Williams-Sonoma (WSM) Stock Trades Down, Here Is Why
What Happened:
Shares of kitchenware and home goods retailer Williams-Sonoma (NYSE:WSM) fell 12.4% in the pre-market session after the company reported second-quarter earnings. Same-store sales and revenue both missed. The company also lowered its full-year revenue guidance "to reflect lower net revenue trends," although Williams-Sonoma expects higher full-year margins. On the other hand, EPS exceeded expectations. The areas below expectations seem to be driving the stock move, and shares traded down as a result.
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What is the market telling us:
Williams-Sonoma’s shares are somewhat volatile and over the last year have had 18 moves greater than 5%. But moves this big are very rare even for Williams-Sonoma and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock gained 19.1% on the news that the company reported fourth-quarter results, with revenue and EPS exceeding Wall Street's expectations. Management noted that although 2023 was the slowest housing market in several decades, it avoided discounting, enabling it to deliver an operating margin ahead of its pre-pandemic profitability. Revenue outperformance was driven by better-than-expected same-store sales at its flagship Williams Sonoma brand (1.6% growth vs estimates of negative 0.5%) and Pottery Barn (negative 9.6% vs estimates of negative 10.3%). The revenue and gross margin beats also led to an EPS beat, and management increased the company's quarterly dividend by 26% and share repurchase capacity to $1 billion. In addition, the company's board approved a new $1 billion stock repurchase program. Zooming out, this was a great quarter that shareholders will appreciate.
Williams-Sonoma is up 29.9% since the beginning of the year, but at $132.27 per share it is still trading 18.9% below its 52-week high of $162.99 from July 2024. Investors who bought $1,000 worth of Williams-Sonoma’s shares 5 years ago would now be looking at an investment worth $3,872.
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