WSM tops expectations as income disparity among shoppers remains
1min read Williams-Sonoma (WSM) delivered a strong Q3 report, with adjusted EPS of $1.96 surpassing analyst expectations of $1.77. Revenue came in at $1.8 billion, slightly ahead of the $1.79 billion consensus estimate, marking a year-over-year decline of 2.9%. Comparable sales also fell 2.9%, a significant improvement from the 14.6% decline recorded a year ago, and beat the expected drop of 3.36%.
Operating margin rose to 17.8%, up from 17% in the prior year and above market expectations, showcasing improved profitability. Segment performance varied, with Pottery Barn's comparable sales down 7.5% but better than the previous year’s 16.6% drop. Williams-Sonoma segment sales were nearly flat, down just 0.1%, while West Elm saw a 3.5% decline, a significant recovery from last year’s 22.4% decrease. Pottery Barn Kids and Teen continued to shine, posting a 3.8% sales increase compared to 6.9% last year.
The highlight of the quarter was WSM’s upward revision to its fiscal 2024 outlook. The company now expects full-year revenue to decline by 1.5% to 3%, an improvement from earlier forecasts. Operating margin guidance was also raised to 17.8%-18.2%, reflecting confidence in cost control and sales momentum. Management attributed the stronger outlook to market share gains, improving sales trends, and robust profitability.
CEO Laura Alber emphasized the company’s strategic execution as a driver of its Q3 performance. She highlighted continued market share gains and strong profits, noting the company’s ability to outperform in a challenging retail environment. Alber also reiterated WSM’s commitment to its long-term growth strategy, targeting mid-to-high single-digit annual revenue growth and maintaining operating margins in the mid-to-high teens.
WSM also announced a new $1 billion share repurchase program, signaling confidence in its financial stability and shareholder value creation. This move follows strong capital returns, underpinned by healthy margins and a disciplined approach to inventory and cost management. The program is expected to further enhance investor sentiment as WSM capitalizes on its operational strengths.
Store expansion was modest, with the company ending Q3 with 525 stores, a 0.8% increase sequentially. While the Williams-Sonoma segment saw a slight year-over-year decline in store count, Pottery Barn Kids expanded, reflecting strategic adjustments to focus on growing areas of the business. Inventory levels and store productivity were well-managed, contributing to the quarter’s strong results.
Looking ahead, WSM remains optimistic about the upcoming holiday season and beyond. The company’s ability to improve sales trends and profitability in a challenging environment bodes well for future growth. With raised guidance, disciplined cost control, and market share gains, WSM is well-positioned to sustain its performance and deliver long-term value for shareholders.