Williams-Sonoma, Inc. ( WSM Quick Quote WSM - Free Report) is benefiting from growth in the Business-to-Business segment and its expansion plans. Also, focus on marketing and digital innovation bodes well.
However, challenging macroeconomic background, supply-chain constraints and high costs are a concern.
Shares of WSM have increased 5.2% in the past six months period compared to the
industry’s rise of 4.6%. Earnings estimates for 2024 have declined to $13.46 per share from $13.52 per share in the past 60 days. This depicts analysts' concern over the company’s growth prospects. Image Source: Zacks Investment Research Growth Catalysts
The company's B2B strategy remains successful, allowing them to capture market share in the fragmented $80-billion market. The B2B operates in two formats, trade and contract. Despite a 7% decline in B2B accounts, the company experienced double-digit growth in the contract business line, attributed to its design capabilities and diverse product range offered across multiple brands. The company anticipates that B2B will continue to contribute positively to the quarterly performance. During first-quarter fiscal 2023, the company successfully launched B2B in Canada and planning to introduce Canadian customers to rejuvenation, Mark and Graham and Williams-Sonoma Home through the upcoming website launch.
Williams-Sonoma is one of the largest e-commerce retailers in the United States. Its innovative efforts have helped the company drive e-commerce growth. The company is expanding globally, with a particular focus on the Indian market where brand momentum surpassed expectations. In the third quarter of fiscal 2023, the company is set to drive growth through retail expansion, opening third West Elm store, second Pottery Barn store and the first Pottery Barn Kids store. India holds strategic importance as the company continues global expansion, with plans to open additional locations in 2024. Williams-Sonoma is focused on enhancing customer experience through technology innovation and operational improvement. The company's marketing team is highly skilled and adaptable, utilizing the in-house capabilities, first-party data and multi-brand platform to optimize advertising spend. These advantages provide the company a competitive edge by allowing them to respond quickly to changing trends. Looking ahead, the brand will emphasize marketing its excellent and affordable line-up of textiles, decorating and entertaining products to enhance performance. Headwinds
The company’s performance is being impacted by the supply chain bottlenecks. Due to the supply issue across the world, the company witnessed short-term and long-term delays in the last few quarters. Due to weak macroeconomic condition, the demand for its products may witness a downward trend in the coming year.
During the fiscal first quarter, as a percentage of net revenues, the cost of goods sold increased to 61.5% compared with the year-ago quarter’s level of 56.2%. The upside can be attributed to higher input costs and increased expenses for ocean freight, detention, and demurrage due to supply chain disruptions and global inflation pressures. WSM expects cost pressures to persist for the balance of fiscal 2023, primarily across the supply chain and demand patterns. Zacks Rank & Other Key Picks
Williams-Sonoma currently sports a Zacks Rank #3 (Hold).
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