Hot Retail Stock to Watch: Williams-Sonoma, Inc. (NYSE: WSM)

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Williams-Sonoma, Inc. (NYSE: WSM) stock rose over 2.8% in the pre-market session of May 27th, 2021 (Source: Google finance) after the company posted better than expected results for the first quarter of FY 21 and raised the outlook for the full year 2021.

The comparable brand revenue growth grew to 40.4%. The company saw strong sequential acceleration across all brands, starting with West Elm at a comp of 50.9%, Pottery Barn at a 41.3%, Williams-Sonoma at 35.3% and Pottery Barn Kids and Teen at 27.6%. The company’s emerging brands, Rejuvenation and Mark and Graham combined, delivered comp growth of over 35%, and the global business grew over 81% to approximately $100 million. The company ended the first quarter with almost $640 million in cash and over $238 million in operating cash flow, which is a significant increase over last year.

Further, the company’s gross margin expanded by record 850 basis points to 43%, driven by substantially higher selling margins and occupancy leverage. Selling margins expanded for another consecutive quarter, up over 440 basis points year-over-year and 310 basis points from the fourth quarter, driven by higher merchandise margins and ship cost leverage, which reflects the higher mix of retail sale versus last year. Occupancy leverage was of approximately 410 basis points in the quarter resulted from higher sales and another quarter of relatively flat year-over-year occupancy dollars at approximately $176 million, as compared to $175 million last year.

WSM in the first quarter of FY 21 has reported the adjusted earnings per share of $2.93, beating the analysts’ estimates for the adjusted earnings per share of $1.83, according to Refinitiv Ibes Data. The company had reported the adjusted revenue of $1.75 billion in the first quarter of FY 21, beating the analysts’ estimates for revenue of $1.52 billion. Q1 non-GAAP operating margin expanded 950bps to 15.9%

The company expects for fiscal year 2021, the low double-digit to mid-teen net revenue growth and year-over-year non-GAAP operating margin expansion.

For the long-term, the company expects net revenue growth to be of mid-to-high single digits and non-GAAP operating margin expansion. The strong results, combined with the three key differentiators of in-house design, digital-first channel strategy and values, and the macro trends that should benefit the business over the long-term, give the confidence in these future growth projections and an accelerated path to $10 billion in net revenues and maintaining at least 15% non-GAAP operating margins in the next five years.

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