On Jan 16, we issued an updated research report on Williams-Sonoma, Inc. (WSM).
This leading specialty retailer of home furnishing products reported impressive earnings and top line results in the three quarters of 2014 reported so far on the back of strong comparable brand revenues. Comparable brand revenues remained strong as the company is consistently increasing its store count and offering new collections of home furnishings in order to reach out to more customers. In fact, Williams-Sonoma has been delivering strong results since late 2011 on the back of product innovation, personalized services and strong marketing and execution.
With improving demand for Williams-Sonoma’s home furnishing goods, the company recently announced the expansion of its upholstered furniture manufacturing at Sutter Street Manufacturing, a wholly owned subsidiary of Williams-Sonoma. The company intends to add over 500 positions at the three facilities in North Carolina, Texas and California by early 2015.
In addition, Williams-Sonoma’s investment in merchandising of its brands, efficient catalog circulations and digital spending has been boosting its e-commerce revenues. As a result, the e-commerce segment has grown stronger and generated 51% of the total revenue in the third quarter, up from 49% in the prior-year quarter.
We are also encouraged by Williams-Sonoma’s strong international presence. In 2014, the company opened its first Philippines store, which is its first footprint in Southeast Asia. During the same time period, the company also opened several new stores in Australia. The company intends to open its first store in Mexico in 2015.
On the back of a better-than-expected performance in the third quarter of 2014, Williams-Sonoma raised its earnings outlook for 2014. For 2014, Williams-Sonoma expects adjusted earnings per share in the range of $3.11 to $3.19 compared with the prior expectation of $3.07–$3.17 per share and higher than $2.84 per share earned in 2013.
The company expects net revenue in the range of $4.68 billion to $4.73 billion compared to the prior expected range of $4.65 billion to $4.73 billion.
However, the earnings outlook for the fourth quarter of 2014 was below market estimates. In addition, with U.S. macroeconomic recovery rather slow, the demand for William Sonoma’s products could be hurt in the future quarters.
Williams-Sonoma carries a Zacks Rank #2 (Buy).
Stocks to Consider
Other better-ranked stocks in the retail home furnishing sector include Haverty Furniture Companies Inc. (HVT), Kirkland's Inc. (KIRK) and Restoration Hardware Holdings, Inc. (RH). All three companies sport a Zacks Rank #1 (Strong Buy).
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