As of May 24, Williams-Sonoma (WSM) was trading at $52.08, which represents a fall of 8.4% since the announcement of its fourth-quarter earnings on March 20.
In the fourth quarter, Williams-Sonoma had outperformed analysts’ revenue and EPS estimates. After reporting its fourth-quarter earnings, WSM’s management set EPS guidance of $4.50–$4.70 and revenue guidance of $5.67 billion–$5.84 billion for 2019, which surpassed both analysts’ EPS and revenue estimates. The strong first-quarter earnings and better-than-expected 2019 guidance led to a rise in the company’s stock price. However, the renewed trade tensions between the US and China have been putting pressure on the company’s stock price.
Despite the recent fall in its stock price, Williams-Sonoma has returned 3.2% YTD. However, the company has been lagging the broader equity market this year, where the S&P 500 Index has returned 12.7% YTD. In comparison, WSM’s peer Bed Bath & Beyond (BBBY) and RH (RH) have returned 22.4% and -25.7%, during the same period, respectively.
The fall in WSM’s stock price since the announcement of its fourth-quarter earnings have also lowered its valuation multiple. As of May 24, the company was trading at a forward PE multiple of 11.2x compared to 12.7x before the announcement of its first-quarter earnings. On the same day, its peers BBBY and RH were trading at a forward PE multiple of 6.9x and 10.2x, respectively.
Also, WSM was trading at 11.3 times analysts’ 2019 EPS estimate of $4.60, and 10.8 times analysts’ 2020 EPS estimate of $4.80 with its EPS expected to grow at 3.0% in 2019 and 4.5% in 2020.