Williams Sonoma Inc. (NYSE: WSM) announced its Q4 2021 earnings and revenue results topped earnings estimates, but sales were weaker than expected.
What to look for: The company's CEO, Laura Alber, said that their Q4 results demonstrated the resilience of their business model as the home furnishing retailer navigated unprecedented supply chain disruptions, labor and material shortages, and capacity limitations from high consumer demand.
Earnings: Stockearning's Estimated EPS was pegged at $4.78 per share, but the company produced actual EPS of $5.42 per share. A year ago, the company had EPS of $3.95 per share. The quarterly report represents an earnings surprise of 13.39%. In the third quarter, the cookware and home furnishings seller was expected to deliver EPS of $3.11 but produced actual EPS of $3.32, which is a 6.75% surprise. Historical EPS Performance for the past 12 quarters, the company has topped earnings 31 times (86%), matched four times (11%), and missed once (2%).
Revenue: The home furnishings seller posted sales of $2.5 billion in the fourth quarter missing estimates by 2.77%. In the quarter ended January 2021, the company had reported revenue of $2.29 billion. Over the past four quarters, William-Sonoma has topped consensus sales estimates thrice. Sales were up during the quarter across all brands, with Pottery barn leading in growth. The brand reported revenue of $921 million compared to $799 million a year ago whole comparable brand revenue was up 10.8%, with West Elm at 18.3, Pottery Barn at 16.2%, and William Sonoma at 18.3%.
Stock movement: WSM shares have lost 32.2% since the company released its last earnings release. Interestingly, following the earnings release, the company's shares have been UP 24 times in the past 48 quarters. So, the historical price reaction suggests a 5o% probability of the share price going UP following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-6%, while the predicted volatility on the seventh day is +/-7%.
What analysts are saying: Wells Fargo analyst Zachary Fadem slashed his price target on WSM from $180 to $160 and maintained a Hold rating on the shares ahead of the earnings report. Checks by the analyst indicate that the category declined in Q4, that inflation is rising, and that supply chain difficulties are likely driving increased levels of sales/margin fluctuation. Fadem prefers RH’s (RH) unique growth catalysts, luxury positioning, reduced marketing, and proven pricing strength. Gordon Haskett analyst Chuck Grom upgraded the stock from Hold to Buy but lowered his price target from $205 to $200.
RBC Capital analyst Steven Shemesh upgraded the stock from Hold to Buy but lowered his price target from $219 to $202. In a research note to investors, Shemesh indicated that he feels there is adequate top-line flexibility to produce on consensus EPS easily. However, margins are slightly less than projected, and the name's top-line upside is undervalued.
Citi analyst Steven Zaccone slashed his price target on the stock from $225 to $165 but maintained a Hold rating in the shares. According to the analyst, consumer sentiment has turned toward "defensive, steady margin industries" such as home maintenance and automotive parts sales, leaving a minimal margin for mistakes in terms of value for the hardlines retail division. He does feel, however, that the current market downturn in growth stocks and the uncertainty surrounding 2022 present some intriguing risk/reward possibilities for long-term investors.
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