Williams-Sonoma (WSM) Up 9.7% Since Last Earnings Report: Can It Continue?

Core Insights - Williams-Sonoma reported better-than-expected Q3 results for fiscal 2025, with earnings and net revenues exceeding estimates and showing year-over-year growth [2][4]. Financial Performance - Earnings per share (EPS) reached $1.96, surpassing the Zacks Consensus Estimate of $1.87 by 4.8%, compared to $1.87 in the prior-year quarter [4]. - Net revenues totaled $1.88 billion, exceeding the consensus mark of $1.86 billion by 1.1% and growing 4.4% year over year [4]. - Comparable store sales (comps) increased by 4%, a significant improvement from a decline of 2.9% in the same quarter last year [4]. Brand Performance - The namesake brand's comps grew by 7.3%, recovering from a 0.1% downturn in the previous year [5]. - West Elm's comps increased by 3.3%, compared to a 3.5% decline last year [5]. - Pottery Barn Kids and Teens saw a 4.4% increase in comps, up from 3.8% in the prior year [5]. - Pottery Barn's comps rose by 1.3%, a recovery from a 7.5% decline reported last year [5]. Operating Metrics - Gross margin improved to 46.1%, an increase of 70 basis points year over year, driven by higher merchandise margins and supply-chain efficiencies [6]. - Selling, general and administrative expenses accounted for 29.1% of net revenues, reflecting a 60 basis point increase year over year due to higher advertising and performance-based compensation [6]. - Operating margin expanded by 10 basis points to 17% for the quarter [7]. Financial Position - As of November 2, 2025, cash and cash equivalents were reported at $884.7 million, down from $1.21 billion at the end of fiscal 2024 [8]. - Net cash from operating activities for the first nine months of fiscal 2025 was $718 million, slightly down from $726.7 million a year ago, allowing the company to return nearly $165 million to shareholders through stock repurchases and dividends [8]. Guidance and Outlook - For fiscal 2025, the company maintains its annual net revenue projection of +0.5% to +3.5% and comparable brand revenue growth of +2.0% to +5.0% [10]. - The operating margin is now expected to be between 17.8% and 18.1%, an increase from the previous range of 17.4% to 17.8% [10]. - The revised outlook considers new tariffs on furniture and other materials, which may impact future performance [11]. - Long-term expectations include mid-to-high single-digit annual net revenue growth and operating margin growth in the mid-to-high teens [11].