Williams-Sonoma Inc. WSM posted better-than-expected fourth-quarter fiscal 2019 results in the quarter under review. However, the company suspended its full-year guidance due to the global impact of coronavirus pandemic.
Nonetheless, West Elm — its biggest growth catalyst — continues to renew strength in Pottery Barn brands. Also, cross-brand initiatives such as The Key, Business-to-Business as well as in-home Design Crew are expected to become important growth drivers.
Non-GAAP earnings of $2.13 per share surpassed the Zacks Consensus Estimate of $2.05 by 3.9%. The figure also inched up 1.4% year over year.
Williams-Sonoma, Inc. Price, Consensus and EPS Surprise
Williams-Sonoma, Inc. price-consensus-eps-surprise-chart | Williams-Sonoma, Inc. Quote
Moreover, revenues of $1,843.6 million beat the consensus mark of $1,815 million by 1.5% and increased 0.4% year over year.
Comps increased 7.6% in fiscal fourth quarter compared with 5.5% growth in the preceding quarter and 2.4% in the year-ago quarter.
Comps in the West Elm brand increased 13.9% compared with 11.1% growth in the prior-year quarter. Pottery Barn’s comps rose 6.7% against 0.4% decline in the year-ago quarter. Comps in Pottery Barn Kids and Teen increased 7.9% compared with 1.6% growth registered in the prior-year quarter. Notably, the Williams Sonoma brand’s comps rose 3.3% against 2.1% decline in the preceding quarter and 0.1% growth registered in the year-ago quarter.
Non-GAAP gross margin was 37.6%, down 110 basis points (bps) from fourth-quarter fiscal 2018. The downside was primarily caused by lower occupancy leverage, higher shipping costs stemming from a greater mix of furniture sales and the impact of the implementation of China tariffs.
Non-GAAP selling, general and administrative expenses accounted for 26.1% of net revenues compared with 26.9% in the year-ago quarter, down 80 bps. The upside was driven by leverage across employment and advertising from higher sales as well as consistent cost-saving initiatives. However, non-GAAP operating margin contracted 30 bps to 11.6% in the quarter.
Williams-Sonoma reported cash and cash equivalents of $432.2 million as of Feb 2 compared with $339 million on Feb 3, 2019.
During fiscal fourth quarter, the company invested $65 million in the business and returned $74 million to its stockholders through dividend payouts as well as share repurchases. Notably, the company paid out $38 million worth of dividends and repurchased about $36 million shares.
Fiscal 2019 Highlights
Non GAAP earnings came in at $4.84 per share that exceeded the high-end of the guidance and increased 8.5% year over year. Comps growth was 6% (at the high-end of the guidance range), with positive comps growth across its brands, including West Elm at 14.4%, Pottery Barn at 4.1% as well as Pottery Barn Kids and Teen at 4.5%.
Total revenues were $5,898 million, up 4% from fiscal 2018 end.
Fiscal 2020 Guidance Suspended
Given the unpredictable effects of the coronavirus on consumer behavior and economic activity in general, the company decided to temporarily suspend its full-year guidance.
Zacks Rank & Other Key Picks
Currently, Williams-Sonoma — which shares its space with RH RH in the Zacks Retail - Home Furnishings industry — carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the industry include At Home Group Inc. HOME and The Lovesac Company LOVE. While At Home sports a Zacks Rank #1 (Strong Buy), The Lovesac Company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
At Home and Lovesac’s have trailing four-quarter positive earnings surprise of 23.2% and 0.5%, on average, respectively.
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