Shares of Williams-Sonoma Inc. (NYSE:WSM) are down 11.5% as of 11:00 a.m. EST after the home-furnishings retailer announced in-line quarterly results, but offered underwhelming earnings guidance for the holiday quarter. The company also announced an acquisition.
Williams-Sonoma's third-quarter revenue climbed 4.3% year over year to $1.299 billion, including 3.3% comparable-brand growth. That translated to a 2.8% increase in net income to $71.3 million, and -- thanks to share repurchases over the past year -- 7.7% growth in earnings per share to $0.84. Williams-Sonoma's latest guidance called for revenue of $1.27 billion to $1.31 billion, comparable-brand revenue growth of 2% to 5%, and earnings per share of $0.80 to $0.87.
To be fair, Williams-Sonoma achieved these results literally in spite of hurricane-related headwinds: hurricanes in Texas, Florida, and Puerto Rico resulted in lost sales of $7 million and reduced earnings by around $0.02 per share.
And for perspective, consolidated comparable-brand revenue included 2.3% growth at Williams Sonoma, 11.5% growth at West Elm, 0.1% growth at Pottery Barn Kids, 3% growth at PBteen, and a modest 0.3% decline at Pottery Barn.
"Our third quarter results demonstrate the effectiveness of our strategic priorities to deliver value, quality and excellent customer service," added Williams-Sonoma CEO Laura Alber. "During the quarter, strong execution against our product and digital initiatives drove new customer acquisition and top-line expansion in a competitive and dynamic retail environment."
In addition, in a separate press release yesterday, Williams-Sonoma announced it has agreed to acquire 3D imaging and augmented reality platform leader Outward, Inc., for an all-cash consideration of $112 million. Williams-Sonoma will capitalize on Outward's platform to both enhance its existing high-touch customer service platform and develop new technology to "transform the shopping experience for home furnishings."
For the holiday quarter, Williams Sonoma expects revenue of $1.61 billion to $1.675 billion, roughly in line with consensus estimates for $1.63 billion. But it also sees earnings per share for the quarter arriving in the range of $1.49 to $1.64, below investors' expectations for $1.65.
As such, Williams-Sonoma increased its full-year revenue outlook to a range of $5.225 billion to $5.29 billion (up from $5.165 billion to $5.265 billion before), while simultaneously reducing the high end of its full fiscal-year earnings guidance by a nickel per share, for a new range of $3.45 to $3.60. These figures assume comps growth of 2% to 4%, up from previous guidance for 1% to 3%.
In short, this was a solid quarter from Williams-Sonoma despite the impact from hurricanes. But our market is a forward-looking machine. While I'm not convinced its steep drop today is fully merited, it's no surprise Wall Street is frowning upon the company's bottom-line guidance shortfall even as its sales remain strong.