Why Williams-Sonoma Stock Was Falling Today
Shares of Williams-Sonoma (NYSE: WSM) were pulling back today after the high-end home furnishings company missed top-line estimates and posted declining comparable sales in its second-quarter report.
As of 10:56 a.m. ET, the stock was down 8.5% on the news.
Image source: Getty Images.
Williams-Sonoma is still facing headwinds
Like most of its home furnishings peers, Williams-Sonoma has struggled in the current environment as the sluggish housing market has weighed on demand for furniture, home decor, and kitchen items.
As a result, comparable brand revenue in the quarter fell 3.3% and overall revenue was down 4% to $1.79 billion, which missed the consensus at $1.81 billion.
However, gross margin improved by 550 basis points to 46.2% due to an increase in merchandise margins and improving supply chain efficiencies. Selling, general, and administrative (SG&A) expenses also increased 390 basis points to 30% due to increased performance-based compensation and advertising spend.
As a result, operating margin increased 160 basis points to 16.2%, and earnings per share (EPS) rose 12% to $1.74, beating estimates at $1.60.
CEO Laura Alber noted the "improved top-line trend, market-share gains, and continued delivery on our commitment to profitability."
Can Williams-Sonoma bounce back?
Williams-Sonoma's guidance update was mixed as its revenue forecast called for a decline of 1.5% to 4% for the full year, indicating ongoing headwinds in the home furnishings space. However, the company raised its operating margin guidance to a range of 18% to 18.4%, which translates into holding EPS guidance steady. Analysts expect EPS to improve from $7.28 to $8.21 for the year.
There is some good news for investors, however. Interest rates should start to come down at the Fed's next meeting in September, supporting a recovery in the housing market, which should help Williams-Sonoma return to sales growth.
At the current price, the stock looks like a solid value at a forward P/E of 16.3. If the housing market bounces back, look for Williams-Sonoma stock to move higher.
Should you invest $1,000 in Williams-Sonoma right now?
Before you buy stock in Williams-Sonoma, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Williams-Sonoma wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $787,394!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Jeremy Bowman 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.