"I am extremely proud of this company-wide effort" is how Williams-Sonoma (NYSE:WSM) Chairman Howard Lester describes his company's fiscal year 2003 results. And proud he should be with fourth-quarter revenue up 16.9% and diluted earnings per share up 26.9% for the last quarter and for the year. Same-store sales (the holy grail of retail) rose a strong 4.1% for the latest quarter.
The company's namesake brand continued to grow. Pessimists will note that, at "just" 4.8%, growth in fourth-quarter same-store sales was down from last year's 5.3%. For the year, same-store sales at Williams-Sonoma stores were up 6.7% after rising 3.3% in 2002. That's sold!
The company's other big concept, Pottery Barn, reversed a loss of 0.8% in same-store sales in last year's fourth quarter to a gain of 4.3%.
How do these fourth-quarter results stack up against other specialty retailers? Yuppie outlet Pier 1 (NYSE:PIR) saw a decline of 2.7%. Cost Plus (NASDAQ:CPWM) enjoyed a 3.1% gain. Linens 'n Things (NYSE:LIN) logged a 4.7% increase (the largest in two years). Bed Bath & Beyond (NASDAQ:BBBY) managed a 6.4% climb, and Limited Brands (NYSE:LTD) an eye-popping 8% jump.
Against that backdrop, a 4.1% sales increase could be regarded as OK, but not worthy of a letter home to mom.
What is good news is that operating margins increased for the fiscal year from 8.6% to 9.3%. That said, they still lag those of most specialty retailers, although, impressively, they do beat Wal-Mart's (NYSE:WMT) 5.5% operating margins.
As for valuation, the stock is up over 55% for the last 52 weeks, and trades at a rich 25 times trailing earnings. Company guidance for 2004 projects earnings increasing at least 15% to between $1.52 and $1.56 a share. That seems reasonable, based on the company's strong sales growth and focus on improving margins.
Williams-Sonoma has a right to be proud of its results. Investors, though, might want to look at other investments that trade at earnings multiples closer to their expected earnings growth rates.
Interested in discussing food or specialty retailers with other investors? Try The Motley Fool's The Art of Fun(ky) BBQ or Williams-Sonoma discussion boards.
Fool contributor W.D. Crotty owns many Williams-Sonoma products and enjoys trying their gourmet items. W.D. does not own stock in any of the companies mentioned.
