After a nearly 200% run, it seems investors are starting to take some profits.
Shares of home-goods retailer Williams-Sonoma (WSM -7.03%) jumped in early trading on Wednesday after the company reported results for its fiscal first quarter of 2024. As of 11:15 a.m. ET today, the stock was actually down almost 3% after being up as much as 11% shortly after the opening bell.
A new all-time high didn’t hold
In the first quarter (which ended in April), Williams-Sonoma generated net revenue of almost $1.7 billion, which was down 5% year over year. On the bottom line, the company had diluted earnings per share (EPS) of $4.07, which blew past expectations by a mile. But there’s an asterisk with this number.
In past years, management overestimated some expenses. Realizing the mistake, it’s correcting that, which provided a one-time boost to this quarter’s profit from an accounting perspective.
Still, the quarter was fairly strong for Williams-Sonoma. It had an operating margin of almost 20% which is impressive considering its pullback in sales. No doubt this was on investors’ minds early today as the stock jumped to an all-time high of nearly $350 per share.
However, the all-time high might explain its subsequent pullback. The stock was up nearly 200% in the past year when it was at its highs today. It seems that some shareholders decided it was a good time to take some profits, explaining the current drop in price.
A profitable company and good investment
Management essentially maintained its full-year guidance today. It technically raised its guidance for its operating margin, but this was only done to reflect the one-time accounting adjustment in the first quarter.
For the year, it expects sales to be roughly flat with an operating margin of almost 18%.
It might not appeal to growth investors. But Williams-Sonoma is highly profitable and returns a lot of cash to shareholders, which has propelled it to strong gains in recent years and could continue to do so.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Williams-Sonoma. The Motley Fool has a disclosure policy.