Williams-Sonoma Stages a Decent Holiday Quarter

By MarketsFool.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.

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

Williams-Sonoma results: The raw numbers

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Data source: Williams-Sonoma.

What happened with Williams-Sonoma this quarter?

  • 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:

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.

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