evidence of profit-taking but, so far, support is holding above the previous all-time high. Assuming this level holds and there's no reason to think that it won't, shares of WSM may consolidate in the near term but are expected to advance and eventually reach the $300 level. Possibly before the end of the year.
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