American home furnishing and kitchenware retailer Williams-Sonoma, Inc. (WSM) delivered stellar second-quarter results backed by 30% comparable brand revenue growth, strong growth across all brands and channels, and a 360 basis point margin expansion. Shares soared 12.7% on the news in the after-hours trading session on August 25.
The company reported earnings of $3.24 per share, 80% higher than the prior-year quarter and significantly better than analysts’ estimates of $2.60 per share.
To add to that, net revenue climbed 30.7% to $1.95 billion compared to the year-ago period and meaningfully outpaced the Street’s estimate of $1.81 billion. (See Williams-Sonoma stock charts on TipRanks)
Commenting on the outstanding quarterly performance, Laura Alber, President and CEO of the company said, “We have an advantage in the industry due to our exclusive in-house design capability, our channel strategy which is digital-first but not digital-only, and our values – with sustainability and equity underlying all that we do.”
She added, “We do not see any evidence that growth trends are waning, and in fact, we see favorability in the macro environment as more people prioritize their homes and home decor. We believe we are at the intersection of a transformative change that will accelerate the growth of our industry, and our market share within the industry.”
Based on the current momentum and favorable macro trends, the company lifted its full-year guidance for revenue growth and expects it to be in the high-teens to low-twenties range. Additionally, WSM expects to reach the $10 billion revenue mark by 2024, one year faster than previously expected.
In a separate release, Williams-Sonoma announced a 20% hike in its quarterly cash dividend to $0.71 per share. It also revealed the approved new share buyback authorization worth $1.25 billion.
In response to the strong quarterly results, Wells Fargo analyst Zachary Fadem lifted the price target on the stock to $195 from $180 while maintaining a Hold rating.
Fadem said, “While we appreciate WSM’s ample LT initiatives and strong performance during the pandemic, our Equal Weight rating is based on rising FY21 expectations in the face of considerably difficult 2H comparisons, likely return of category promotions and potential mean reversion in home goods-related spending.”
Furthermore, the analyst noted that investors have got accustomed to impressive WSM results, however, he believes that factors such as decelerating comps, supply chain challenges, and normalized industry promo remains a looming threat as the company raises the second-half bar yet again.
Overall, the stock has a Hold consensus rating based on 4 Buys, 8 Holds, and 3 Sells. The average Williams-Sonoma price target of $180.62 implies 5.8% upside potential to current levels. Shares have gained 72.5% over the past year.
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