Williams-Sonoma (NYSE: $WSM) is a renowned American retailer specializing in high-quality home furnishings and gourmet cookware. Founded in 1956, the company has grown into a premier lifestyle brand, offering extensive products through its retail stores and e-commerce platform.
On Wednesday, March 13, 2024, the company delivered impressive fourth-quarter and fiscal year 2023 results, defying market challenges and exceeding analyst projections. The company’s performance underscores its resilience in the face of a sluggish housing market and geopolitical uncertainties.
CEO Laura Alber said, “We outperformed in 2023 despite the slowest housing market in several decades and geopolitical unrest. Although this pressured our top-line trend, we stayed focused on full-price selling, supply chain efficiencies, and best-in-class customer service.”
Fourth Quarter 2023 Highlights
Williams-Sonoma reported revenue of $2.28 billion for the fourth quarter, surpassing analyst expectations of $2.23 billion by 2.4%. However, this figure represents a 6.9% decline compared to the $2.45 billion recorded in 2022. The company’s diluted EPS stood at an impressive $5.44, exceeding analyst estimates by 5.5%.
The company’s gross margin increased by an impressive 480 basis points compared to the previous year, reaching 46.0%. This substantial improvement was primarily driven by a 560 basis point rise in selling margin, attributable to better product margins and reduced costs from improved supply chain efficiency. However, a decrease in occupancy leverage by 80 basis points partially offset this gain.
The Selling, General, and Administrative (SG&A) rate increased to 25.9%, up by 390 basis points on a GAAP basis and 460 basis points on a non-GAAP basis compared to last year. This increase was largely due to employment and general expense deleverage. SG&A expenses amount to $591 million, marking a 9.3% increase on a GAAP basis and a 13.0% increase on a non-GAAP basis. The operating income reached $458 million, resulting in an operating margin of 20.1%.
Fiscal Year 2023 Highlights
For the full fiscal year 2023, Williams-Sonoma reported net revenue of $7.75 billion, although its comparable brand revenue declined 9.9%. The company’s gross margin stood at 42.6% on a GAAP basis, marking a modest increase of 20 bps compared to the previous year. This improvement was primarily driven by a 170 basis point increase in selling margin, fueled by better merchandise margins and supply chain efficiencies.
The SG&A rate increased by 150 bps compared to last year on a GAAP basis, reaching 26.6%, and by 140 bps on a non-GAAP basis, reaching 26.3%. This rise was largely attributable to increased employment and general expenses. However, the company reported a GAAP operating income of $1.24 billion with a 16.1% margin. Its non-GAAP operating income was $1.27 billion with a 16.4% margin.
The company reported a GAAP diluted EPS of $14.55 and a non-GAAP diluted EPS of $14.85, further solidifying its position as a strong performer in the retail industry.
Financial Strength and Shareholder Returns
Williams-Sonoma’s strong financial position enabled it to return $545 million to stockholders during the fiscal year, comprising $313 million in stock repurchases and $232 million in dividends. Moreover, the company announced a 26% increase in its quarterly dividend to $1.13 per share and extended its stock repurchase capacity to $1 billion, underscoring its commitment to delivering value to shareholders.
Williams-Sonoma’s 2024 Outlook
For fiscal 2024, the company anticipates annual net revenue growth of -3% to +3%, with comparable store sales expected to be from -4.5% to +1.5%. Although Wall Street expects revenue to decline by 2.1%, the company projects an operating margin between 16.5% and 16.8%.
WSM Stock Skyrockets on Earnings Beat
Williams-Sonoma (WSM) witnessed an extraordinary surge in its stock price today, on March 13, 2024, with shares skyrocketing to $286.14, marking an impressive 18.71% increase from the previous close of $241.05. This remarkable rally was fueled by the company’s announcement of its stellar quarterly earnings, which exceeded market expectations.
It boasts a Market Cap of $18.391 billion, with an average trading volume of 906.18k shares over the past three months. The company’s impressive 52-week change of 103.23% has outperformed the S&P500’s 52-week change of $32.97%. Its 52-week high stands at a remarkable $289.77, while the low is $109.44.
WSM Stock: Analyst Ratings & Price Target
According 9 Wall Street analysts who provided 12-month price targets for Williams-Sonoma within the last 3 months, the average price target is $243.56. However, with the stock currently trading well above this level, it may be an opportune time for investors to reevaluate their positions.
Among the analysts, 4 recommend buying shares of WSM, 4 suggest holding, and 1 advises selling. Given the company’s strong performance, robust financials, and positive outlook, a buy recommendation appears well-supported for investors seeking exposure to the premium home furnishings market.
$WSM: A Buy Opportunity?
Williams-Sonoma’s fourth quarter and fiscal 2023 results highlight the company’ ability to navigate headwinds. With its focus on operational efficiencies, supply chain optimization, and shareholder value creation, the company appears well-positioned for continued growth and profitability.
The impressive stock price surge following the earnings release, its outperformance relative to broader market indices, and its positive outlook offer investors an appealing buying opportunity.
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