Williams-Sonoma shares soared to a new high Wednesday after the home furnishings company reported a better-than-expected fourth quarter and raised its dividend payment.
THE SPARK: The San Francisco company said that its net income jumped 9 percent to $133.7 million, or $1.34 per share, for the quarter. Its total revenue increased nearly 11 percent to $1.41 billion with gains in sales at stores, online and its catalogs. It also got a boost from an extra week in the period.
Analysts polled by FactSet, on average, had expected the company to earn $1.29 per share on revenue of $1.4 billion for the period.
Williams-Sonoma Inc. also said that it is increasing its quarterly cash dividend by 41 percent to 31 cents per share. It also announced plans to buy back up to $750 million of its shares over the next three years.
THE BIG PICTURE: Williams-Sonoma, like many retailers, has struggled with the impact of the tough economy and increased competition. The owner of the Williams-Sonoma, Pottery Barn, Rejuvenation, West Elm and Mark and Graham brands has relied on its array of brands and the diverse ways that they are sold to appeal to shoppers.
It appears to be paying off, particularly at its West Elm brand which has made steady gains in recent quarters.
THE ANALYSIS: Wedbush analyst Joan Storms said that the fourth-quarter beat and conservative guidance were expected. The announcements of a much higher dividend, new share repurchase program and a longer-term growth plan, however, were not anticipated and should drive its stock up in the short term.
While the company issued disappointing first-quarter and full-year earnings forecast and modest revenue expectations, the analyst said that she expects the company's revenue and earnings per share will pick up in 2014 and 2015.
Storms continues to believe that Williams-Sonoma is one of the best-positioned public companies in the home goods and furnishings sector, which stands to benefit from the recovering domestic housing market. The analyst said she also has a very positive take on the company's multi-distribution channel model, strong brands, advanced technology and international prospects. Nevertheless, she said the stock looks fairly valued at its current price.
SHARE ACTION: Shares of Williams-Sonoma jumped $4.94, or 10.9 percent, to $50.15 in midday trading after rising as high as $50.49 earlier in the day. FactSet says that was an all-time high for the company.