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Williams-Sonoma's Pottery Barn Partners with Lilly Pulitzer

Zacks Equity Research

Williams-Sonoma, Inc. WSM, through its notable brands Pottery Barn, Pottery Barn Kids and PBteen, unveiled new collection, with the well-known resort wear brand, Lilly Pulitzer. The company will incorporate Lilly Pulitzer’s signature patterns and prints in their quality home furnishing collection.

This collection, which has more than 100 variants, includes bedding assortment, duvets, comforters and quilts in 14 different Lilly Pulitzer prints, sheeting and accent pillows along with bath furnishings. Moreover, the recent assortment will allow customers to decorate their homes with Lilly’s Palm Beach style.

Initiatives to Drive Growth

Williams-Sonoma is one of the largest e-commerce retailers in the United States. Its innovative efforts helped it drive e-commerce growth to an all-time high of 55% of the total revenues in the third quarter of fiscal 2018.

The company keeps on collaborating with celebrated brands and designers to offer exclusive home furnishings products to meet consumers’ changing preference.  It believes that collaborations with designers and brands attract new customers, invent trends in home furnishing and widen social media reach.

In the first nine months of fiscal 2018, the company’s total revenues increased 6.2% to $3,835 million. Also, comps grew 4.4% in the same period. The upside was driven by a 9.4% improvement in e-commerce business as well as growth across all brands.

Notably, comps grew 2% and 3.4% in Pottery Barn, and Pottery Barn Kids and Teen, respectively, from negative 0.2% and negative 3% recorded in the year-ago period. For fiscal 2018, the company expects total revenues of $5,565-$5,665 million, reflecting 4.2-7% growth from fiscal 2017. Also, comps are anticipated to grow 3-5% (versus 3.2% reported a year ago).



However, shares of Williams-Sonoma have underperformed its industry in the past year. The company has been facing higher costs related to continued investments in e-commerce. Increased spending on digital advertising and higher employment-related costs have been pressurizing margins.  In the first nine months of fiscal 2018, its non-GAAP operating margin contracted 30 bps to 6.9%.

Nonetheless, the company took initiatives to achieve retail transformation and excellence by offloading the fleet of underperforming stores, and selectively investing in new stores, remodels and relocations while elevating the store experience.

Zacks Rank & Stocks to Consider

Williams-Sonoma currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Retail-Wholesale sector are RH RH, Haverty Furniture Companies, Inc. HVT, and Darden Restaurants, Inc. DRI. While RH currently sports a Zacks Rank #1 (Strong Buy), Haverty and Darden carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RH’s earnings for fiscal 2019 are expected to increase 175.4%.

Haverty surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 19.3%.

Darden’s earnings for the current year are expected to increase 18.3%.

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