Williams-Sonoma, Inc. 1Q24: Trends Are Finally Beginning to Improve, But Have a Long Way to Go

Jun 5, 2024 | Corporate Insights, No Bull Economics

Williams-Sonoma continues to struggle with declining sales of high-ticket, discretionary items (particularly as it relates to furniture) although its q/q sequential results are finally improving. While the company enjoys beneficial positioning as the largest player in a huge, fragmented industry, a complete sales rebound may have to wait for a badly needed interest rate cut.

Williams-Sonoma 1Q24 Net Revenues & Comps

Revenue Trends

  • 1Q24 comps came in above expectations at -4.9% y/y, improving sequentially from 4Q23. Market share gains during the quarter reflected the company’s unique in-house design capabilities & vertically integrated sourcing ability which facilitates high-quality design innovation at compelling price points. The company’s positioning also benefits from its in-house digital marketing optimization capabilities.
  • Performance improved across both furniture & non-furniture even as the company reduced its overall level of promotions.
  • The Williams-Sonoma brand comp increased +0.9% y/y, representing the second consecutive quarter of positive comps, helped by its kitchen business which ran a positive comp for the fourth consecutive quarter.
  • Pottery Barn’s comp declined -10.8% y/y, reflecting softness in higher ticket furniture sales, although its sales improved sequentially q/q during the quarter.
  • West Elm’s comp declined -4.1% y/y although the chain also was able to generate a sequential sales improvement even as it materially reduced its promotions.
  • FY24 guidance: net revenues down -3% to up +3%, with comps ranging from -4.5% to +1.5%.

Margin Trends

  • 1Q24 adjusted gross margin increased +6.8% to 45.4%, primarily reflecting: a +4.7% merchandise margin improvement driven by lower ocean freight costs & a commitment to full-price selling; and supply chain efficiencies which contributed +2.4% to the improvement.
  • Operating income margin improved +3.7% y/y to 16.6% & management is raising its FY24 adjusted operating margin outlook to 17% to 17.4%.

Long-Term Growth Prospects

  • While Williams-Sonoma’s sales are currently stressed by macro pressures, management believes the company has significant upside as it continues to consolidate & gain share in a very fragmented market. 
  • In the same way, growth prospects benefit from an opportunity to drive its digital sales mix to levels closer to other industries like consumer electronics & office supplies.

Williams Sonoma Market Opportunity & Ecommerce

Williams-Sonoma 1Q24 Financials

Marketing Consumer Research Weekly Banner

Nobull consumer research weekly

No Bull Economics

Get Corporate & Market Insights in your inbox