How Hot Is Williams-Sonoma, Inc.?

After reporting earnings and revenue that beat analyst expectations, is Williams-Sonoma still a strong buy or should investors consider jumping into Bed Bath & Beyond, or Restoration Hardware instead?

Mar 18, 2014 at 10:00AM


Source: © BrokenSphere / Wikimedia Commons. 

March 13, 2014 was a great day to be a shareholder of Williams-Sonoma (NYSE:WSM). After reporting earnings for the fourth quarter a day earlier, shares of the specialty retailer rose 10% to close at $64.74 after touching a record-high of $65.87 in mid-day trading. Now with shares of the company at a lofty price, should you consider scaling back or is the business still one to own for the long-term?

Earnings were strong!
For the quarter, Williams-Sonoma reported revenue of $1.47 billion. Although this is only 4% higher than the $1.41 billion the company earned the same quarter a year earlier, it beat out the $1.43 billion forecasted by analysts. In its earnings release, management attributes the rise in sales to a comparable rise in brand revenue of 10.4%, driven largely by a 14.6% jump in its Pottery Barn operations and an 18.3% increase in its West Elm brand.

While the company's retail revenue declined 1.7% (partially due to an extra week of operations in 2012 compared to last year), its direct-to-consumer revenue rose 11.5% from $633.5 million to $706.4 million. At that level, the company's retail operations declined from 55% of sales to about 52%, while its online revenue rose from 45% of sales to 48%.

In terms of profits, the company did even better. In spite of its net income coming in virtually unchanged, the 3% reduction in its shares outstanding allowed the business to report earnings per share of $1.38. This is 3% higher than the $1.34 Williams-Sonoma reported a year ago, and slightly higher than the $1.35 analysts anticipated.

How does Williams-Sonoma stack up against other specialty retailers?
From 2009 through 2012, Williams-Sonoma demonstrated a reasonable revenue growth rate of 30% from $3.1 billion to $4 billion. At first glance, this may seem good when compared to larger retailers like Wal-Mart or Target, but when it's placed next to other small specialty retailers like Bed Bath & Beyond (NASDAQ:BBBY) and Restoration Hardware (NYSE:RH), the numbers are striking.


Source: Wikimedia Commons. 

Over the same timeframe, Bed Bath & Beyond saw its revenue rise 39% from $7.8 billion to $10.9 billion. In its most recent annual report, the company attributed its rise in revenue to acquisitions like World Market as well as to rising (though decelerating) comparable-store-sales growth.


Source: Wikimedia Commons. 

Restoration Hardware did far better than either company. During the past four years, the company saw its sales leap 91% from $625.7 million to $1.2 billion. Just as in the case of Bed Bath & Beyond, Restoration Hardware attributed its jump in revenue to an increase in comparable store sales, but also said that higher direct sales played a significant role in the company's growth.

While Williams-Sonoma comes in last place compared to its peers in terms of top-line growth, the company excelled in profits. During the four-year time horizon, the business enjoyed a 232% increase in its net income from $77.4 million to $256.7 million as lower costs stemming from greater buying power helped propel earnings upward.

Bed Bath & Beyond also performed well over the four-year period, as demonstrated by its 73% rise in profits from $600 million to $1 billion. In juxtaposition, Restoration Hardware was the worst of the bunch, with its net loss of $28.7 million narrowing slightly to a loss of $12.8 million.

Foolish takeaway
Based on the data provided, it looks as though Williams-Sonoma has had a great run and that its momentum should continue. Whether or not this will continue into the future is something you will have to watch closely, but the company's prospects are attractive. Admittedly, the business will probably never see the same kind of revenue growth boasted by Bed Bath & Beyond or Restoration Hardware, but its increase in earnings should level the playing field.

Is Williams-Sonoma the best of the best?
After reporting revenue and earnings, shares of Williams-Sonoma skyrocketed!  Is it possible that this great development for the company is just the beginning and that it could prove to be the best company to hold for 2014 or is there something better available for the Foolish investor?

There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers