Williams-Sonoma on Wednesday reported second quarter revenues rose 3.7% to $1.2 billion versus $1.16 billion in the year-ago period, meeting the Zacks Consensus analyst estimate for $1.2 billion. Same-store sales grew 2.8% from the year-ago period. The company’s operating margin was 6.8%, down from 7.2% last year, according to a company press release.
Retail net revenues in the quarter rose 2.1% to $571 million from $559 million last year. E-commerce net revenues rose 5.2% year-over-year to $631 million, generating 52.5% of total company net revenues in the quarter.
By brand in the quarter, same-store sales at Pottery Barn rose 1.2% (compared to a 4.8% decline a year ago); Williams-Sonoma rose 1.9% (compared to flat sales last year); West Elm rose 10.1% (compared to 15.8% a year ago); Pottery Barn Kids fell 3.9% (compared to a 0.1% rise a year ago); and PBTeen rose 0.2% (compared to a 5.2% decline a year ago).
Williams-Sonoma’s stable of brands had a “good but not great” second quarter, thanks to its focus on supply chain efficiency, customer acquisition strategies like better pricing clarity and improved merchandising, according to a note from Gordon Haskett analyst Chuck Grom emailed to Retail Dive.
The furniture and home goods retailer is seeing strong new customer accounts with higher traffic trends and increased orders thanks in part to a boost in digital advertising that is reaching more customers, CEO Laura Alber told analysts Wednesday.
“We've also experienced strong new customer growth in the key channels of paid search, display and social advertising,” she said, according to a transcript of a conference call from Seeking Alpha. “In an effort to drive engagement with our customers to relevance across all our brands we are expanding our one-to-one personalization efforts. We have experienced an uplift in engagement and higher margins in our new personalization based emails and we are seeing these same results translate to our site.”
The focus is very much on e-commerce, she said, and the company expects to triple the number of personalized impressions delivered on its websites, thanks to an expansion of personalization campaigns and improved customer identification. “We have several high impact e-commerce initiatives going live throughout Q3,” according to Alber, noting the company is redesigning its production information pages with “improved functionality, product information and storytelling” and improvements to its loyalty program, the in-store experience, customer and self-service options.”
With growth accelerating to 14.3% and same-store revenues up 10.1%. the company’s West Elm unit posted the most stellar results, and the company is continuing to open stores and affiliated hotels. In addition to two new stores in Phoenix, AZ and Portland, ME in the second quarter (Alber said both stores are performing above expectations), West Elm will open seven more stores openings by year’s end, along with plans for two West Elm Hotels.
Inventory at quarter-end was an issue, though, up 11.4% versus 3.7% sales growth in the quarter. That was partially explained by higher in-transit inventory, particularly at West Elm and PBTeen, according to Grom. “It’s hard to envision [the company] missing numbers in 2017,” Grom said. “All told, with numbers safe, sentiment brutally negative, and retail due for some mean reversion in the coming weeks (in our view), we like the set-up for Williams-Sonoma into year-end.”