Shares of Williams Sonoma (WSM -1.62%) gained 36.5% in value last month, according to data provided by S&P Global Market Intelligence. The company delivered a better-than-expected earnings report for its fiscal fourth quarter that sent the stock price upward. It also announced an 11% increase in its dividend and a new share-repurchase authorization of $1 billion. The dividend hike brings its quarterly cash payout to $0.59 per share, or an annual dividend yield of 1.28% based on the current stock price of about $183.
The pandemic continued to spark demand for home products throughout its fiscal 2020, which ended on Jan. 31. Williams Sonoma saw a sharp acceleration in revenue growth last year, but management anticipates more modest growth as the economy reopens.
Williams Sonoma entered its new fiscal year with tremendous momentum. For the recently reported fiscal quarter, comparable revenue growth increased to 25.7% year over year, as the company's three chains -- Williams Sonoma, Pottery Barn, and West Elm -- each delivered double-digit percentage growth in comparable sales.
What was most impressive about this performance was that nearly 70% of total revenue came from e-commerce, which grew 48% year over year.
Moreover, the company experienced higher merchandise margins due to a reduction in promotional activity. That drove a 4.5 percentage point improvement in gross margin. Despite an increase in shipping costs related to the pandemic, the company still managed to lower its operating expenses as a percentage of revenue, which helped fuel 86% growth in earnings per share compared to the year-ago quarter.
Management anticipates another year of growth as retail foot traffic is expected to return. However, the company will be up against tough year-over-year growth comparisons, which will make it difficult to sustain its recent momentum. Current guidance for fiscal 2021 calls for revenue to increase at a mid-to-high single-digit percentage rate, but further improvements in non-GAAP (adjusted) operating margins should lead to a higher rate of earnings growth.
Looking further ahead, management believes it is on track to reach $10 billion in revenue and a 15% adjusted operating margin in the next five years. For perspective, the company finished fiscal 2020 with $6.7 billion in revenue and an adjusted operating margin of 14.2%.
The outlook implies a modest annualized growth rate in revenue and earnings, so investors shouldn't expect the stock to continue climbing at its recent clip. The stock has already advanced 79% year to date, and trades at a fair valuation of 19 times forward earnings estimates.