Image Source: Unsplash

Williams-Sonoma, Inc. (WSM - Free Report) is scheduled to release first-quarter fiscal 2024 results on May 22, before market open.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 7.5% but decreased 1.1% year over year. Revenues of this multi-channel specialty retailer of premium-quality home products beat the consensus mark by 3% but declined 6.9%.

Williams-Sonoma reported better-than-expected earnings in all the last four quarters, the average being 10.3%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share (EPS) has remained unchanged at $2.78 over the past 30 days. The estimated figure indicates growth of 5.3% from $2.64 per share reported in the year-ago quarter.

The consensus mark for revenues is pegged at $1.65 billion, suggesting a 5.8% decline from the year-ago figure of $1.76 billion.

Williams-Sonoma, Inc. Price and EPS Surprise

Williams-Sonoma, Inc. price-eps-surprise | Williams-Sonoma, Inc. Quote

Factors to Note

WSM’s solid operating model, comprising full-price selling, supply-chain efficiencies and top-tier customer service, is expected to have partly offset headwinds like slowing discretionary demand conditions and ongoing softness in the housing market given higher rates and geopolitical uncertainties in its fiscal first-quarter results. Softening category demand due to macro and geopolitical concerns has been weighing on consumers’ capacity to spend on discretionary products.

WSM is reducing its advertising efforts and aiming to uphold stable pricing in a fiercely competitive market. This strategy is intensifying the decline in market share, impacting not only its main growth brand, West Elm (which represented 23.9% of fiscal 2023 sales) but also its core Pottery Barn brand (which represented 41.4% of fiscal 2023 sales).

However, the multi-channel, multi-brand platform, strong e-commerce growth, solid execution of strategic initiatives, digital leadership, product innovation, retail transformation and operational excellence across businesses are also expected to have contributed to Williams-Sonoma’s net sales in the first quarter of fiscal 2024. Also, cross-brand initiatives are expected to have positively contributed to consolidated comps to some extent.

From the margin perspective, an increase in occupancy costs, along with employment and general expenses, are likely to have weighed on its to-be-reported quarter’s bottom-line performance. Yet, higher merchandise margins and lower costs from supply-chain efficiencies are expected to have boosted its profitability in the quarter.

We expect Pottery Barn Kids and Teen’s comps growth to be at negative 4.7%. The same had declined 3.3% a year ago. In the fourth quarter of fiscal 2023, comps were negative 2.5%.

Our model predicts Pottery Barn’s comps to decline 5.5% year over year. The same declined 0.4% a year ago. In the fourth quarter of fiscal 2023, comps were negative 9.6%.

Our model predicts West Elm’s comps to decline 6.8%. The metric witnessed a 15.8% decline a year ago and a 15.3% decline in the last reported quarter.

We expect the namesake brand’s comps to be up 1.3%. The metric witnessed a 4.4% decline a year ago but growth of 1.6% in the previously reported quarter.

What the Zacks Model Says

Our proven model predicts an earnings beat for Williams-Sonoma this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case here, as elaborated below.

Earnings ESP: Williams-Sonoma has an Earnings ESP of +1.96%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Williams-Sonoma currently carries a Zacks Rank #3.

More By This Author:

Bear Of The Day: ASGN
2 Intriguing Medical Stocks To Buy For Steady Growth As Earnings Approach
3 IT Services Stocks To Buy From A Challenging Industry