Williams-Sonoma, Inc. WSM has been benefiting from e-commerce expansion and optimization of supply chain. Improved marketing techniques, West ELM & emerging businesses along with its focus on product innovation are driving growth.
Recently, this multi-channel specialty retailer of premium quality home products reported fourth-quarter fiscal 2018, wherein its earnings and revenues beat the Zacks Consensus Estimate by 6.6% and 2.2%, and grew 25% and 9.3% year over year, respectively.
Shares of Williams-Sonoma have gained 16.3% over the past three months compared with the industry’s rally of 17.1%. Meanwhile, earnings estimates have been upwardly revised over the past few weeks, suggesting that sentiments on Williams-Sonoma are moving in the right direction. Earnings estimates for fiscal 2019 and 2020 have moved up 2% and 3.3%, respectively, over the past seven days, reflecting analysts’ optimism surrounding the company’s bottom-line growth potential.
This positive estimate revision trend justifies the company’s Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Makes Williams-Sonoma a Solid Bet?
Focus on E-Commerce Expansion: Technological evolution is changing the dynamics of the retail industry and the e-commerce boom has hugely impacted retailers’ business model. Williams-Sonoma is one of the largest e-commerce retailers in the United States and has a history of driving market share gains, supported by strong e-commerce growth.
Its innovative efforts helped to drive e-commerce growth to an all-time high of 54.3% of the total revenues in fiscal 2018. Also, the company’s investment in merchandising of its brands, efficient catalog circulations and digital marketing boosted its e-commerce revenues. It saw revenue growth of 10.8% in its e-commerce channel in 2018, almost double the fiscal 2017 growth. With more than 54% of its business (as of fiscal 2018) conducted online, Williams-Sonoma is among the top 25 internet retailers in North America.
West Elm & Emerging Businesses Continue to Shine: West Elm continued its accelerated growth trajectory in fiscal 2018, which marked its ninth consecutive year of double-digit growth and another year of strong comps of 9.5%. Its emerging businesses, Rejuvenation and Mark and Graham, delivered double-digit comps growth of 17.4% in fiscal 2018.
Product Innovation: There is consistent demand for new products. Williams-Sonoma addresses this demand very well. It also collaborates with celebrated brands and designers to offer exclusive designs on home furnishings products. It believes that collaborations with designers and brands attract new customers, invent trends in home furnishing and widen the company’s social media reach.
VGM Score: Williams-Sonoma has a VGM Score of A. VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with VGM Score of A or B when combined with a Zacks Rank #1 or 2 make a solid investment choice.
Other Key Picks
Other top-ranked stocks from the Zacks Retail-Wholesale sector include Fastenal Company FAST, Kohl's Corporation KSS and The Kroger Co. KR, each carrying a Zacks Rank #2.
Fastenal has a long-term earnings growth rate of 16%.
Kohl's surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average positive surprise being 10.7%.
Kroger has a solid return on equity of 23.5%, much higher than its industry’s 10%.
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