Last night, Williams-Sonoma (WSM) missed fourth-quarter revenue estimates and guided fiscal year 2016 down. The stock should get hit today because the guidance was pretty awful.
For the fourth quarter, revenue grew 5.2% to $1.542 billion. Earnings per share increased 13.8% to $1.57. For the year, revenue advanced 7.1% to $4.699 billion and EPS rose 14.9% to $3.24.
The best performing brand was West Elm, which posted same-store sales growth of 19.6%. Results for the rest of the company were fairly mediocre. Pottery Barn Kids had a 2.7% comp vs. 11.2% last year. Pottery Barn reported a 2.9% comp vs. last years 14.6%.
Management blamed the West Coast port slowdown for the poor results. The company had a tough time getting goods through the port during the holidays and that had a serious impact on the results. Customers couldn't buy items that were out of stock.
Even though the port slowdown has ended, the company will feel the effects through the first quarter as merchandise remains tied up in shipping containers all over Los Angeles. Furthermore, the company is likely to be stuck with holiday goods that didn't make to the stores in time. I think Williams-Sonoma will end up taking aggressive markdowns over the next few months as the inventory stuck in port begins to float ashore.
William-Sonoma said it now expects Q1 EPS of $0.40-$0.45 vs. the previous estimate of $0.54. Revenue is expected to come in at $1 billion. For the year, management took $0.25 out of its EPS estimate. It is now looking for something between $3.35 and $3.45 for the year.
In order to ease the pain, the company boosted the quarterly dividend 6%, to $0.35 per share.
Analysts were really surprised by the results. They expected strong performance from Pottery Barn, which really didn't come through this quarter.
It seems it could take a few quarters to sort through the port problems. But it remains to be seen if investors will just look though this as a temporary setback, or if the company is simply using the port slowdown as a cover for management not having the right merchandise mix over the holidays.
Even without the port slowdown, I thought WSM was overvalued. The company isn't growing that fast. For fiscal 2016, the company is only expected to add a net 10 new stores. It's not like the old days, when William-Sonoma was building dozens of stores. I think the stock is a better value in the in the mid $60s.
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