Williams-Sonoma Stages a Decent Holiday Quarter

By Steve Symington Markets Fool.com

Williams-Sonoma(NYSE: WSM)announced better-than-expected fiscal fourth-quarter 2016 results Wednesday after the market closed. But that doesn't mean the Pottery Barn parent was without its challenges over the key holiday period. Let's take a closer look at how Williams-Sonoma capped the year, as well as what investors can expect from the company going forward.

Continue Reading Below

Image source: Williams-Sonoma/Pottery Barn via BusinessWire.

Williams-Sonoma results: The raw numbers

Metric

Q4 2016

Q4 2015

Year-Over-Year Change

Revenue

$1.582 billion

$1.586 billion

(0.3%)

GAAP net income

$144.6 million

$141.1 million

2.5%

GAAP earnings per diluted share

$1.63

$1.55

5.2%

Data source: Williams-Sonoma.

What happened with Williams-Sonoma this quarter?

Continue Reading Below

  • On an adjusted (non-GAAP) basis, which excludes an $0.08-per-share benefit from a one-time favorable tax adjustment during the quarter, earnings per share remained flat from the same year-ago period at $1.55.
  • By comparison, revenue was in line with guidance for $1.57 billion to $1.65 billion, while diluted earnings per share came in at the high end of Williams-Sonoma's expected range of $1.45 to $1.55.
  • E-commerce sales climbed 2.2% year over year, to $809 million, or 51.1% of total revenue, while retail revenuedeclined 2.7%, to $773 million.
  • Comparable-brand revenue declined 0.9% -- near the low end of guidance for negative-1% to positive-4% -- including:
    • A 4.1% decline at Pottery Barn.
    • 1.4% growth at Williams-Sonoma.
    • 6.5% growth at West Elm.
    • A 4.9% decline at Pottery Barn Kids.
    • An 8.1% decline at PBteen.
  • The company repurchased $36 million in common shares, leaving $411 million remaining under the company's existing repurchase program.
  • Williams-Sonoma's board authorized a $0.02-per-share increase to the company's quarterly dividend, to $0.39 per share.

What management had to say

Williams-Sonoma CEO Laura Alber noted that the company "executed one of [its] best holiday seasons and delivered an improved customer experience" during the quarter. She elaborated on the road ahead:

Entering 2017, we will continue to improve performance and increase our competitive advantage, with a focus on innovation in e-commerce, our products and service, and the retail experience. We will also remain relentlessly focused on operational excellence throughout our supply chain, driving strategies that will improve our customers' experience across all of our brands. We are optimistic about the future and believe we have the infrastructure, strategies, and talent in place to drive long-term profitable growth for our shareholders.

Looking forward

For the current fiscal first quarter, Williams-Sonoma expects revenue to be in the range of $1.085 billion to $1.120 billion, assuming a change in comparable-brand revenue of negative-1% to positive-2%. On the bottom line, that should translate to diluted earnings per share of $0.45 to $0.50.

Finally, for the full fiscal year 2017, Williams-Sonoma expects revenue of $5.165 billion to $5.265 billion, up from $5.084 billion in fiscal 2016, and assuming comparable-brand revenue growth of 1% to 3%. That should result in full-year diluted earnings per share of $3.45 to $3.65, compared with $3.41 in fiscal 2016. For perspective -- and though we don't typically pay close attention to Wall Street's demands -- analysts' consensus estimates predicted revenue and earnings near the high ends of Williams-Sonoma's respective guidance ranges.

Similar to its past few quarters, that doesn't rule out the possibility that Williams-Sonoma is offering a tempered outlook given today's notoriously difficult retail environment -- something to which investors have grown accustomed. So given its relative outperformance in the lucrative holiday season, and with shares down nearly 20% over the past year, it's no surprise that the stock was moving higher in initial after-hours trading following the report.

10 stocks we like better than Williams-Sonoma
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Williams-Sonoma wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Williams-Sonoma. The Motley Fool has a disclosure policy.