Williams-Sonoma Reports 4Q Earnings, Deutsche Bank Sees Upside

Deutsche Bank has published a research report on Williams-Sonoma WSM after the company reported its 4Q results.

In the report, Deutsche Bank writes "WSM reported 4Q10 EPS of $1.08 vs consensus of $0.98. Comps had already been reported at 5.2%, and total DTC revenues increased 17% with internet revenues up 27.2% y/y. DTC represented 39% of total net revenues, up 300 bps y/y. Pottery Barn turned in the strongest retail comp at +8.9%, with PB Kids +4.6% and Williams-Sonoma at +2.3%. The upside to EPS was on both GM and SGA, with GM +50 bps vs expectations and SGA 90 bps better than expected. In GM, 40 bps of upside was from higher than anticipated inventory liquidation recoveries. Leverage on occupancy expense, a decrease in total occupancy dollars, and the sales mix shift discussed above (DTC has lower occupancy expense relative to retail) was partially offset by higher shrink y/y. On the cost side, WSM drove leverage on the 5% comp along with lower incentive compensation expense. This was partially offset by the higher ad costs associated with DTC."

Deutsche Bank maintains its Hold rating and $34 price target.

Williams-Sonoma closed yesterday at $34.98.