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Bull of the Day: Williams-Sonoma (WSM)

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Headquartered in San Francisco, CA, Williams-Sonoma, Inc (WSM) is a multi-channel specialty retailer of premium quality home products. Incorporated in 1973, the company has five brands, each of which are operating segments: Pottery Barn, West Elm, Williams-Sonoma, Pottery Barn Kids and Teen, and Other (includes Rejuvenation and Mark and Graham).

Q4 Earnings Recap

Investors cheered Williams-Sonoma’s fourth quarter report, sending shares up 18% the day after the release.

Comparable brand revenue growth surged nearly 26% year-over-year thanks to strength across all of its brands. Namesake Williams-Sonoma saw 26.2% sales growth, Pottery Barn up 25.7%, and West Elm jumped 25.2%.

Online revenue was up almost 48%, with e-commerce penetration making up 70% of revenues.

Adjusted earnings came in at $3.95 per share, easily beating analyst expectations and growing 85% from the prior year.

It wasn’t just these stellar Q4 results. Investors were also rightly excited by WSM’s announcement that it would be increasing its dividend by 11%, as well as a $1 billion stock buyback plan. Shares currently yield about 1.2% on an annual basis.

WSM Breaks Out

WilliamsSonoma, Inc. Price and Consensus
WilliamsSonoma, Inc. Price and Consensus

In the past six months, shares of WSM have jumped almost 90% compared to the S&P 500’s 20.8% increase. Earnings estimates have been rising too, and WSM is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up $1.78 to $9.37 per share. Earnings are expected to grow over 3.7% compared to the prior year period. Fiscal 2022 looks strong too, and earnings should see positive year-over-year growth as well.

Looking ahead, management forecasts year-over-year revenue growth of mid- to high single digits as well as operating margin expansion; these are both in-line with the company’s long-term goals.

Additionally, WSM received a parade of price target increases post-earnings, and brokerage firm William O’Neil initiated coverage on the stock with a buy rating. This demonstrates confidence that analysts have even as the retailer begins to face tough year-over-year comparisons.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep WSM on your shortlist.

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