Shares of home-goods retailer Williams-Sonoma(NYSE: WSM) absolutely skyrocketed on Wednesday after the company reported financial results for the third quarter of 2024. As of noon ET, Williams-Sonoma stock was up 31% and hitting all-time highs.
Williams-Sonoma is giving back to shareholders
Williams-Sonoma stock is now up 77% so far in 2024 and up 100% over the past year. But its full-year revenue is expected to drop 1.5% to 3% compared with 2023 -- hardly what one would expect for a company with a soaring stock price. The story here isn't revenue, but rather strong profits and returns to shareholders.
Even though its Q3 revenue was modestly down, Williams-Sonoma was able to slightly boost its gross margin, in part thanks to some improvements in its supply chain. And by keeping operating expenses in check, it had operating income of $321 million for the quarter, which was a strong margin of nearly 18%.
Williams-Sonoma is a mature business and doesn't have large needs for capital at this point. Therefore, it returns a lot of cash to shareholders. In fact, it returned $606 million in Q3 alone, which is quite a lot for a company with a market cap of just $22.5 billion.
Why it matters
Williams-Sonoma pays a dividend and buys back shares. Both of these things directly benefit shareholders. And the chart below shows that it's been the long-term trend for the company.
WSM Average Diluted Shares Outstanding (Quarterly) data by YCharts. Chart doesn't reflect Q3 numbers.
These are trends that can continue. Williams-Sonoma has more than enough money to keep paying and raising its dividend. And management just approved another $1 billion for share repurchases. Sales aren't necessarily growing. But as long as demand holds steady as it is now, management has proven itself to be adept at turning a strong profit and giving back to shareholders, which is good reason to keep holding even with shares at all-time highs.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Williams-Sonoma. The Motley Fool has a disclosure policy.
