Williams Sonoma Store

Image source: Williams-Sonoma.

Williams-Sonoma (NYSE:WSM) just reported fiscal third-quarter 2015 results. With shares currently down around 14% year to date, the specialty home goods retailer gave investors a clearer picture at what to expect as we head into the crucial holiday season.

But before we focus on that picture, let's take a closer look at what Williams-Sonoma accomplished in Q3:

Williams-Sonoma results: The raw numbers

Metric

Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)

Revenue

 $1.232 billion

 $1.143 billion

 7.8%

Net Income

 $70.5 million

 $64.9 million

 8.6%

Earnings Per Diluted Share

 $0.77

 $0.68

 13.2%

Data source: Williams-Sonoma.

What happened with Williams-Sonoma this quarter?

  • Revenue included a 7% year-over-year increase from e-commerce to $628 million (or 51% of total sales), and 8.6% growth in retail sales to $604 million
  • Excluding international growth, retail revenue would have climbed 4.3%
  • EPS was bolstered by $71 million in stock repurchases in Q3 (922,127 shares at $77.54 per share)
  • $90 million remains under Williams-Sonoma's current repurchase authorization
  • Both the top and bottom lines exceeded guidance, which called for Q3 revenue of $1.19 billion to $1.22 billion, and EPS of $0.68 to $0.73
  • 4.5% comparable-brand revenue growth, including:
    • 2% comparable-brand growth at Pottery Barn
    • 1.2% at Williams-Sonoma
    • 15.7% at West Elm
    • 4.7% Pottery Barn Kids
    • a 0.9% decline in comps at PBteen
  • Gross margin declined 110 basis points to 36.6%
  • Operating margin fell 20 basis points from the same year-ago period to 9%
  • At the same time, selling, general, and administrative expenses declined to 27.6% of revenue, from 28.6% in last year's Q3
  • Inventories rose a healthier 12.5% year over year to $1.102 billion as of the end of the quarter

What management had to say 
As CEO Laura Aber said:

We are pleased with our solid third quarter results, which speak to the power of our brands and our ability to execute our customer-focused strategy. [...] Looking ahead, while the retail landscape and consumer demand has been more volatile, we believe our balanced portfolio of differentiated brands and strong multi-channel platform positions us for ongoing market share gains. Our focus remains on executing our strategic initiatives to drive long-term sustainable growth for our shareholders."

Looking forward 
For the current quarter, Williams-Sonoma anticipates revenue of $1.575 billion to $1.63 billion, comparable brand revenue growth of 2% to 5% and diluted EPS of $1.53 to $1.62.

Consequentially, rather than reiterating guidance as it did last after last quarter's beat, Williams-Sonoma raised the lower ends of its expected full-year revenue and earnings ranges. As it stands, Williams-Sonoma now anticipates fiscal 2015 revenue of $4.965 billion to $5.02 billion (compared to $4.95 billion to $5.02 billion before), comparable brand revenue growth of 4% to 6%, and diluted EPS of $3.36 to $3.45 (up from $3.35 to $3.45 previously). That still includes an estimated negative impact from the West Coast port slowdown of roughly $30 million to $40 million to revenue, and a reduction to EPS of $0.10 to $0.12.

During the subsequent conference call, Aber elaborated that Williams-Sonoma should benefit in the holiday quarter from its "compelling seasonal product lineup in conjunction with a more strategic marketing calendar [...]." In addition, Aber says, "We also have the opportunity to deliver better service because we have better in-stock position."

All in all, this slightly better-than-expected report offered no big surprises for Williams-Sonoma shareholders. Going forward, investors should watch closely to see whether the company can deliver as it hopes in the crucial holiday season.

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.