Bull of the Day: Williams-Sonoma (WSM)
This home decor and furniture retailer forecasts more record growth on the horizon.
Headquartered in San Francisco, Williams-Sonoma Inc. WSM is a specialty home goods and furniture retailer founded in 1973.
The company has five core operating segments, each of which make up its brand portfolio: Pottery Barn, West Elm, the namesake Williams-Sonoma, Pottery Barn Kids & Teen, and Other, which includes Rejuvenation and Mark and Graham.
Q2 Earnings Recap
Back in August, Williams-Sonoma crushed expectations for its fiscal second quarter.
Adjusted earnings per share came in at $3.24 while revenue hit $1.96 billion, up 30.7% year-over-year, easily beating top and bottom-line estimates.
Impressively, e-commerce now makes up 65% of the company’s total revenue.
Total comparable sales rose nearly 30% compared to the prior-year period. West Elm was a stand out once again, reporting comps growth of 51.1%; Pottery Barn saw comps rise 29.6% as well.
Gross margin expanded 710 basis points to 44.1%, driven higher by year-over-year merchandise margin gains.
WSM’s liquidity position remains strong. The retailer generated $655 million in cash and more than $475 million in operational cash flow in Q2. This allowed WSM to repurchase an additional $135 million in shares during the period.
Plus, Williams-Sonoma rewarded shareholders with a 20% dividend increase; the upcoming dividend of $0.71 will be paid out on Nov. 26 to investors of record as of Oct. 22. Shares currently yield 1.23% on an annual basis.
Can WSM Surge Higher?
Year-to-date, shares of WSM have risen over 88% compared to the S&P 500’s gain of 16%. Earnings estimates have climbed as well, making the home-focused retailer a Zacks Rank #1 (Strong Buy) right now.
For the current fiscal year, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $11.74 per share to $13.31 per share. Earnings are expected to spike over 47% year-over-year for fiscal 2021, with 2022 continuing the positive earnings growth trend.
Williams-Sonoma’s growth initiatives are clearly paying off faster than expected.
The company now anticipates full-year revenue growth to be in a “high-teens to low-20s” percentage target range. Additionally, management believes it will now reach its goal of $10 billion in annual sales by 2024, one year ahead of estimates.
If you’re an investor searching for a retail stock that offers both future growth and a well-covered dividend, make sure to keep WSM on your shortlist.
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WilliamsSonoma, Inc. (WSM): Free Stock Analysis Report
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