Kitchenware and home goods retailer Williams-Sonoma (NYSE:WSM) missed analysts’ expectations in Q2 CY2024, with revenue down 4% year on year to $1.79 billion. It made a non-GAAP profit of $1.74 per share, improving from its profit of $1.56 per share in the same quarter last year.

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Williams-Sonoma (WSM) Q2 CY2024 Highlights:

• Revenue: $1.79 billion vs analyst estimates of $1.81 billion (1.2% miss)

• EPS (non-GAAP): $1.74 vs analyst estimates of $1.61 (8% beat)

• Lowered full year revenue guidance: now expects full year revenue down 3% year on year vs. previous expectation of flat year on year revenue (miss)

• Gross Margin (GAAP): 46.2%, up from 40.7% in the same quarter last year

• Free Cash Flow Margin: 12%, down from 17.7% in the same quarter last year

• Locations: 521 at quarter end, down from 532 in the same quarter last year

• Same-Store Sales fell 3.3% year on year (-11.9% in the same quarter last year) (miss)

• Market Capitalization: $18.5 billion

“Today we are reporting strong results for the second quarter of 2024, which were driven by our Q2 improved top-line trend, market-share gains, and continued delivery on our commitment to profitability. In Q2, our comp came in at -3.3%, and we exceeded profitability estimates with an operating margin of 16.2% and earnings per share of $1.74, reflecting the 2-for-1 stock split we completed in July,” said Laura Alber, President and Chief Executive Officer.

Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE:WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.

Home Furniture Retailer

Furniture retailers understand that ‘home is where the heart is’ but that no home is complete without that comfy sofa to kick back on or a dreamy bed to rest in. These stores focus on providing not only what is practically needed in a house but also aesthetics, style, and charm in the form of tables, lamps, and mirrors. Decades ago, it was thought that furniture would resist e-commerce because of the logistical challenges of shipping large furniture, but now you can buy a mattress online and get it in a box a few days later; so just like other retailers, furniture stores need to adapt to new realities and consumer behaviors.

Sales Growth

Williams-Sonoma is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.

As you can see below, the company’s annualized revenue growth rate of 5.5% over the last five years was sluggish as its store count dropped.

This quarter, Williams-Sonoma missed Wall Street’s estimates and reported a rather uninspiring 4% year-on-year revenue decline, generating $1.79 billion in revenue. Looking ahead, Wall Street expects sales to grow 4.1% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Williams-Sonoma’s demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 5% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn’t been the case here.

In the latest quarter, Williams-Sonoma’s same-store sales fell 3.3% year on year. This decrease was an improvement from the 11.9% year-on-year decline it posted 12 months ago. It’s always great to see a business improve its prospects.

Key Takeaways from Williams-Sonoma’s Q2 Results

While EPS beat, 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. The areas below expectations seem to be driving the stock move, and shares traded down 11.5% to $127.35 immediately after reporting.

So should you invest in Williams-Sonoma right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.