Discount chain Dollar General rose on Thursday, as did high-end kitchenware and home-goods retailer Williams-Sonoma, after both companies offered upbeat financial forecasts despite reporting mixed fourth-quarter results.
The retailers reported against a backdrop of rising prices, following a fuel spike, pressure on the world's supply chains and demands for higher wages. And while both companies hiked their dividends, analysts had questions over whether Dollar General's low-income consumers, and Williams-Sonoma's wealthier consumers, would still be able or willing to spend in the months ahead.
Williams-Sonoma stock rose 5.4% in the stock market today, up solidly but backing off session highs near its 200-day line. Dollar General stock gained 4.45%, moving above its 200-day.
Dollar General Earnings
Dollar General's top- and bottom-line results met expectations, with earnings per share of $2.57 and revenue of $8.7 billion.
Same store sales slipped 1.4%, amid a decrease in customer traffic and a weaker showing in categories like clothing, groceries and home products. That was worse than consensus for an 0.8% dip. Higher product and transportation costs weighed on profit.
Still, management projected a 10% sales gain in 2022. That was better than Wall Street's expectation for a 7.5% increase. It expects earnings-per-share growth of between 12% to 14%, more than analysts' expectations for 9%.
Dollar General also sees a full-year same-store sales increase of around 2.5%. That's roughly in line with forecasts.
However, analysts said that investors have become concerned about whether low-income consumers can stomach rising prices of gasoline and other goods. Quo Vadis Capital analyst John Zolidis, in a research note, said that some on Wall Street might be skeptical of Dollar General's same-store sales forecast.
"In particular, we believe analysts are focused on expected weakness in the spending of Dollar General's lower income consumer cohort based on fewer stimulus payments this year and higher costs for necessities including gasoline," he said.
Dollar General's board also declared a quarterly cash dividend of 55 cents per share, a 31% increase compared to the previous quarter.
Dollar General Stock
Dollar General stock was clinging to its 200-day line, after reclaiming its 50-day line earlier this week. The stock's relative strength line has trended higher in recent days.
Dollar General reports as discounters try to find ways to offset higher costs, following backups at ports, warehouses and rail yards that pushed transportation costs higher last year.
Rival Dollar Tree in November said it would begin selling most products at $1.25. Five Below, which sells items for teens and tweens typically priced $5 or less, has leaned into its store sections that sell items for higher.
In December, Dollar General said around 20% of its overall product selection was sold at $1 or less.
"Because so many families depend on us for everyday essentials at the right price, we believe products at the $1 price point are important for our customers, and they will continue to have a significant presence in our assortment," CEO Todd Vasos said then.
Williams-Sonoma Stock, Earnings
Late Wednesday, Williams-Sonoma reported earnings per share of $5.41, above forecasts for $4.82. Revenue rose 9% to $2.5 billion, which stopped short of analysts' target for $2.576 billion.
Same-store sales rose 10.8%. That was below expectations for a 13.3% increase.
During Williams-Sonoma's earnings call, management noted said they were sticking with their outlook for "mid-to-high single-digit" same-store sales growth for this fiscal year and beyond. The company said it continued to see "strong sales and margins" so far in the first quarter.
Analysts at Cowen were encouraged by the forecasts. But they also said there was "significant near-term risk including potentially weakening high net worth shopper sentiment and stock market volatility slowing demand, and ongoing supply chain bottlenecks slowing deliveries."
Williams-Sonoma also hoisted its quarterly dividend by 10%, to 78 cents. The board also lifted the company's share buyback initiative to $1.5 billion, up from the $700 million remaining on the prior buyback program.
Williams-Sonoma stock had traded tightly in recent days, holding short-term support at their 21-day exponential moving average, but running into steady resistance at their 50-day line. The stock on Thursday was holding above its 50-day line.
The stock has a 76 Composite Rating. Its EPS Rating is a strong 96.
WSM Brands, Strategy
Williams-Sonoma runs its namesake stores, along with West Elm, Pottery Barn and others.
During its third-quarter earnings call in November, management said they hoped to take advantage of a scattered home-goods and kitchenware industry.
The smaller physical stores that account for much of the segment's sales haven't invested in e-commerce, CEO Laura Alber said. Additionally, consumers continue to buy new homes, driving kitchenware and home-goods demand.
"The housing market continues to hold strong, with purchases of larger first and second homes," Alber said during the call.
"Additionally, hybrid work arrangements continue to gain traction as a permanent work model," she continued. "Both of these trends result in a stronger need and desire to outfit the home for working, entertaining and cooking."
However, the company said it didn't expect its inventories to recover until the middle of this year, after steady consumer demand ran up against shortages caused by Covid-related shutdowns in Vietnam last year. Williams-Sonoma sources many of its product from the nation. The company said wait times to get upholstery were improving.
