Please ensure Javascript is enabled for purposes of website accessibility

Why Williams-Sonoma Stock Dropped 17% in 2016

By Jeremy Bowman – Jan 17, 2017 at 4:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The high-end home-goods retailer struggled last year as sales and profits flatlined.

Image source: Williams-Sonoma. 

What happened

Shares of Williams-Sonoma (WSM -1.08%) tumbled 17% last year, according to data from S&P Global Market Intelligence. The stock was afflicted by a slowing profit growth as a number of luxury retailers including peer Restoration Hardware had down years as well. As the chart below shows, the stock had a volatile year but trended down for much of it.

WSM Chart

WSM data by YCharts.

So what

Through the first three quarters of the year, Williams-Sonoma's revenue has increased just 1% and net income is down slightly, though earnings per share is up by a penny due to share buybacks. CEO Laura Alber said uncertainty in the retail environment weighed on the company's most recent earnings report, but added that it's focused on what it can control such as reducing inventory and lifting gross margins. The lack of investor confidence in the company became vividly clear on Dec. 22 when the stock fell 8%. There was no news out on the company. The stock simply dropped on investor nervousness about the retail holiday, but Williams-Sonoma fell much farther than most.

Two other down streaks sealed the stock's fate last year as it plummeted to start the year along with the rest of the market and then in May during the run-up to its first-quarter earnings report, although it ultimately beat expectations.

Now what 

Unlike most retailers, Williams-Sonoma now derives more than half of its revenue from e-commerce but growth in online sales hasn't been strong enough to make up for declining retail sales. E-commerce revenue is up just 3% this year. West Elm remains strong with double-digit comparable brand revenue, but Pottery Barn has been declining significantly.

The company makes nearly half of its profits in the fourth quarter so its next report will be crucial. With the economy expanding, performance should be improved, but it isn't. That could be a warning sign for investors going forward.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Restoration Hardware and Williams-Sonoma. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Williams-Sonoma Stock Quote
$127.18 (-1.08%) $-1.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.