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Williams Sonoma Defies Skeptics
Shares in Williams Sonoma (NYSE:WSM) surged this week after the company delivered earnings results that surprised even the most bullish of estimates. For the fourth quarter 2009, EPS was up nearly seven fold to 81 cents a share versus 12 cents in the year ago quarter. These results came on the heels of a 8% rise in quarterly revenues on top of a 7.6% comparable store sales increase.
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A Surprise Indeed
Williams Sonoma is a is a nationwide specialty retailer of high quality products for the home. And by high quality, yes, that means pricey. In addition to its namesake stores, WSM also operates the Pottery Barn and Pottery Barn Kids concept stores. The company's stores can be found either in free standing format or inside high end shopping malls. The company's products are fresh, elegant and a bit on the expensive side. Yet, interestingly, all of the company's retail concepts experienced an increase in same store sales save for the lesser priced outlet stores. (For more, see Analyzing Retail Stocks.)
The Value of Luxury
It's rather obvious why discount retailers are doing well in this market. What's not so obvious is the relative strength in specialty and luxury goods during all environments. To be sure, the luxury segment is certainly experiencing its weaknesses today, but it caters to a customer that has more economic resiliency during the tough times. Having a stock market that was up over 20% likely increased the wealth of many of the company's customers. Indeed luxury retailer Tiffany's (NYSE:TIF) reported fourth quarter profit that quadrupled after upscale shoppers came back at the end of last year.
Indeed it seems the place to be in retailing is anywhere but the middle ground. On one end you have places like Big Lots (NYSE:BIG) and TJX (NYSE:TJX) providing ultra discounted merchandise to the frugal shopper. At the other end is luxury which will always be dear to those who value the quality and originality provided by luxury goods.
More Than Luxury
Yet luxury doesn't seem to be the only excuse at Williams Sonoma. Management has done a superb job of navigating the company during the economic storm and it's enabled the company to emerge stronger and more valuable. The company ended the year essentially debt free and a cash pile of $500 million. In most cases, selling expensive products is not a recipe for success unless you can offer your consumers a desirable one of a kind product and superior customer service. Williams Sonoma seems to have the recipe perfected at the moment. (For more, see Investing "Road Less Traveled" May Lead To Riches.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 20 Tools For Building Up Your Portfolio
A Surprise Indeed
Williams Sonoma is a is a nationwide specialty retailer of high quality products for the home. And by high quality, yes, that means pricey. In addition to its namesake stores, WSM also operates the Pottery Barn and Pottery Barn Kids concept stores. The company's stores can be found either in free standing format or inside high end shopping malls. The company's products are fresh, elegant and a bit on the expensive side. Yet, interestingly, all of the company's retail concepts experienced an increase in same store sales save for the lesser priced outlet stores. (For more, see Analyzing Retail Stocks.)
It's rather obvious why discount retailers are doing well in this market. What's not so obvious is the relative strength in specialty and luxury goods during all environments. To be sure, the luxury segment is certainly experiencing its weaknesses today, but it caters to a customer that has more economic resiliency during the tough times. Having a stock market that was up over 20% likely increased the wealth of many of the company's customers. Indeed luxury retailer Tiffany's (NYSE:TIF) reported fourth quarter profit that quadrupled after upscale shoppers came back at the end of last year.
Indeed it seems the place to be in retailing is anywhere but the middle ground. On one end you have places like Big Lots (NYSE:BIG) and TJX (NYSE:TJX) providing ultra discounted merchandise to the frugal shopper. At the other end is luxury which will always be dear to those who value the quality and originality provided by luxury goods.
More Than Luxury
Yet luxury doesn't seem to be the only excuse at Williams Sonoma. Management has done a superb job of navigating the company during the economic storm and it's enabled the company to emerge stronger and more valuable. The company ended the year essentially debt free and a cash pile of $500 million. In most cases, selling expensive products is not a recipe for success unless you can offer your consumers a desirable one of a kind product and superior customer service. Williams Sonoma seems to have the recipe perfected at the moment. (For more, see Investing "Road Less Traveled" May Lead To Riches.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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