Williams-Sonoma, Inc. (NYSE: WSM) shares jumped almost 8.2% during the extended trading session on March 16.
The American consumer retail company, which sells kitchenware and home furnishings, delivered impressive fourth-quarter earnings beat WSM also reiterated its long-term outlook and raised its quarterly dividend. Incremental share repurchases were the additional cherry on the cake.
The earnings beat was driven by robust demand and continued execution of growth initiatives, which successfully offset the negative impact of supply chain constraints, material and labor shortages, and capacity limitations.
Q4 Performance
Markedly, adjusted earnings of $5.42 per share grew 37% year-over-year and massively beat analysts’ expectations of $4.82 per share. The company reported earnings of $3.95 per share for the prior-year period.
Revenues, however, jumped 25.7% year-over-year to $2.5 billion, but were modestly short of consensus estimates of $2.58 billion. The increase in revenues reflected a surge in comparable brand revenue growth, which increased 10.8%.
Notably, driven by higher merchandise margins as well as occupancy leverage of approximately 20bps, gross margin improved 290 bps to 45%.
Likewise, adjusted operating margin witnessed an expansion of 310 bps year-over-year.
Fiscal Year 2022 and Long-Term Outlook
Based on robust business momentum as well as the continued success of new initiatives, the company provided an outlook for FY2022.
Aligning with the company’s long-term financial guidance, the company projects FY2022 annual net revenue growth in the mid-to-high single digits.
Further, operating margins are expected to be at similar levels as the fiscal year 2021. Longer-term, the company forecast revenues to increase to $10 billion by fiscal year 2024.
10% Dividend Hike & Incremental Share Repurchases
Concurrent with the earnings announcement, the company raised its quarterly dividend by 10% to $0.78 per share. The dividend is payable on May 27 to shareholders on record as of April 22.
Furthermore, Williams-Sonoma has authorized a new share repurchase program worth $1.5 billion. The current program replaces approximately $750 million that remains outstanding under the company’s previously authorized repurchase programs.
CEO Comments
Looking ahead into the upcoming year, Williams-Sonoma CEO, Laura Alber, commented, “I am confident that we will continue to raise the bar and extend this momentum in fiscal 2022.”
Wall Street’s Take
Following the earnings release, Bank of America Securities analyst Elizabeth Lane Suzuki reiterated a Sell rating on Williams-Sonoma with a price target of $132 (13.4% downside potential).
The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on six Buys, four Holds and two Sells. The Williams-Sonoma stock forecast of $180.33 implies 18.29% upside potential to current levels.
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