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Williams-Sonama (WSM) |
HenryTo
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 Posted: Thu Aug 19, 2010 11:27 am Post subject: Williams-Sonama (WSM) |
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Morningstar on WSM's 2Q earnings:
| Quote: | For its second quarter, Williams-Sonoma WSM reported solid sales and profitability that again came in well ahead of our and consensus expectations. Total revenue increased 15% year over year, to $776 million. The firm is still lapping easy (double-digit negative) comparisons; same-store sales increased 13.6% from last year, led again by the Pottery Barn and Pottery Barn Kids concepts. Internet sales reached $267 million, a 27% year-over-year jump, as overall direct-to-consumer sales improved to $326 million (up 19.8%). The gross margin came in at 37%, as the company reported an impressive 480-basis-point improvement from the prior year, driven by solid sales growth, fewer markdowns, and lower occupancy costs. The adjusted operating margin (excluding one-time charges) came in at 7.2%, as leverage from increased sales more than offset additional advertising and compensation expenditures. Management raised its full-year outlook for the third straight quarter to reflect the second quarter's outperformance and positive August trends, while also striking a conservative tone and acknowledging that the economic environment is likely to remain volatile in the coming quarters. Management now expects comparable sales growth of 7%-9% (from 6%-9%) and adjusted earnings per share of $1.63-$1.70 (from $1.39-$1.4 . We still have some long-range concerns about the firm's positioning in a competitive retail market, but we admit that the company's restructuring actions and recent turnaround have yielded impressive results. We plan to adjust our full-year estimates based on continued momentum and will bump up our fair value estimate slightly, but our longer-term growth assumptions are not likely to budge much. |
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Williams-Sonama (WSM) Replies |
HenryTo
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| Posted: Thu Mar 08, 2012 4:16 pm Post subject: |
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Morningstar on WSM's 4Q earnings.
| Quote: | | Williams-Sonoma WSM posted fourth-quarter sales and profits that were modestly ahead of management's outlook, which was lowered in early January following a less-than-inspiring holiday period. We are still encouraged by the firm's fundamental operating model, brand concepts, and long-term growth potential, but management's initial 2012 guidance is in line with our previously published model, and we don't anticipate a change to our $37 fair value estimate at this point. Fourth-quarter net revenue rose 6% year over year, to $1.27 billion, but there were several moving parts behind the gain. First, the firm has had success driving traffic through specialized marketing and merchandising tactics, but the promotional environment remains elevated, and we'd like to see a rebound in the namesake Williams-Sonoma concept. Same-store sales grew 6.6% (versus a 10.9% gain in the year-ago period) and was again led by an acceleration of West Elm comps (34.5%) and Pottery Barn (11.3%). Comps at the namesake chain fell 2.3% (some due to planned stock-keeping unit reduction related to Williams-Sonoma Home), and we're still looking for more color surrounding the next leg of growth, even as the firm plans to close four net stores next year. Operating margins improved to 15.6% in the quarter, down 20 basis points year over year as promotional spending accelerated and more than offset di scretionary expense management. All in, diluted earnings per share rose 8% year over year, to $1.17, which was just above the high end of management's guidance range and our own internal projection. Management's outlook for fiscal 2012, which includes an extra week, contained few surprises. We plan to tweak our financial model, but each of the key line items (sales, margin, EPS) were in line with our previously published forecasts. Guidance calls for mid-single-digit sales gains (3%-5% comp growth), modest margin expansion (less than 40 basis points), and 8% EPS growth (at the midpoint of management's $2.37-$2.47 range). In a separate release Thursday, the firm also announced the retirement of COO, CFO, and board member Sharon McCollam, which was a bit of a shock. McCollam has been with Williams-Sonoma for more than a decade and played an integral role in the firm's top-line expansion and renewed focus on cost-reduction and efficiency gains. Although the firm appears to have a reasonably strong bench (the internally promoted acting CFO has worked alongside McCollam for 10 years), we're concerned that the next couple of quarters may be choppy, given the pending transition and a lackluster economic growth environment, which may place more emphasis on cost controls. We still view the company as well positioned through its multichannel and multiconcept business, and there's plenty of runway for growth, particularly in international and ancillary business opportunities, which have yet to be unearthed. Shares trade at roughly 15.5 times our 2012 (January 2013) earnings estimate, and we would require a wider margin of safety before recommending the shares. Given the general macro uncertainty, we like firm's conservative approach to debt/leverage ($500 million in net cash) and its steady dividend program which, when combined with management's focus on cash generation, gives us increased confidence in the firm's ability to outperform in the long run. |
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HenryTo
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| Posted: Thu Jan 12, 2012 3:59 pm Post subject: |
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Morningstar on WSM's sales update.
| Quote: | | Thursday morning, Williams-Sonoma WSM issued a lackluster holiday sales update and management modestly lowered its fourth-quarter sales and earnings outlook. While the company's commentary surrounding a more aggressive promotional environment didn't come as a surprise (as most retailers noted similar trends), sales at the namesake Williams-Sonoma store came in below expectations for the second consecutive quarter. We plan to adjust our financial model based on today's release, though the net result is unlikely to impact our $37 fair value estimate. We expect shares to trade off following the announcement, and while valuation isn't stretched (at approximately 15 times our 2012 earnings estimate), we would seek a wider margin of safety before initiating a position in the name. While the lowered guidance stole the spotlight in the release, the company also increased its quarterly dividend by $0.05 (29%) and announced a new $225 million share repurchase program which, in our view, underscore's management's confidence in the long-term viability of the business. Sales during the eight-week holiday period rose 4.2% year over year, to $901 million, driven entirely by an 11.6% increase in direct-to-customer net revenue. Same-store sales dipped 0.3% (versus a 5% increase in the year-ago period), which further raised questions about the sustainability of the firm's two-year sales rally and ability to leverage fixed expenses. Amid heavy discounting among national brands, margins also took a hit, and management lowered its fourth-quarter EPS range by 5% (to $1.10-$1.15 from $1.15-$1.20 previously). Our long-term view of the company remains intact following this morning's release and we view Williams-Sonoma as strategically well-positioned with its mult ichannel and multiconcept business. We remain focused on the firm's meaningful cash flow generation and appreciate that management is carefully investing in information technology and international platforms that should set the stage for further gains. |
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HenryTo
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| Posted: Thu Nov 17, 2011 8:08 pm Post subject: |
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Morningstar on WSM's 3Q earnings:
| Quote: | | Williams-Sonoma WSM has emerged from the housing downturn as a leaner and more efficient multichannel retailer, and third-quarter results reflect its ongoing transformation. Although management again increased its full-year earnings per share outlook based on $0.02 of "outperformance" in the quarter, we view the shares as fairly valued after a 20% rally since the beginning of October, and there is no change to our $37 fair value estimate. We still view the company as well positioned through its multichannel and multiconcept business, which should drive long-term results, but we would wait for a more attractive entry point before investing. Third-quarter net revenue ticked up 6% year over year, to $867 million, as the firm had success driving traffic with its fresh merchandising and event-based marketing. Same-store sales growth (7.3% in the quarter on top of the 12.5% gain in the year-ago period) was led by West Elm (27.0%) and Pottery Barn (7.0%). More notably, sales at the namesake chain were flat, despite a relatively easy (2.3%) comparison; we're not yet sure what might have caused the deceleration here, which is somewhat concerning. Operating margins improved to 7.9% in the quarter, up 60 basis points year over year, as ongoing long-term investments were more than offset by lower advertising costs and prudent expense management. The net result was an 18% increase in diluted EPS, which came in at $0.41, just ahead of management's guidance and our own internal projection. We like the long-term story at Williams-Sonoma, and while the firm is still exposed to a choppy U.S. macro environment, management has been proactive in branching out and streamlining its operations. The tuck-in acquisition of Rejuvenation, a manufacturer and multichannel retailer of high-end lighting and cabinet hardware, and the foray into the international franchise waters are two good examples. While it's still early in the lifecycle, we like the firm's competitive position. With the shares now trading near our fair value estimate and at 15 times our 2012 (ending January 2013) earnings estimate, we would require a wider margin of safety before recommending the shares. Today, given the general macro uncertainty, we like firm's conservative approach to debt/leverage ($375 million in net cash), and its steady dividend program which, when combined with management's focus on cash generation, gives us increased confidence in the firm's ability to outperform in the long run. |
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HenryTo
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| Posted: Tue Aug 23, 2011 2:19 pm Post subject: |
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Morningstar on WSM's 2Q earnings:
| Quote: | | Williams-Sonoma WSM continued its streak of solid performance in the second quarter, and management ticked up its full-year earnings per share forecast (by roughly 1%) despite general U.S. macro concerns. We still view the company as well positioned through its multichannel and multiconcept business, which should drive long-term results. Although we plan to adjust our model following the year-to-date results, the net impact will not be enough to affect our fair value estimate. Total second-quarter company revenue rose 5% year over year, to $815 million, as the firm's lower-price "value" proposition and solid e-commerce platform continued to drive volume gains. Same-store sales were up 6.5% in another impressive quarter (versus 16.5% in the year-ago period), led by West Elm and PBteen, which were up 28.6% and 20.4%, respectively. E-commerce channel sales remained solid and at $317 million (up 18% year over year) represented 39% of total sales, further supporting management's business model and strategy. Operating margins came in at 7.9%, 70 basis points over last year's adjusted margin, as higher sales volume and fixed-cost occupancy leverage more than offset increased international and e-commerce business investments. The firm continues to generate solid free cash flow and management is committed to buying back stock and expanding the e-commerce and international business channels, which we view as encouraging. We believe there is more downside risk to near-term economic growth in the United States, but we also acknowledge that management still has several cost levers it can pull in order to drive profitability. Management is not afraid to close or relocate underperforming stores (34 expected this year), and reinvest in its relativel y young West Elm brand, which in particular has a long runway for growth. Following the recent market drop, shares now trade at a 20% discount to our fair value estimate and roughly 13.5 times our forward earnings estimate--even less when considering the $415 million in net cash on the balance sheet. We would still like to see a wider margin of safety given the general economic uncertainty/volatility, but we believe the current price represents an attractive entry point for longer-term investors. |
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HenryTo
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| Posted: Fri May 20, 2011 2:07 am Post subject: |
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Morningstar on WSM's 1Q earnings:
| Quote: | | Williams-Sonoma WSM posted solid first-quarter results and issued an upbeat forecast for the second quarter and full year, supporting our positive view of the firm. There is still a measure of caution in management's tone (it only raised full-year guidance for first-quarter outperformance and second-quarter trends), which we believe is appropriate given concerns surrounding large-ticket discretionary spending, yet the firm is performing quite well. We plan to adjust our model assumptions based on the first-quarter outperformance and management's updated full-year outlook, though there is no change to our fair value estimate. First-quarter revenue rose to $771 million, a 16% year-over-year increase, as the firm's fresh merchandising and lower-price-point "value" pr oposition continues to drive volume. Same-store sales were up 9% (against an 18% increase in the year-ago period), led by a 31% jump at West Elm, as all five concepts comped positively. Year-over-year growth in Internet sales remained healthy, at 21%, and revenue from this channel touched $290 million in the quarter, further supporting management's business model and strategy. Adjusted earnings before tax increased 27% year over year as adjusted margins rose 110 basis points to 6.9%. The improvement was driven by higher sales volume, better full-price sell-through, and fixed cost occupancy leverage that more than offset increased Internet advertising spending. Our confidence in management's multichannel sales model is building, and the firm's merchandising and cost-cutting efforts are beginning to bear fruit, which is encouraging. The increased full-year guidance (up $0.02 per share for the year) appears conservative and quite achievable, though we recognize that management is looking to strike a balance between long-term investment and near-term sales gains, which may require additional expenditures (and limit further margin expansion this year). The firm continues to generate solid free cash flow, buy back shares, pay a healthy dividend, and self-fund its growth initiatives. We believe the company has the right mix in place to deliver mid-single-digit sales growth and modest margin expansion as the U.S. economy recovers. Still, with shares trading slightly above our fair value estimate, we would wait for a more attractive entry point before building a position. |
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HenryTo
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| Posted: Tue Mar 15, 2011 3:09 pm Post subject: |
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Morningstar on WSM's 4Q and full-year earnings:
| Quote: | | Williams-Sonoma WSM posted fourth-quarter and full-year results that were modestly ahead of our expectations, as the home furnishings retailer continued to strengthen amid a stabilizing U.S. economy. We plan to make changes to our financial model based on the outperformance and management's updated 2011 outlook, which will result in an increase to our fair value estimate. Full-year sales came in just ahead of our projections, rising 13% year over year to $3.5 billion, as both the retail and direct-to-consumer segments posted solid gains. As expected, the firm was able to leverage its fixed cost base and a more efficient supply chain to drive meaningful operating margin gains over the course of the year, more than offsetting increased Internet advertising spending. The magnitude of the increase was particularly impressive, up 500 basis points year over year to 9.2%, 70 basis points above our initial projection. For the fourth quarter, same-store sales were up 5.2% (versus 7.6% in the year-ago quarter), led again by the Pottery Barn brand, which posted an 8.9% jump against a positive 11.5% comp last year. Internet sales added $466 million to the top line in the quarter, a 17% increase year over year; this channel now accounts for nearly 40% of the company's net revenue, further validating management's strategy and the evolving business model. The firm continues to generate solid free cash flow, and we believe it has the right mix in place to deliver mid-single-digit sales growth and modest margin expansion as the U.S. economy recovers. We still have some questions surrounding differentiation in a crowded retail market and near-term inflationary headwinds, but the firm is generally executing well. In yet another indication of its strength, management raised its quarterly dividend for the third time in the past 12 months, to $0.17 per share. Our confidence in management's multichannel sales model is building, and the firm's merchandising and cost-cutting efforts are beginning to bear fruit, which is encouraging. Management's 2011 guidance paints a similar picture, calling for 2%-4% comparable-store sales growth, modest expense leverage, and 8%-12% adjusted earning per share growth (to $2.11-$2.19). While we plan to increase our fair value estimate, we believe the current share price reflects a balanced risk/reward trade-off; we would wait for a more attractive entry point before building a position. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Thu Jan 13, 2011 3:47 pm Post subject: |
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Morningstar on WSM's mid-quarter update:
| Quote: | | Williams-Sonoma WSM provided its midquarter holiday business update Thursday. The firm is again on track (through eight weeks of the quarter) to exceed management's guidance. It now projects sales to reach $1.17 billion-$1.19 billion in the fourth quarter, a $300 million-$500 million increase from initial guidance. Meanwhile, Williams-Sonoma is leveraging its fixed costs, and management now expects adjusted earnings per share of $0.96-$0.98 (up from $0.88-$0.93 previously). Although we are impressed by the report, we will wait until management reports full quarterly and annual results and its 2011 outlook before we adjust our valuation. If postholiday sales trends continue, though, we will probably add a few dollars to our fair value estimate. The company's contin uing momentum is important, since the fourth quarter of 2010 represents the first real "tough" (nonnegative, across concepts) year-over-year comparables. As we analyze William-Sonoma's financials and competitive position, the firm's merchandising and cost-cutting efforts are beginning to bear fruit, which is encouraging. And as mentioned previously, our long-term confidence in management's multichannel sales model is increasing. The firm continues to generate solid free cash flow, and we believe it has the right mix in place to deliver mid-single-digit sales growth and modest margin expansion as the U.S. economy recovers. Still, with the shares trading above our fair value estimate, we would wait for a more attractive entry point before building a position in the name. |
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