Source: Williams-Sonoma.

Shares of Williams-Sonoma (NYSE:WSM) were rising by 7.2% on Wednesday after the close, as the company delivered a smoking-hot earnings report for the third quarter of fiscal 2014. Let's look at the latest earnings report from Williams-Sonoma and the main takeaways for investors.

Mouthwatering sales growth
Total sales during the quarter ended on Nov. 2 increased 8.7% to $1.14 billion, better than the $1.12 billion Wall Street analysts forecasted on average, according to data compiled by Thomson Reuters. Comparable brand revenue increased by a remarkable 8.7% versus the same quarter last year.

Performance was strong across the company's different brands, with concepts such as West Elm and Pottery Barn delivering particularly vigorous growth rates.

SegmentComparable Brand growth
Pottery Barn 7%
Williams-Sonoma 4.3%
Pottery Barn Kids 8.6%
West Elm  17.4%
PBteen 11.7%
Total company 8.7%

Data source: Williams-Sonoma.

E-commerce revenues were $587 million, a 14.7% increase versus the same quarter in the prior year and a big 51% of total company revenues. It's also an increase versus 49% of revenues coming from e-commerce in the third quarter of 2013.

Williams-Sonoma has done a tremendous job at building its online sales channel, a crucial competitive factor in the current retail environment. The recently released earnings report shows that e-commerce is a potent growth driver for the business.

Retail revenues increased 3.1% year over year to $556 million. Williams-Sonoma opened a total of 14 net new stores since the third quarter of 2013, nine of them being West Elm stores.

Tasty profit margins
Gross profit margin declined to 37.7% of sales, versus 38.6% in the same quarter last year. This comes as no big surprise, considering the intensely promotional retail environment.

On the other hand, selling, general, and administrative expenses as a percentage of revenues declined from 29.8% to 28.6% of sales. This allowed Williams-Sonoma to deliver expanding operating margins during the quarter, at 9.2% of sales versus 8.8% of revenues in the same quarter last year. A strong online presence is most likely an advantage in terms of leveraging sales growth and increasing operating margins.

Earnings per share came in at $0.68, a nice 17.2% increase from $0.58 per share in the same quarter of fiscal 2013. The figure was better than the $0.63 per share that Wall Street analysts forecasted on average.

Moving forward
President and CEO Laura Alber attributed Williams Sonoma's performance during the quarter to factors such as brand power, strong merchandising, and online leadership:

These achievements reflect our product leadership, lifestyle merchandising, iconic brands, and strong execution. We also believe that this third quarter further demonstrates that our multi-channel model, with more than 51% of revenues now coming from the e-commerce channel, represents a distinct competitive advantage. We continue to focus on serving our customers and investing for sustainable long-term growth.

Furthermore, Alber sounded quite optimistic regarding prospects for the company during the remarkably important holiday period: "This holiday season, we believe we have a strong lineup of beautiful gifts [and] entertaining and decorating collections across all of our brands, and most importantly, we are ready to provide the best service to our customers across all channels."

Williams-Sonoma raised its sales and earnings per share guidance for the full year 2014, as the company expects sales to be in the range of $4.68 billion to $4.73 billion, versus a prior guidance of between $4.64 billion and $4.72 billion. Comparable brand revenue growth is expected to be between 5% and 7% during the full year.

Earnings-per-share guidance was raised to between $3.11 and $3.19, versus a previous guidance of $3.07 to $3.17. Wall Street analysts are on average expecting earnings per share of $3.18 during the year.

Summing up, sales were above expectations and healthy across the board. The company more than compensated for the decline in gross margins with a reduced incidence of operating costs on sales, so operating margins were also on the rise. Earnings per share came in better than expected, and management raised guidance for the full year. There is a lot to like in Williams-Sonoma's latest earnings report.