U.S. Markets close in 6 hrs 4 mins

Can E-commerce Growth Aid Williams-Sonoma (WSM) Q3 Earnings?

Zacks Equity Research
1 / 2

Can E-commerce Growth Aid Williams-Sonoma (WSM) Q3 Earnings?

Strong e-commerce growth, digital leadership, product innovation and operational excellence are likely to aid Williams-Sonoma's (WSM) fiscal third-quarter numbers, partly offset by increased expenses.

Williams-Sonoma, Inc. WSM is slated to report third-quarter fiscal 2018 results on Nov 15, after market close. In the last reported quarter, the company’s earnings outpaced the Zacks Consensus Estimate by 13.2%. In fact, its earnings surpassed estimates in three of the trailing four quarters, with the average being 8.5%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. For the quarter to be reported, the Zacks Consensus Estimate is currently pegged at 94 cents, remaining stable over the past 30 days. Nevertheless, this reflects an increase of 11.9% from the year-ago earnings of 84 cents per share. Revenues are expected to be $1.37 million, up 5.1% year over year.

Williams-Sonoma, Inc. Price and EPS Surprise



Williams-Sonoma, Inc. Price and EPS Surprise | Williams-Sonoma, Inc. Quote

Factors at Play

Williams-Sonoma is expected to witness higher revenues in the fiscal third quarter, courtesy of its multi-channel multi-brand platform, strong e-commerce growth, solid execution of strategic initiatives and digital leadership, product innovation, retail transformation, coupled with operational excellence across business.

The company’s investment in merchandising of its brands, efficient catalog circulations and digital marketing is expected to boost its e-commerce top line. This is evident from 10.1% revenue growth in its e-commerce channel in the first six months of fiscal 2018.

Importantly, sales from e-commerce channel are an important source of revenues, as it accounts for 53.9% of its total revenues. For the to-be-reported quarter, the Zacks Consensus Estimate for e-commerce revenues of $743 million indicates an increase from $687 million in the last reported quarter and $690 million in the year-ago period.

Meanwhile, the company’s Retail segment (comprising 46.1% of the total revenues) is expected to generate $627 million in revenues compared with $588 million reported in the fiscal second quarter and $609 million in the year-ago period, per the Zacks Consensus Estimate.

Overall, Williams-Sonoma expects net revenues in the range of $1,355-$1,380 million in the fiscal third quarter. Comparable brand revenues are likely to grow 3-5%. Higher revenue growth, lower tax rate and share repurchases are likely to aid the company’s bottom line.

However, increased digital advertising investments, higher labor costs along with implementation of the new revenue recognition standard are expected to offset some of the positives mentioned above. Williams-Sonoma expects non-GAAP earnings per share in the band of 90-95 cents for the to-be-reported quarter.

What the Zacks Model Says

Our proven model does not show that Williams-Sonoma is likely to beat estimates in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: Williams-Sonoma currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are a few stocks in the Retail-Wholesale sector, which have the right combination of elements to beat estimates in their respective quarters to be reported.

RH RH has an Earnings ESP of +2.18% and a Zacks Rank #2. The company is slated to report quarterly results on Dec 4.

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +2.95% and sports a Zacks Rank #1. The company is expected to report quarterly results on Dec 5.

Big Lots, Inc. BIG has an Earnings ESP of +100.00% and a Zacks Rank #3. The company is expected to release quarterly numbers on Dec 7.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>