Williams-Sonoma's Strategic Investments Start to Pay Off

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Williams-Sonoma (NYSE: WSM) released fiscal first-quarter 2019 results on Thursday after the market closed, trouncing expectations and building on the momentum we saw last quarter, when the home-furnishings retailer outlined efforts to position itself to capitalize on a number of compelling strategic, longer-term growth initiatives. The company also noted its strength has extended so far into the current fiscal second quarter, and raised its full-year earnings outlook to boot.

With the stock up 12% in after-hours trading as of this writing, let's dig in for a better idea of how Williams-Sonoma started the new year.

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Williams-Sonoma results: The raw numbers

Metric

Fiscal Q1 2019*

Fiscal Q1 2018

Year-Over-Year Growth

Revenue

$1.241 billion

$1.203 billion

3.2%

GAAP net income

$52.7 million

$45.2 million

16.6%

GAAP earnings per diluted share

$0.66

$0.54

22.2%

What happened with Williams-Sonoma this quarter?

  • Adjusted for one-time items, Williams-Sonoma's (non-GAAP) earnings climbed 21% year over year to $0.81 per share.
  • As of last quarter, the company no longer provides specific quarterly guidance (opting instead to update its full-year outlook as needed). So for perspective, and though we don't usually pay close attention to Wall Street's demands, most analysts were modeling lower adjusted earnings of $0.69 per share on revenue of $1.23 billion.
  • Comparable-brand revenue growth accelerated to 3.5% (from 2.4% last quarter), including 1.5% growth from Pottery Barn, 11.8% growth from West Elm, a 1.6% decline from Williams Sonoma, and 1.2% growth from Pottery Barn Kids & Teen.

What management had to say

CEO Laura Alber stated:

Looking forward

Alber added that with their "strong start to the year and the strength we are seeing early in the second quarter," Williams-Sonoma now expects adjusted EPS in the range of $4.55 to $4.75 for the full fiscal-year 2019, marking an increase of a nickel per share from both ends of its previous outlook. The company simultaneously reiterated its guidance for fiscal 2019 revenue of $5.67 billion to $5.84 billion, which still assumes comparable-brand revenue growth of 2% to 5%.

Over the longer term, Williams-Sonoma also says it's targeting growth in both total net revenue and adjusted operating income in the mid- to high-single-digit percent range, as well as "above industry average" returns on invested capital.

In the end, it's hard to argue with this beat-and-raise performance from Williams-Sonoma. And the market is bidding up shares accordingly.

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