Williams-Sonoma's stock soars to a record after profit beat, dividend raised 26%

By Tomi Kilgore

New $1 billion stock-repurchase program is set, and new dividend boosts the yield above S&P 500's

Shares of Williams-Sonoma Inc. rallied into record territory Wednesday after the home-products retailer beat quarterly earnings expectations, with "full-price selling" and supply-chain improvements helping boost margins.

The company also raised its dividend by 26% and set a new $1 billion share-repurchase program as part of its focus on maximizing shareholder returns.

The stock (WSM) soared 18.8% in afternoon trading, to surpass by a wide margin the current record closing price of $247.49 reached on March 7. It was headed for the biggest one-day gain since it rocketed 21.4% on April 6, 2020.

"We outperformed in 2023 despite the slowest housing market in several decades and geopolitical unrest," said Chief Executive Laura Alber. "Although this pressured our top-line trend, we stayed focused on full-price selling, supply-chain efficiencies and best-in-class customer service."

The company raised its quarterly dividend to $1.13 a share from 90 cents a share, with shareholders of record on April 19 to receive the new dividend on May 24.

Based on current stock prices, the new annual dividend rate would increase the implied dividend yield to 1.58% from 1.31%, compared with the implied yield for the S&P 500 index SPX of 1.39%.

Separately, the company said its new $1 billion stock-buyback program replaces any authorization remaining under previous programs. The new program represents 5.4% of Williams-Sonoma's current market capitalization of $17.67 billion.

For the quarter to Jan. 28, net income came in at $354.4 million, or $5.44 a share, compared with $355 million, or $5.28 a share, in the same period a year ago. That beat the FactSet consensus for earnings per share of $5.12.

Net income declined while EPS increased because the number of shares used in calculating EPS fell by 3.1% to 65.15 million.

Revenue was down 7.1% to $2.28 billion but was above the FactSet consensus of $2.22 billion.

Same-store sales, or sales at stores open at least a year, dropped 6.8% but beat expectations for a 9.1% decline. Among the company's store brands, Pottery Barn same-store sales dropped 9.6%, West Elm sales sank 15.3% and Pottery Barn Kids and Teen sales declined 2.5%, while Williams Sonoma sales increased 1.6%.

Gross margin improved by 4.8 percentage points to 46%, helped by higher merchandise margins and lower supply-chain costs.

For fiscal 2024, the company expects revenue in the range of down 3% to up 3% from $7.75 billion in 2023, while the current FactSet revenue consensus of $7.58 billion implies a 2.2% decline.

Williams-Sonoma's stock has run up 45% over the past three months, while the SPDR S&P Retail exchange-traded fund XRT has gained 8.8% and the S&P 500 has advanced 9.9%.

-Tomi Kilgore

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03-13-24 1501ET

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