Williams-Sonoma posted in-line revenue growth and operating margin gains for its fourth quarter, but investors were particularly encouraged by management’s upbeat 2013 forecast and three-year outlook. The company is well positioned in a large and fragmented industry, led by its multi-channel (and multi-concept) business, which should drive long-term results.
Total fourth-quarter revenue rose 11% year over year, to $1.4 billion, as the firm’s lower-price-point value proposition and solid e-commerce platform continue to drive volume gains. Same-store sales were up 4.0% in a solid showing (versus 6.6% in the year-ago period), led by West Elm and Pottery Barn Kids, which were up 19.1% (despite lapping a 34.5% comp) and 7.7%, respectively. E-commerce channel sales remained solid, and at $576 million (up 24% year over year) further support management’s business model and strategy. The operating margin came in at 15%, toward the higher end of management’s guidance, as higher sales volume and fixed-cost occupancy leverage more than offset increased international and e-commerce business investments.
The firm continues to generate solid free cash flow, and management is committed to buying back stock ($750 million under the new program) and expanding the ecommerce and international business channels, which is encouraging. The 41% increase in the quarterly dividend was also a plus, as was management’s three-year outlook, which calls for mid- to high-single-digit annual revenue growth and low-double-digit to midteens earnings per share growth.
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