Williams-Sonoma, Inc. (WSM) shares took a dip on Thursday following the company’s second-quarter earnings report. While the company exceeded analyst expectations for adjusted earnings per share, coming in at $1.74 versus a consensus of $1.59, its quarterly sales of $1.788 billion fell short of the estimated $1.811 billion.
Laura Alber, President and Chief Executive Officer, acknowledged the challenging market conditions, stating, “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.”
Despite the revenue miss, Williams-Sonoma showcased its financial strength. The gross margin significantly improved by 550 basis points to 46.2% compared to the previous year, primarily driven by higher merchandise margins and supply chain efficiencies. The company also maintains a robust liquidity position with $1.3 billion in cash and $246 million in operating cash flow. This strong financial standing enabled Williams-Sonoma to return $203 million to shareholders through stock repurchases and dividends.
Looking ahead, Williams-Sonoma revised its outlook for fiscal 2024. The company now anticipates annual net revenue to decline between 4.0% and 1.5%, a notable adjustment from its prior guidance of a 3% increase to a 3% decline. Comparable store sales are also projected to fall between 5.5% and 3.0%, compared to the previous range of a 4.5% decline to a 1.5% increase. However, Williams-Sonoma remains optimistic about its long-term prospects, expecting mid-to-high single-digit annual net revenue growth and an operating margin in the mid-to-high teens.
As of Thursday’s closing, WSM shares were down 8.68% at $131.37.
