Williams-Sonoma shares rocket on improved outlook for 2024, Q3 beat by Investing.com
Investing.com — Shares in Williams-Sonoma (NYSE: ) rose more than 23% in premarket trading Wednesday after the company raised its full-year outlook and reported better-than-expected Q3 results.
For the third quarter, the retailer reported earnings per share (EPS) of $1.96, beating analyst expectations of $1.77.
Revenue came in at $1.8 billion, just ahead of the consensus estimate of $1.79 billion.
Comparable sales fell 2.9% year over year, a significant improvement from a 14.6% decline last year and better than the expected 3.36% decline.
Operating margin for the quarter rose to 17.8%, compared to 17% in the same period last year, and above the consensus estimate of 16.7%. Gross margins also increased by 230 basis points to 46.7%, above the average of 45.9%.
“The expectation is that page growth will begin to decline as comparisons become more difficult,” said analysts at RBC Capital Markets. “It may still be the case, but the rate of erosion was estimated to be higher than that, meaning the 2025 numbers are likely to be higher.”
Willimas-Sonoma repurchased a record $533 million of shares during the quarter and launched a new $1 billion repurchase program.
Higher margins, along with strong repurchase activity “may cause pressure” on WSM shares, added RBC analysts.
Looking ahead, Williams-Sonoma raised its outlook for 2024 to “reflect higher revenue trends and higher operating margin expectations.”
It now forecasts a decline in annual revenue of 1.5% to 3.0%, with comparable sales expected to decline by 3.0% to 4.5% for the fiscal year.
Operating margin guidance for fiscal 2024 has also been revised upward. Including the first quarter adjustment of 60 basis points, the operating margin is expected to be between 18.4% and 18.8%. Excluding this adjustment, the margin is expected to range from 17.8% to 18.2%.
The company maintains its long-term outlook, expecting mid- to high-single-digit revenue growth and operating margins remaining in the mid- to high-teens.
“We are pleased with our third quarter results, beating both high and low expectations,” said Laura Alber, President and CEO of Williams-Sonoma. “The quarter was driven by continued improvements in our sales strategy, market share gains, and strong profitability.”
Similar to RBC, UBS analysts said Williams-Sonoma’s print shows strong margin strength, and provides “more visibility into top-line earnings in ’25.”
That said, following the stock’s decline, WSM now trades near 20x the company’s revised 2024 EPS guidance.
“Therefore, in this iteration, combined with a relatively tight rating and potential risks such as future taxes, we maintain a low sense of caution on the shares,” UBS analysts concluded.
