What Happened:

Shares of kitchenware and home goods retailer Williams-Sonoma (NYSE:WSM) jumped 19.1% in the afternoon session after the company reported fourth-quarter results, with revenue and EPS exceeding Wall Street's expectations. Management noted that although 2023 was the slowest housing market in several decades, it avoided discounting, enabling it to deliver an operating margin ahead of its pre-pandemic profitability. Revenue outperformance was driven by better-than-expected same-store sales at its flagship Williams Sonoma brand (1.6% growth vs estimates of negative 0.5%) and Pottery Barn (negative 9.6% vs estimates of negative 10.3%). The revenue and gross margin beats also led to an EPS beat, and management increased the company's quarterly dividend by 26% and share repurchase capacity to $1 billion. Zooming out, this was a great quarter that shareholders will appreciate.

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What is the market telling us:

Williams-Sonoma's shares are quite volatile and over the last year have had 8 moves greater than 5%. But moves this big are very rare even for Williams-Sonoma and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the company gained 10.9% on the news that private equity firm Leonard Green took a 5% stake in the company. This can be considered a vote of confidence from a savvy investor and could boost Wall Street's optimism regarding the stock. It also raises the prospect of a future acquisition as private equity companies tend to prefer controlling interests in companies to improve operations or management.

Williams-Sonoma is up 40.8% since the beginning of the year. Investors who bought $1,000 worth of Williams-Sonoma's shares 5 years ago would now be looking at an investment worth $5,022.

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