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Williams-Sonoma (WSM) to Report Q1 Earnings: What's in Store?

Shrabana Mukherjee

Williams-Sonoma, Inc. WSM is expected to witness moderate sales and earnings growth when it reports first-quarter fiscal 2019 results.

In the last reported quarter, earnings and revenues topped the Zacks Consensus Estimate by 6.6% and 2.2%, respectively. In fact, its earnings surpassed estimates in all the trailing four quarters, with the average being 9.6%.

Fiscal fourth-quarter 2018 earnings and revenues increased 25% and 9.3%, respectively, on a year-over-year basis.

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 has remained unchanged over the past 60 days at 68 cents per share. This indicates an increase of 1.5% from the year-ago reported earnings of $67 cents per share. Revenues are expected to be $1.22 billion, up 1.6% year over year.

Williams-Sonoma, Inc. Price and EPS Surprise

 

Williams-Sonoma, Inc. Price and EPS Surprise

Williams-Sonoma, Inc. price-eps-surprise | Williams-Sonoma, Inc. Quote

 

Factors at Play

Williams-Sonoma is expected to witness soft comps in the fiscal first quarter, given slowing macro-environment, relentless competition, tariffs and tough comparisons. Meanwhile, the company has been using increased promotional levels that point to sales softness and potential gross margin pressure.

The company expects full-year comps to be back-half weighted, given difficult comparison in the first half of 2019. Revenues in the first quarter may be impacted by an Easter shift.

That said, multi-channel multi-brand platform, strong e-commerce growth, solid execution of strategic initiatives and digital leadership, product innovation, retail transformation, along with operational excellence across business are expected to provide some support to the company’s top line.

Importantly, sales from e-commerce channel, accounting for 54.3% of its total revenues, are an important source of revenues. For the to-be-reported quarter, the Zacks Consensus Estimate for e-commerce revenues of $680 million indicates an increase from $646 million in the year-ago quarter but a decrease from $1,002 million in the fiscal fourth quarter.

The Zacks Consensus Estimate for the company’s Retail segment (accounting for 45.7% of the total revenues) revenues is pegged at $554 million compared with $557 million reported in the year-ago period and $834 million in the fiscal fourth quarter.

Apart from soft comps, higher shipping and increased employment-related costs are also expected to pressurize margins in the to-be-reported quarter. Increased digital advertising investments and higher labor costs also remain pressing concerns.

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 #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

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 Zacks 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 +0.43% and a Zacks Rank #3.

Costco Wholesale Corp. COST has an Earnings ESP of +2.10% and a Zacks Rank #3.

Dollar General Corp. DG has an Earnings ESP of +1.51% and a Zacks Rank #3.

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