Williams-Sonoma Slides 6% as Company Guidance Disappoints Wall Street

Premium kitchenware and home furnishings retailer Williams-Sonoma (WSM.US) reported Q4 2024 earnings, exceeding Wall Street expectations. Revenue grew by 8% year-over-year, reaching $2.46 billion, while adjusted earnings per share (EPS) of $3.28 came in 11.5% above analysts’ consensus. Quarter-over-quarter sales increased by 3.1% in Q4.

Key Q4 2024 Results:

• Revenue: $2.46 billion vs. analysts’ expectations of $2.36 billion (+8% YoY, 4.5% beat)
• Adjusted EPS: $3.28 vs. analysts’ expectations of $2.94 (11.5% beat)
• 2025 Guidance: Flat sales YoY (in line with forecasts) and operating margin of 17.6% (below expectations of 18.1%)
• Operating Margin: 21.5%, up from 20.1% in the same quarter last year
• Free Cash Flow (FCF) Margin: 23%, down from 27.3% a year ago
• Store Count: 512 at quarter-end vs. 518 a year ago
• Comparable Sales Growth: +3.1% YoY (vs. -6.8% in Q4 2023)

In 2024, the company earned $8.79 per share, generating $7.71 billion in net income, of which $1.13 billion was attributed to Q4. For the full year, Williams-Sonoma’s revenue declined by 1.6% YoY, but investors are concerned about flat growth projections, rising uncertainty around potential tariff costs, and demand for the company’s products. Wall Street is dissatisfied with the disappointing operating margin outlook and flat revenue forecasts, though on the other hand, the company’s cautious communication leaves room for potential upward revisions to revenue forecasts later in the year.

Source: xStation5

Williams-Sonoma Financial Multiples Dashboard

As shown below, despite slowing growth, Williams-Sonoma’s valuation remains in the high double-digit P/E ratio range. At the same time, the company has significant exposure to economic cycles in the furniture and home improvement sector, and its products are theoretically easy to substitute. Given weaker market conditions and mixed forecasts, the market may justify a repricing of the company’s valuation.

Additionally, the Return on Invested Capital (ROIC) has declined, while the Weighted Average Cost of Capital (WACC) is trending upward, suggesting potential pressure on profitability. Higher CAPEX expenditures could further weigh on margins in the coming quarters. The biggest risk remains soft consumer demand, and weaker U.S. economic data could negatively impact the company if this trend continues.

Source: XTB Research, Bloomberg Finance L.P.

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