Williams-Sonoma, Inc. (WSM – Free Report) has seen strong demand recently, thanks to a resilient housing market, an intense focus on the e-commerce platform as well as marketing and digitization moves. Additionally, product innovation, retailer transformation and a strong liquidity position are helping this multi-channel specialty retailer increase value for its investors.
So far this year, shares of WSM have outperformed the industry of Zacks Retail – Home Furnishings. Impressively, the company has outstripped other industry players like HR (HR – free report), Tempur Sealy International, Inc. (TPX – free report) and The Lovesac company (LOVE – Free report) within the same time frame. Price performance has been supported by a strong history of earnings surprises, having topped the Zacks consensus estimate for the past 17 quarters. Earnings estimates for fiscal 2022 have risen 8.4% in the past 30 days.
Although the company noted that it has experienced both short-term and long-term delays due to global supply issues, macro trends are encouraging.
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Let’s dig deeper into the factors that solidify its Zacks No. 1 (Strong Buy) rank. You can see the full list of today’s Zacks #1 Rank stocks here.
E-commerce platform drives growth: Williams-Sonoma has a history of generating market share gains, supported by strong e-commerce websites, direct mail catalogs and retail stores, and shipping charges received for delivering goods . The company is generating strong revenue from the e-commerce channel as it focuses on redesigning mobile sites to progressive web application technology, streamlining the checkout process and implementing the next generation of machine learning, on-site research as well as personalization. experience.
The company’s return on invested capital was 57.9% for fiscal 2021, compared to 22.4% last year. In addition, WSM now expects revenue acceleration to $10 billion over the long term (by FY2024). It remains on track to invest nearly $350 million in the business in fiscal 2022.
Product innovation, marketing and digitalization: Williams-Sonoma is a very customer-centric company and focuses on improving the customer experience through technology innovation as well as operational improvement. Additionally, continuous innovation in technology and new products helps it improve customer engagement.
The company’s initiatives in e-commerce and real estate optimization strategies were behind its shift in channel line-up. Williams-Sonoma had acquired new customers in digital channels throughout fiscal 2021. The digital-first channel strategy will drive profitable market share gains, accelerating its path to $10 billion in revenue and an increase in operating margin by fiscal year 2024.
It also reworked the marketing strategy, placing more emphasis on targeted digital marketing and investing in store remodeling. In digital advertising, the company is moving from catalog mailing to higher-impact digital channels to drive short-term ROI, long-term gains and customer growth. Higher digital marketing leads to more customers. Its newest division, Williams-Sonoma Inc. Business-to-Business, has made significant progress.
Improve shareholder value: Williams-Sonoma has strong liquidity to navigate the current environment which is impacted by the COVID-19 outbreak. The company ended fiscal 2021 with strong liquidity, including $850.3 million in cash and cash equivalents and operating cash flow of over $1.37 billion, with zero debt. This allowed Williams-Sonoma to announce an additional quarterly dividend increase of 10%. In addition, its board of directors approved a new $1.5 billion share buyback authorization.
The company’s return on equity is currently 73.4%. This compares favorably to the industry’s 30.7%.
A brief overview of the actions mentioned above
The expected growth rate of HR earnings for fiscal 2022 is 2.8%. The Zacks consensus estimate for fiscal 2022 earnings has improved 0.5% over the past seven days.
The company has exceeded earnings estimates in each of the past four quarters, averaging 14.2%. HR stocks have lost 34.4% since the start of the year.
Tempur Sealy’s earnings have exceeded analysts’ expectations in three of the past four quarters, averaging 13.1% surprise.
TPX earnings estimates have been flat for 2021 and 2022 over the past 60 days. TPX shares are down 36.8% year-to-date.
Lovesac’s earnings surprise over the past four quarters averaged 245.9%.
Over the past 60 days, Lovesac’s earnings estimates have remained flat for fiscal year 2023 (ending January 2023). Shares of LOVE have lost 33.2% since the start of the year.
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