First-quarter gross margin

In the first quarter, Williams-Sonoma (WSM) reported a gross margin of 35.9%, representing a marginal contraction from 36.0% in the first quarter of 2018. Increased shipping costs, primarily due to a greater mix of furniture sales, lowered the company’s gross margin. However, an expansion in its product margin and a decline in its occupancy expenses offset the majority of the contraction in WSM’s gross margin.

The company’s management has credited its strategy of focusing on relevant products rather than broad-based promotions and improving its supply chain efficiency for its higher product margin. Its occupancy expenses fell 0.4% due to its retail optimization initiatives, the closure of its underperforming stores, and lower occupancy-related other expenditures.

What Led Williams-Sonoma’s EBIT Margin to Improve in Q1?

Expansion in EBIT margin

During the quarter, WSM’s SG&A (selling, general, and administrative) expenses fell 0.8% to 28.9% of its total revenue compared to 29.7% in the corresponding quarter of the previous year. The company’s implementation of cost-saving initiatives led to a decline in its advertising, employment, and general expenses, leading to an expansion in its EBIT margin.

Peer comparison and outlook

For the comparable quarter, analysts expect Bed Bath & Beyond (BBBY) and RH (RH) to report EBIT margins of 1.9% and 10.5%, respectively.

For 2019, WSM’s management expects its adjusted operating margin to be in line with its previous year’s margin of 8.5%.

Latest articles

Pure Storage shares have risen more than 15% today. The company announced its second-quarter results after the markets closed on Wednesday.

Nordstrom (JWN) stock was up 16% as of 11:50 AM today after it reported better-than-expected earnings for the second quarter of fiscal 2019.

Last month, four automakers, including Ford, made a voluntary deal with California to make cars cleaner and more fuel efficient. Trump isn't happy with the deal.

GameStop (GME) shares rose 8% in early market trading today. The company laid off about 120 employees as part of its restructuring process.

Today, citing German business publication Manager Magazin, Reuters reported that Volkswagen CEO Herbert Diess is interested in a stake in Tesla.

For the second quarter, Cresco Labs reported revenues of $29.9 million, which beat analysts’ expectation of $27.9 million.