Kitchenware and home goods retailer Williams-Sonoma (NYSE: WSM) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 8% year on year to $2.46 billion. Its non-GAAP profit of $3.28 per share was 11.5% above analysts’ consensus estimates.
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Williams-Sonoma (WSM) Q4 CY2024 Highlights:
- Revenue: $2.46 billion vs analyst estimates of $2.36 billion (8% year-on-year growth, 4.5% beat)
- Adjusted EPS: $3.28 vs analyst estimates of $2.94 (11.5% beat)
- Full-year guidance: flat sales compared to 2024 (in line) and 17.6% operating margin (miss vs expectations of 18.1%)
- Operating Margin: 21.5%, up from 20.1% in the same quarter last year
- Free Cash Flow Margin: 23%, down from 27.3% in the same quarter last year
- Locations: 512 at quarter end, down from 518 in the same quarter last year
- Same-Store Sales rose 3.1% year on year (-6.8% in the same quarter last year)
- Market Capitalization: $21.21 billion
“We are proud of our strong finish to 2024. In Q4, our comp came in above expectations at positive 3.1%. We exceeded profitability estimates with an operating margin of 21.5% and earnings per share of $3.28. This success was fueled by the strength of our operating model, our standout seasonal offerings, our impactful collaborations, and a strong improvement in both retail and online furniture sales. On the full year, our comp ran down 1.6%. We delivered a record annual operating margin of 17.9% with full-year earnings per share of $8.50,” said Laura Alber, President and Chief Executive Officer.
Company Overview
Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.
Home Furniture Retailer
Furniture retailers understand that ‘home is where the heart is’ but that no home is complete without that comfy sofa to kick back on or a dreamy bed to rest in. These stores focus on providing not only what is practically needed in a house but also aesthetics, style, and charm in the form of tables, lamps, and mirrors. Decades ago, it was thought that furniture would resist e-commerce because of the logistical challenges of shipping large furniture, but now you can buy a mattress online and get it in a box a few days later; so just like other retailers, furniture stores need to adapt to new realities and consumer behaviors.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $7.71 billion in revenue over the past 12 months, Williams-Sonoma is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, Williams-Sonoma’s 5.5% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was tepid as it closed stores.
This quarter, Williams-Sonoma reported year-on-year revenue growth of 8%, and its $2.46 billion of revenue exceeded Wall Street’s estimates by 4.5%.
Looking ahead, sell-side analysts expect revenue to decline by 1.3% over the next 12 months, a deceleration versus the last five years. This projection is underwhelming and implies its products will see some demand headwinds.
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Store Performance
Number of Stores
A retailer’s store count influences how much it can sell and how quickly revenue can grow.
Williams-Sonoma listed 512 locations in the latest quarter and has generally closed its stores over the last two years, averaging 2.2% annual declines.
When a retailer shutters stores, it usually means that brick-and-mortar demand is less than supply, and it is responding by closing underperforming locations to improve profitability.
Same-Store Sales
A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Williams-Sonoma’s demand has been shrinking over the last two years as its same-store sales have averaged 5.9% annual declines. This performance isn’t ideal, and Williams-Sonoma is attempting to boost same-store sales by closing stores (fewer locations sometimes lead to higher same-store sales).
In the latest quarter, Williams-Sonoma’s same-store sales rose 3.1% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.
Key Takeaways from Williams-Sonoma’s Q4 Results
We liked that Williams-Sonoma beat on revenue and EPS in the quarter. However, the company initiated full-year 2025 guidance, and it was less exciting. Williams-Sonoma called for flat sales year-on-year and operating margins that fell below expectations. This outlook of no growth and margins below Wall Street's estimates is weighing on shares, and the stock traded down 7.1% to $160 immediately after reporting.
Is Williams-Sonoma an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
