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Tickers in this Article: WSM, BBBY, PIR, JCP, SHLD
Williams-Sonoma (NYSE:WSM), kitchen and home décor retailer, posted a tremendous first-quarter earnings performance. The retailer rebounded sharply from last year's loss in the first quarter, and surged ahead with a substantial revenue increase.

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Consumers Return
During the recession consumers fled most things to do with the home, from buying homes themselves to buying items for their homes. Williams-Sonoma showed a 17% revenue increase in same-store sales for its first quarter this year. Revenue was $717.6 million for the quarter, compared with $611.6 million in last year's quarter. The retailer, which features midline and upscale cookware and cutlery, was able to sell its inventory down by 8.3% in the quarter. Its merchandise inventory stood at $502 million at the end of the quarter.

Performance Not Guaranteed
While home décor stores such as Bed Bath & Beyond (Nasdaq:BBBY) and Pier 1 Imports (NYSE:PIR) are doing well, strong business performance is not a given in the area. JCPenney (NYSE:JCP), which recently had an improved quarter, is still struggling with its home goods section. Sears Holdings (Nasdaq:SHLD), which sells a universe of products including home goods, found favor mostly with deep bargain hunters in appliances, not softlines. So home decor customers haven't completely returned.

An Impressive Performance
Williams-Sonoma earned net income of $19.5 million for the quarter, after a loss of $18.7 million last year's quarter. The earnings per share was a positive 18 cents for this quarter and a loss of 18 cents for last year's. A quick glance at the company's quarter-by-quarter earnings shows that after last year's Q1, the retailer pulled even or got into the black in subsequent quarters. Notable was its fourth quarter of 83 cents per share earnings. So the retailer executed better than weaker peers such as Sears or Penney even during the heart of the recession.

The Heart Of Recovery
Business execution, which was what good companies such as Williams-Sonoma and Bed, Bath & Beyond still did during the recovery, are ultimately at the heart of a company's success. Perhaps that belabors the obvious, but if you look more closely at Williams-Sonoma, it has fashioned a wonderful niche with its high-quality kitchenware culinary product line. The company responds to its customers' desires, as its business results indicate. Likewise, Bed, Bath & Beyond, which remains a leader more broadly in home décor, has established itself in the same way.

Pier 1 Imports has turned its business around, where retailers Sears, JCPenney and others still struggle in the home goods game. The winners in home décor appear to be focused companies, rather than diffuse ones. Williams-Sonoma and the other successful home goods retailers find their stocks rewarded accordingly by investors. The current PE of 26 for Williams-Sonoma makes its stock price too rich, but with the market correction taking down just about everything, investors may soon have a better opportunity to buy it. (For savvy real estate investors, times of lower prices reveal investment opportunity. To learn more, see 7 Steps To A Hot Commercial Real Estate Deal.)

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