Share price of Williams-Sonoma Inc. (WSM) reached a new 52-week high of $76.99 on Dec 30. Shares of the company eventually closed at $76.51, yielding a solid year-to-date return of 32.7%. In fact, share price of this California-based home furnishing company has been rising ever since the company announced better-than-expected third-quarter fiscal 2014 results on Nov 19 and provided a favorable outlook for 2014.
Growth Drivers
Williams-Sonoma‘s third quarter 2014 earnings per share, revenues and comparable brand revenues exceeded the company’s guidance. Adjusted earnings of 68 cents per share increased 17.2% year over year on the back of top-line growth and operating margin increase.
Net revenue of $1.14 billion increased 8.7% year over year, thanks to an increase in comparable brand revenues. Comparable brand revenues increased due to strong sales growth, particularly in its iconic brands, Williams-Sonoma and Pottery Barn Kids.
Owing to better-than-expected performance in the third quarter of 2014, Williams-Sonoma raised its earnings outlook for fiscal 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 and higher than $2.84 per share earned in fiscal 2013. Also, the company expects net revenue in the range of $4.68 billion and $4.73 billion, compared with the prior expected range of $4.65 billion to $4.73 billion.
Williams-Sonoma offers premium quality products and has some of the most popular brands in home furnishing, namely Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen Rejuvenation and Mark and Graham. These products are exclusively designed to meet the changing preference of customers.
Moreover, Williams-Sonoma has been gaining market share due to its multi-brand, multi-channel format. In fact, the company is consistently increasing its store count and offering new collections of home furnishings in order to reach out to more customers. 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 at North Carolina, Texas and California by early 2015.
Overall, improving trends have thus been driving the shares of this Zacks Rank #2 (Buy) company.
Other Stocks to Consider
Investors interested in the retail sector can consider stocks like Kirkland's Inc. (KIRK), Restoration Hardware Holdings, Inc. (RH) and Pier 1 Imports, Inc. (PIR). All the three companies hold a Zacks Rank #2.
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