Williams-Sonoma Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Williams-Sonoma (WSM -1.34%) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Premium home furnishings took a back seat to economic necessity during the recession, and even high-quality companies like Williams-Sonoma couldn't weather the housing storm unscathed. Now that home prices are coming back, can the company follow suit? Let's take an early look at what's been happening with Williams-Sonoma over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Williams-Sonoma

Source: Yahoo! Finance.

Will Williams-Sonoma deliver the goods this quarter?
Analysts have generally held their views on Williams-Sonoma fairly stable over the past few months, cutting just a penny per share off earnings estimates for the just-ended quarter and $0.02 per share from their fiscal-year 2014 calls. The shares have done reasonably well, climbing almost 5% since mid-December.

Williams-Sonoma has already given investors some information about the holiday quarter, having given early guidance back in January. The company said that holiday sales rose 4.8%, but fears that net income would come in below expectations sent shares falling after the announcement.

Still, backward-looking numbers tell only part of the story. Throughout the industry, Williams-Sonoma and its rivals are working hard to expand their reach, with Williams-Sonoma moving into the Australian market, where real estate has performed very well. Restoration Hardware (RH -3.37%) has been expanding rapidly, trying to build back up to the levels it reached during the housing boom before tough times forced the company to accept a deal to go private in 2008. It has sacrificed margins in order to accelerate growth. Meanwhile, Bed Bath & Beyond (BBBY) continues to command high margins and holds the leadership role in all-purpose home furnishings for all demographics.

In its quarterly report, watch for Williams-Sonoma to discuss the broad implications of consumer trends among its higher-end customer base, including income tax increases. If the company's core customers start to retrench, then Williams-Sonoma might have trouble reigniting growth going forward.

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