Why Williams-Sonoma Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of upscale home goods retailer Williams-Sonoma (NYSE: WSM  ) climbed 10% today after its quarterly results and outlook topped Wall Street expectations.

So what: Sluggish consumer spending has pressured the company's Williams-Sonoma brand, but strong second-quarter revenue -- $874.3 million versus the consensus of $864.2 million -- coupled with upbeat guidance for the full year, is triggering hopes of a prolonged turnaround. Improving sales at its Pottery Barn and West Elm stores, overseas expansion, and e-commerce growth continue to offer shareholders plenty of upside, so stabilizing revenue at Williams-Sonoma should do well to relieve much of the uncertainty weighing on the stock.

Now what: Management now sees full-year adjusted EPS of $2.44-$2.51 on revenue of $3.98 billion-$4.03 billion in revenue, versus the consensus of $2.50 and $4 billion, respectively. "Our momentum entering the third quarter remains strong, and we are well-prepared to execute our second-half strategies," CEO Laura Alber said. With the stock hitting a new 52-week high today and currently trading at a P/E of around 20, however, I'd wait for pullback before buying into that bullishness.

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