The Q1 2014 earning report for furniture retailer Williams-Sonoma, Inc (NYSE: WSM), a peer of stocks like Bed Bath & Beyond Inc (NASDAQ: BBBY), Pier 1 Imports Inc (NYSE: PIR) and Restoration Hardware Holdings Inc (NYSE: RH), is scheduled for after the market closes on Wednesday. Aside from the Williams-Sonoma's earnings report, it should be said that Bed Bath & Beyond Inc reported Q4 2013 earnings on April 9 and will report Q1 2014 earnings on June 23rd; Pier 1 Imports Inc reported Q4 2014 earnings on April 10 and will report Q1 2014 earnings around June 16th; and Restoration Hardware Holdings reported Q4 2013 earnings on March 27 and will report Q1 2014 earnings on June 2nd. However and unlike many other retailers, Williams-Sonoma is going into the first quarter after having a great holiday season.
What Should You Watch Out for With the Williams-Sonoma, Inc Earnings Report?First, here is a quick recap of Williams-Sonoma's recent earnings history from Yahoo! Finance:
| EPS Est | 0.37 | 0.47 | 0.55 | 1.35 |
| EPS Actual | 0.41 | 0.49 | 0.58 | 1.38 |
| Difference | 0.04 | 0.02 | 0.03 | 0.03 |
| Surprise % | 10.80% | 4.30% | 5.50% | 2.20% |
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In mid March, Williams-Sonoma made a double digit jump to an all time high after reporting earnings that beat expectations. Q4 2013 net revenues grew to $1.466 billion versus $1.406 billion for the same period last year with comparable brand revenue growth of 10.4%. Excluding the additional week in Q4 2012, EPS increased 8.7% to $1.38. The CEO commented:
"We believe that our lifestyle merchandising approach, together with our high-touch service model, separates us from commoditized offerings as we help our customers decorate, entertain, and create the homes of their dreams. Our multi-channel marketing, built from decades of data analytics experience, enables us to reach our customers and attract new ones in increasingly relevant ways. Our e-commerce business, which represented 44% of our net revenues in fiscal 2013, is growing rapidly, allowing us to capture even greater market share as more consumers transition to online shopping in our categories. Our vertically integrated supply chain is enabling us to deliver exceptional quality and value to our customers."
In addition, Williams-Sonoma authorized a 6% increase to the quarterly cash dividend to $0.33 while during Q4 13, the company repurchased 402,810 shares of common stock for a total of 4.3 million shares or $239 million for FY 2013. As of February 2, 2014, $511 million remained under a three-year $750 million stock repurchase program.
Kate McShane of Citi Investment Research commented after the earnings report was releases that the strong earnings and same-store sales results give her more confidence that Williams-Sonoma can navigate its way through tough conditions given how it dealt with rough winter weather and a very competitive and promotional holiday season during the fourth quarter. She also believes fiscal 2014 guidance is conservative. Meanwhile, William Blair's Daniel Hofkin believes Williams-Sonoma could benefit even more in the future from an improving housing market, a continued shift toward the direct channel, ongoing improvement at its namesake brand and international expansion opportunities.
This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenues of $941.88M and EPS of $0.44 - down from a consensus EPS of $0.46 expected ninety days ago. However, it should be noted that on Monday, it was noticed that Williams-Sonoma June call option implied volatility is at 29, August is at 23 and January is at 22 verses its 26-week average of 23 according. This suggests large near term price movement into earnings.
What do the Williams-Sonoma, Inc Charts Say?The latest technical chart for Williams-Sonoma shows bullish along with a bearish trend line:
However and over the long term, Williams-Sonoma, Bed Bath & Beyond Inc, Pier 1 Imports Inc and Restoration Hardware Holdings Inc have all put in good performances that appears to have leveled off over the past year:
The technical charts for Bed Bath & Beyond and Pier 1 Imports also look rather bearish while Restoration Hardware Holdings' technical chart is mixed:
I don't see any reason for Williams-Sonoma business model to have suddenly stalled during the first quarter. The problem for investors and traders alike is the tendency of great performing stocks to get ahead of themselves in terms of valuation and expectations plus there is all of the options volatility heading into earnings.
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