Williams-Sonoma Inc.WSM

Morningstar Rating

Stock Research and Analysis

by R. J. Hottovy, CFA

Demand for home-related products remains weak amid macroeconomic pressures, restrictive credit markets, and a still-sluggish housing market. Although sales trends among leading home-furnishing retailers have shown modest improvement over the past few Read more

Bulls Say

Integrated retail, catalog, and e-commerce operations provide marketing economies of scale and promote brand-building. The firm can drive sales with minimal costs due an extensive customer database.

The e-commerce channel, which represents more than 30% of total revenue, is the fastest-growing and most profitable segment. Increased e-commerce functionality could drive incremental sales.

West Elm has resonated well with young professionals, making it more resilient to economic woes than Pottery Barn. With just 36 stores nationwide, there are exceptional growth prospects.

Television cooking channels and celebrity chefs have increased the popularity of cooking as a pastime. Awareness of new dishes and cooking techniques could benefit specialty cookware stores.

Bridal registries, which make up about 10% of Williams-Sonoma sales, represent an important growth driver across all channels and could introduce new customers to the brand. Read more

Bears Say

Prolonged weakness in housing starts could stunt top-line growth, since new homeowners represent the bulk of home-related products.

Heavy markdown activity and rising commodity prices have created a challenging environment for home furnishing retailers and manufacturers.

Pottery Barn is losing market share to lower-priced imitation products in the discount and specialty channels. Recent efforts to revitalize the brand's assortment have yielded mixed results.

Given the lead time needed to manufacture furniture and other home-furnishing goods, there are risks inherent with constantly evolving consumer preferences.

Of Williams-Sonoma's products, 60% are manufactured overseas (primarily Asia and Europe), exposing the company to increased sourcing and labor costs, as well as foreign currency fluctuations. Read more

Strategy

Williams-Sonoma is focused on developing new brands while continuously growing its mature concepts. A multichannel marketing approach enables the testing of new concepts online and through catalogs before Read more

Management

Under the leadership of CEO and chairman Howard Lester, Williams-Sonoma developed a track record of building brands focused on the home. Lester served as CEO from 1979 through 2001 and again from 2006 through the present while also holding the chairman Read more

Profile

With a breadth of retail brands and strong direct-to-consumer presence, Williams-Sonoma is a leader in the $120 billion home furnishings space. Namesake Williams-Sonoma Read more

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