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Williams-Sonoma Up 13% YTD: Will E-Commerce Aid Further?

Zacks Equity Research

Williams-Sonoma, Inc. WSM has been riding high on solid e-commerce growth, and strong West ELM and emerging businesses. Moreover, its focus on innovation, and marketing and digitalization techniques are helping it gain further.

Shares of this multi-channel specialty retailer spiked nearly 14% on May 29, as it reported better-than-expected first-quarter fiscal 2020 results. Non GAAP earnings topped analysts’ expectation by a significant 722.2%.

The company’s comps increased 2.6% year over year in the quarter. The upside was buoyed by 30.2% acceleration in e-commerce revenue growth despite having all its 616 stores closed for more than half of the quarter.


Let’s delve deeper into the factors that are benefiting this Zacks Rank #2 (Buy) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

E-Commerce Business Remains a Major Growth Driver

Williams-Sonoma has a history of driving market share gains, supported by strong e-commerce websites, direct mail catalogs and retail stores, along with shipping fees received for the delivery of merchandise. Owing to the coronavirus outbreak in March, the company closed all its 616 stores for more than half of first-quarter fiscal 2020. Yet, e-commerce revenue growth accelerated to more than 30% in the fiscal first quarter. The company witnessed strong demand during the quarter, especially for the Pottery Barn brand.

The company is expected to generate strong revenues from the e-commerce channel, as it focuses on re-platforming mobile sites to progressive web app technology, streamlining checkout process, and implementing the next-generation of machine learning, on-site search as well as personalization experience. Also, it has been continuously investing in various online channels to boost demand.

Strategic Initiatives Bodes Well

Williams-Sonoma is a highly customer-centric company and focuses on enhancing customer experience through technological innovation and operational improvement. Also, continuous technological and new products innovation helps it enhance customer engagement. Cross-brand initiatives such as The Key, Design Crew Room Planner and The One Registry are expected to be incremental growth drivers for all its brands in fiscal 2020 and beyond.

The company’s focus on West Elm and emerging brands, namely Rejuvenation and Mark and Graham, is raising hopes. The West Elm business generated 3.3% comps growth in the fiscal first quarter (despite coronavirus related disruptions), followed by 10th consecutive year of double-digit growth in fiscal 2019. Notably, it experienced strong comps growth in early second-quarter fiscal 2020.

Strong Marketing & Digitalization

Williams-Sonoma, which shares space with At Home Group Inc. HOME, RH RH and The Lovesac Company LOVE in the same industry, is focused on enhancing customer experience through technology innovation and operational improvement. During the fiscal first quarter, it expanded online services including Design Chat, Virtual Design appointment and Ask the Expert via leveraging the outward Inc. 3D visualization technology to maximize online demand.

It has also been reworking on the marketing strategy, placing more emphasis on digital targeted marketing and investing in store remodeling.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.

Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.

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