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Most retailers are struggling. Not Williams-Sonoma
It’s been a dismal summer for national retailers. Most have downgraded their forecasts for the balance of the year, indicating caution about consumer spending patterns, especially for home furnishings products. Apparently, Williams-Sonoma didn’t get the memo.
In reporting another outstanding quarter on Wednesday, the big home furnishings retailer continued its exuberant outlook for the remainder of its fiscal year, which was quite robust to begin with. While some other national chains like Home Depot and Dick’s Sporting Goods remain positive in their forecasts for the immediate future, other players like Macy’s, Nordstrom, Kohl’s and TJX have all been more negative. Inflation, consumer spending trending more toward travel and entertainment rather than big-ticket purchases and ominous signs of a looming recession all contributed to the pessimism across much of the retail spectrum.
“We’re just not seeing what others are mentioning,” Williams-Sonoma CEO Laura Alber told analysts on a conference call following the earnings release Wednesday, referring to the reduced expectations other retailers have been talking about in their own earnings calls.
“I am very proud of [our] performance, especially given the macroeconomic backdrop and the strong compares we were up against, all while delivering an impressive 41.1 percent comp on a two-year basis,” she said in a statement. “It is this continued outperformance that gives us the confidence to reiterate our 2022 guidance and longer-term outlook today.”
In its earnings release, the company reported that “we are reiterating our fiscal year 2022 and long-term financial outlook of mid-to-high single-digit annual net revenue growth, increasing revenues to $10 billion by fiscal year 2024, and operating margins [are] relatively in-line with our fiscal year 2021 operating margin.”
The company’s Q2 results were impressive on virtually every level: top-line revenues up from $1.9 billion to $2.1 billion; comp sales up 11.3 percent, including double-digit gains both in-store and online; and earnings up 19 percent per share. The biggest gains came from Pottery Barn, up 21 percent, followed by West Elm at 6 percent, and Pottery Barn Kids and Teen, up 5 percent. Even the namesake kitchen division showed a small 0.5 percent gain after being the only nameplate in negative territory last quarter. Another of the company’s smaller brands, Rejuvenation, had double-digit gains, as did the Williams Sonoma Home brand, which registered “high double-digit gains,” according to Alber.
Additional growth came from a number of other areas: B2B sales, up 32 percent, are on track to be a billion-dollar business; profits from e-commerce startups that licensed several nameplates in India, which will also see the debut of physical Pottery Barn stores during the third quarter; strong business in Mexico; and a slow but steady work down of the company’s extensive backlog of orders, particularly in custom upholstery. “It’s still too high,” a company executive said on the call, “but we expect to get back to normal by next year.”
As they have for the past several quarters of sustained growth, executives attributed the company’s strong performance to its proprietary products designed in house, its corporate-wide sustainability efforts and its elimination of site-wide price promotions.
Putting it all together, Alber said all the data shows the company continuing to gain market share and remaining on track to hit $10 billion in annual sales by fiscal 2024. (That’s up from $8.25 billion last year.) Maybe that’s why Alber ended the analyst call with a jubilant sign-off: “Happy shopping!”