Home Furnishing Retailer Williams-Sonoma Slumps After Dull Q2 Earnings; Slashes Annual Outlook

Williams-Sonoma, Inc. WSM shares are trading lower on Thursday.

The company reported second-quarter adjusted earnings per share of $1.74, beating the analyst consensus of $1.59. Quarterly sales of $1.788 billion missed the street view of $1.811 billion.

“In Q2, our comp came in at -3.3%, and we exceeded profitability estimates with an operating margin of 16.2% and earnings per share of $1.74, reflecting the 2-for-1 stock split we completed in July,” said Laura Alber, President and Chief Executive Officer.

The gross margin increased by 550 basis points to 46.2% from last year, driven by higher merchandise margins (+380bps) and supply chain efficiencies (+180bps), partially offset by occupancy deleverage (-10bps).

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The company maintained a liquidity position with $1.3 billion in cash and $246 million in operating cash flow, allowing it to return $203 million to stockholders through $130 million in stock repurchases and $73 million in dividends. Merchandise inventories, net, at the end of the quarter were $1.247 billion.

Outlook: Williams-Sonoma now expects fiscal 2024 annual net revenue to decline between 4.0% and 1.5%, a shift from the previous guidance of a 3% increase to a 3% decline.

Comparable store sales are projected to fall between 5.5% and 3.0%, compared to the prior range of a 4.5% decline to a 1.5% increase.

Over the long term, the company continues to expect mid-to-high single-digit annual net revenue growth with an operating margin in the mid-to-high teens.

Price Action: WSM shares are trading lower by 8.68% to $131.37 at last check Thursday.

Photo via Wikimedia Commons

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