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WSM reported 2Q comps fell (11.9)%, coming in behind estimates of (8.5)%. However, the company surprised with stronger-than-anticipated margins, achieving 14.6% in operating margins compared to Bank of America’s estimated 11.7%. The decline in gross margins by 280bp year-over-year was primarily attributed to a 190bp increase in occupancy costs and a 90bp rise in freight expenses. Notably, merchandise margins remained relatively unchanged year-over-year.
Analysts wrote in a note, “We still expect a challenging industry backdrop over the next several quarters given demand was pulled forward during the pandemic, but we’re growing increasingly optimistic for a better housing market on rate pauses and potentially cuts next year.”
WSM lowered its 2023 revenue guidance to -5% to -10% (-3% to +3% prior), but raised operating margin guidance from 14-15% to 15-16% which looks achievable given the first half of the year performance.
Reflecting WSM’s 2Q beat and guidance raise, Bank of America raised ’23/24/25 EPS estimates by 8/10/13%.
Shares of WSM are up 0.98% in morning trading Thursday.
