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Williams-Sonoma Going Strong on eCommerce, Risks Persist

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On Aug 12, we initiated coverage on Williams-Sonoma, Inc. (WSM - Free Report) , a leading specialty retailer of home furnishing products.

However, the company depends on the U.S housing market and overall slow macroeconomic conditions.

We are encouraged by Williams-Sonoma’s strong portfolio. The company offers premium quality products and has some of the most popular brands in home furnishing, namely Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen Rejuvenation and Mark and Graham. The company’s multi-brand, multi-channel format gives it’s a competitive advantage.

The company’s size gives it a scale advantage and provides the company with flexibility and leverage in marketing spend, which subsequently improves productivity and margins. Headquartered in San Francisco, CA, Williams-Sonoma’s leading position as an e-commerce retailer is also commendable.

In addition, Williams-Sonoma enjoys a strong international presence. Other than United States, the company operates retail stores in the Canada, Puerto Rico, Australia, and the United Kingdom. The company is fast expanding its international footprint in order to gain market share and drive revenues.

Williams-Sonoma has posted solid revenues and profits since late 2011 on the back of product innovation, strong international presence, personalized service and strong marketing and execution.

However, Williams-Sonoma’s products primarily focus on home furnishings. The U.S. residential activity growth has slowed down in the second half of 2013 as well as early 2014. If the housing demand worsens in future quarters, demand for WSM’s products could be hurt.

Williams-Sonoma carries a Zacks Rank #2 (Buy).

Investors interested in the retail sector can consider stocks like Mattress Firm Holding Corp. , Barnes & Noble, Inc. (BKS - Free Report) and Skechers USA Inc. (SKX - Free Report) . While Mattress Firm Holding  and Skechers USA sports a Zacks Rank #1, Barnes & Noble hold a Zacks Rank #2.

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