Source: YCharts.

Looking at variables like new single family houses sold, it looks like the real estate recovery still has a lot of room to run in the coming years. For investors looking to capitalize on the trend, companies such as Home Depot (NYSE:HD), Williams-Sonoma (NYSE:WSM), and Mattress Firm (NASDAQ:MFRM) are delivering strong financial performance while benefiting from powerful tailwinds in the years ahead.

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Source: Home Depot.

Home Depot is built on solid ground
With more than 2,200 retail stores in the U.S., Canada, and Mexico, Home Depot is the largest home improvement retailer in the world. This provides rock-solid competitive strengths for the company in areas such as scale advantages, geographical presence, brand recognition, and access to financial resources, among others.

Home Depot has been an unequivocal beneficiary from the real estate recovery over the last years, and management has implemented a series of initiatives to increase profitability and streamline operations in order to better capitalize economic tailwinds.

This strategy is yielding solid results for investors. During fiscal 2013 Home Depot delivered the strongest growth in comparable-store sales it has seen in the last 14 years. Total sales during the year increased by 7.2% when excluding the 53rd week in fiscal 2012, reaching $78.8 billion on the back of a 7.5% increase in U.S. comparable-store sales during the period.

Earnings per share increased by a remarkable 28.3% when adjusted for the extra week in 2012 to $3.76, and management seems quite confident about the future, as the company announced a big dividend increase of 21% to $0.47 per share.

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Source Williams-Sonoma.

Williams-Sonoma is firing on all cylinders
Williams-Sonoma is benefiting from multiple tailwinds. The real estate recovery is providing a boost for the company, and retailers operating in the high end of the pricing spectrum are generally doing better than companies that need to aggressively compete in price.

Importantly, management has done a great job at positioning Williams-Sonoma for growth in the crucially important online segment.

Williams-Sonoma announced an increase of 10% in net revenues during the fourth quarter of 2013 when excluding the extra week in 2012 to $1.47 billion. Comparable brand revenues increased by 10.4% during the quarter, with brands such as West Elm and Pottery Barn performing particularly well and generating growth rates of 18.3% and 14.6%, respectively.

Another key growth driver for Williams-Sonoma is its direct sales channel: Direct-to-consumer revenues increased by a remarkable 19% to $706 million during the quarter, accounting for 48% of total sales in the period.

CEO Laura Alber sounded quite pleased with the company's performance in the press release:

Williams-Sonoma outperformed the retail industry this holiday season, gaining market share and demonstrating the structural advantage of our multi-brand, multi-channel platform. The strength of our brands across retail and e-commerce, in conjunction with disciplined execution, enabled our team to drive record operating results.

Mfrm Image

Source: Mattress Firm.

Sweet dreams with Mattress Firm
Mattress Firm has doubled its store count over the last three years, and the company now owns 1,326 stores, including franchises in 87 markets across 33 states, this makes Mattress Firm the leading specialty bedding retailer in the U.S.

Management is focused on growing the company's relative market share versus peers, Mattress Firm is taking a more aggressive approach to pricing, broadening the availability of third-party consumer financing and resourcing to acquisitions in order to consolidate its competitive position.

Performance seems to be responding positively to these initiatives; net sales in the fourth fiscal of the company's fiscal 2013 increased 20.8% to $312.1 million on the back of new store openings and acquisitions combined with a 6.5% increase in comparable-store sales. The increase in comparable-store sales was mostly due to a jump of 9.1% in unit sales, which more than compensated for the 2.3% decline in prices caused by intense promotional pricing.

Management also increased its guidance for fiscal 2014, sales are expected to be in the range of $1.46 billion to $1.52 billion versus a previous guidance of between $1.38 billion and $1.43 billion. Adjusted earnings per share guidance was also increased to between $1.88 and $2 per share versus a prior guidance in the range of 1.85 to 1.95 per share.

Bottom line
Economic variables don't move in a straight line, so investors should expect some volatility in real estate data from time to time. However, from a historical perspective, the sector seems to be offering much more upside potential than downside risk from current levels. Home Depot, Williams-Sonoma, and Mattress Firm look well positioned to capitalize the housing recovery for years to come.

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Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Home Depot 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.

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