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Shares of Williams-Sonoma (NYSE:WSM) jumped 10% early Thursday after the specialty home goods retailer turned in better-than-expected third-quarter results.
Why it's happening
Quarterly revenue rose 8.7% year-over-year to $1.143 billion, which translated to 17.2% growth in earnings per diluted share to $0.68. Analysts, on average, were modeling earnings of just $0.63 per share on sales of $1.12 billion.
For perspective, Williams-Sonoma's top-line growth was led by 14.7% growth in e-commerce revenue, which now comprises 51% of total sales, as well as comparable brand revenue growth of 8.7%. That includes 7% growth at Pottery Barn, 4.3% at Williams-Sonoma, 8.6% at Pottery Barn Kids, 17.4% at West Elm, and 11.7% at PBteen.
Meanwhile, Williams-Sonoma's earnings out-performance was driven by a combination of higher operating margin (up 0.4 percentage points year-over-year to 9.2%), as well as the repurchase of 1.2 million common shares during the quarter for roughly $83 million, or an average cost of $66.70 per share. As of Nov. 2, Williams-Sonoma still had roughly $316 million remaining of the original $750 million repurchase authorization announced in March of last year.
Finally, for the current quarter, Williams-Sonoma expects revenue in the range of $1.525 billion to $1.575 billion, and diluted earnings per share of $1.42 to $1.50. Curiously, the mid-point of both ranges is below Wall Street's expectations, which call for earnings of $1.52 per share on sales of $1.57 billion. In the end, though, considering this quarter was already much better than even Williams-Sonoma expected, it's no surprise the market is willing to look past its slight guidance shortfall.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.