Williams-Sonoma Gears Up to Report Q3 Earnings: Here's What to Expect

Williams-Sonoma, Inc. WSM is scheduled to release its third-quarter fiscal 2025 results on Nov. 19, before the opening bell.In the last reported quarter, the company’s earnings and net revenues topped the Zacks Consensus Estimate by 11.7% and 1.1%, respectively. Year over year, the metrics grew 14.9% and 2.8%, respectively.Williams-Sonoma reported better-than-expected earnings in each of the last four quarters, the average surprise being 10.2%.How are Estimates Placed for WSM?For the fiscal third quarter, the Zacks Consensus Estimate for adjusted earnings per share (EPS) has remained unchanged at $1.85 over the past 60 days. The estimated figure indicates a decline of 5.6% from $1.96 per share reported in the year-ago quarter.The consensus mark for net revenues is pegged at $1.86 billion, indicating year-over-year growth of 3.3% from $1.8 billion.Williams-Sonoma, Inc. Price and EPS Surprise Williams-Sonoma, Inc. price-eps-surprise | Williams-Sonoma, Inc. QuoteFactors That Might Have Shaped WSM’s Q3 PerformanceRevenuesWilliams-Sonoma’s top-line performance is expected to have increased year over year on the back of incremental sales trends in furniture and non-furniture business lines, alongside robust performance across its retail and ecommerce channels. Moreover, the company’s top-tier marketing initiatives, the focus on global expansion, digital upgrades and collaborations are likely to have acted as a catalyst in boosting the quarter’s performance. The introduction of new design tools in stores and online to support space planning and integrating AI across digital platforms is expected to support growth in the upcoming period.Although the challenging environment for home furnishings due to the continued weakness in the U.S. housing market, alongside macroeconomic and geopolitical uncertainties, is concerning, WSM’s in-house capabilities have more than offset these headwinds. Segment-wise, our model predicts fiscal third-quarter revenues in the West Elm brand (25.5% of the second quarter of fiscal 2025 net revenues) to be $461.1 million, up 2.3% from the prior-year quarter level. Revenues for the namesake brand (13.6% of the second-quarter fiscal 2025 net revenues) and the Pottery Barn Kids and Teen brand (15.6% of the second-quarter fiscal 2025 net revenues) are expected to be up year over year by 2.8% to $259.2 million and 5.1% to $301.9 million, respectively.Contrarily, we expect revenues for the Pottery Barn brand (which represented 40.2% of the second quarter of fiscal 2025 net revenues) to be down year over year by 0.5% to $714.9 million.MarginsIn the quarter to be reported, Williams-Sonoma’s bottom line and margins are likely to have tumbled year over year due to ongoing macroeconomic uncertainties and the adverse impact of the new incremental tariff regulations. Moreover, higher performance-based incentive compensation is expected to have added to the ongoing pressures.Our model expects selling, general and administrative expenses (as a percentage of net revenues) to expand 60 basis points (bps) year over year to 29.1% during the quarter to be reported. We expect the gross margin to inch down 10 bps year over year to 45.3%.Nonetheless, WSM’s ongoing efforts to optimize its supply chain and ensure operational efficiency amid inflationary challenges are likely to have offset these headwinds in the upcoming period.CompsFavorable impact from diversified product lines, new product introductions and collaborations is expected to have boosted the comps growth across all Williams-Sonoma’s key brands.Our model expects Pottery Barn Kids and Teen’s comps growth to be 5.1%. The metric witnessed a 3.8% increase a year ago and a rise of 5.3% in the previously reported quarter. We expect Pottery Barn’s comps to grow 1.9% year over year. The same declined 7.5% a year ago, but grew 1.1% in the previously reported quarter.Our model predicts West Elm’s comps to increase 3.1%. The metric witnessed a 3.5% decline a year ago, but rose 3.3% in the last reported quarter. We expect the namesake brand’s comps to be up 4.9%. The metric witnessed a 0.1% decline a year ago but a rise of 5.1% in the previously reported quarter.What Our Model Says for Williams-SonomaOur proven model does not predict an earnings beat for Williams-Sonoma this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, it is not the case here.WSM’s Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.WSM’s Zacks Rank: It currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.Stocks With the Favorable CombinationsAccording to our model, the following companies in the broader Retail-Wholesale sector possess the right combination of elements to post an earnings beat in the upcoming quarter.Macy's, Inc. M currently has an Earnings ESP of +14.82% and a Zacks Rank of 1 at present.Macy's reported better-than-expected earnings in three of the trailing four quarters and missed on the remaining one occasion, the average surprise being 25.8%. The company’s earnings for the third quarter of fiscal 2025 are expected to decline year over year by 450%.Dollar General Corporation DG has an Earnings ESP of +12.31% and a Zacks Rank of 2.Dollar General reported better-than-expected earnings in three of the trailing four quarters and missed on the remaining one occasion, the average surprise being 11.3%. The company’s earnings for the third quarter of fiscal 2025 are expected to improve year over year by 6.7%.American Eagle Outfitters, Inc. AEO currently has an Earnings ESP of +2.67% and a Zacks Rank of 2.American Eagle’s earnings for the third quarter of fiscal 2025 are expected to tumble 10.4% year over year. The company reported better-than-expected earnings in three of the last four quarters and missed on the remaining one occasion, the average surprise being 30.3%.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. 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(WSM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks