Williams-Sonoma on Wednesday said that second quarter net revenue rose 6.1% to $1.28 billion from $1.20 billion a year ago, as comparable sales grew 4.6%. E-commerce net revenue rose 8.9% to $687 million from $631 million in the year-ago period and accelerated to 53.9% of total company net revenues, according to a company press release.
By brand, comps rose at Pottery Barn by 2%, at West Elm by 9.5%, at Williams Sonoma by 1.6% and at Pottery Barn Kids and Teen by 5.7%. Inventories rose 2.5% to $1.10 billion from $1.07 billion a year ago, well below sales growth.
The company raised its fiscal year guidance to non-GAAP net revenue of between $5.57 billion and $5.67 billion, comp growth to between 3% and 5% and non-GAAP operating margin to between 8.4% and 9%.
Williams-Sonoma is moving forward with e-commerce and analytics initiatives that are stoking online and cross-channel revenue, but its brands continue to center sales at physical stores, many of which are getting remodeled or relocated. Those locations are averaging double-digit growth in annualized sales over the prior stores, CEO Laura Alber told analysts Wednesday, according to a transcript from Seeking Alpha.
The company opened nine stores in the second quarter and plans four in the third, included one location for its new Rejuvenation lighting and hardware brand. West Elm opened a new format store in Santa Monica, Calif. that has an expanded outdoor living area with displays of outdoor collections and open space for community engagement, she said. The planned closure of 30 underperforming stores is on pace for the year, with four shuttering in the second quarter, the company said.
"Our stores are a key part of our multi-channel strategy as they provide an incomparable experience to our customers to engage with our products in real life," Alber said. "Our new stores are performing better than the fleet generating strong profitability with a payback of just over one year."
The company's multi-channel, multi-brand strategy is an asset, as are its design services, Jeffries analysts said in a note emailed to Retail Dive. But they also warned that all that "appears to trade margin for top-line and we think [Williams Sonoma] has work to do in communicating its value proposition vs. peers. We would look for stabilization in [Pottery Barn] banners and emerging brands to scale to become more constructive."
Those analysts are also wary of the company's use of lower price points on some items to lure customers into higher-priced product. "While it appears to be driving some new customer acquisition, it remains to be seen whether these customers can be transitioned to higher-priced goods and we question whether existing customers could trade down eventually," according to Jeffries.
The company's improved supply chain and inventory discipline is helping offset ongoing shipping costs, which continue to be a pressure point as e-commerce sales grow, executives said. But those headwinds are likely to persist, Jeffries analysts warned.