Williams-Sonoma Shares Gain After Q2 Earnings Beat Despite Softening Industry Metrics & Revenue Trends

Williams-Sonoma, Inc. WSM reported a second-quarter FY23 revenue decline of 12.9% year-over-year to $1.86 billion, missing the consensus of $1.96 billion.

Non-GAAP EPS was $3.12, above the consensus of $2.71.

WSM clocked a comparable brand revenue decline of 11.9%. Occupancy costs rose 5.3% to $203 million.

Gross margin of 40.7% in Q2 contracted by 280 bps. 

The selling margin contracted by 90 bps due to higher shipping and freight costs and occupancy deleverage of 190 bps.

In the quarter under review, WSM reported an operating income of $272 million with an operating margin of 14.6%.

WSM has $514 million cash at quarter-end, with no borrowings outstanding. Operating cash flow in the quarter under review was $372 million.

"We achieved these results against an increasingly promotional environment and softening industry metrics by focusing on regular price selling, driving improved customer service and controlling costs," said Laura Alber, President and Chief Executive Officer.

Outlook

Williams-Sonoma revised FY23 guidance reflecting lower revenue trends. The company expects a revenue decline of 5%-10% versus prior guidance of -3% to +3%, with an operating margin of 15%-16% (prior view 14%-15%).

Over the long term, the company expects mid-to-high single-digit annual net revenue growth with an operating margin above 15%.

Price Action: WSM shares are trading higher by 10.6% at $138.58 on the last check Wednesday.