What happened

Shares of Williams-Sonoma, Inc. (NYSE:WSM) were riding higher last month after a solid earnings report and a boost from RH Inc (NYSE:RH), formerly known as Restoration Hardware. RH surged on its earnings report at the end of the month, which investors saw as a bullish indicator for the high-end home furnishings sector.

A Williams-Sonoma inside a mall

Image source: Motley Fool.

According to data from S&P Global Market Intelligence, Williams-Sonoma shares finished the month up 10.4%. As the chart below shows, the bulk of the gains came at the end of the month.

WSM Chart

WSM data by YCharts

So what

Shares of the home-furnishings retailer gained modestly after its holiday-quarter earnings report on March 15. Comparable brand revenue declined 0.9% in the period, while earnings per share was flat at $1.55. That result nonetheless beat estimates at $1.51. Performance remained strong at West Elm, and the company saw modest growth at Williams-Sonoma-branded stores. However, Pottery Barn continued to underperform, with a decline of 4.1% in the fourth quarter.

What really propelled Williams-Sonoma higher was strong results from RH at the end of the month as the struggling retailer seemed to bounce back from a disastrous 2016. RH beat earnings estimates in the fourth quarter and posted better-than-expected guidance for the first quarter.

Now what 

Since Williams-Sonoma and RH cater to a similar clientele, the stocks tend to track together, but that may be a mistake -- RH had a number of self-inflicted wounds last year, including shipping delays that caused the stock to plummet. Williams-Sonoma is also better diversified and has more affordable brands than RH.

Looking ahead, Williams-Sonoma guided for earnings per share at $3.45-$3.65 this year, a modest improvement from $3.43 last year. It also sees comparable revenue growth of 1-3% with overall revenue growth of around 2.5%.

With its respected brand family and strong e-commerce business, Williams-Sonoma is in a better position than a lot of retailers, but its modest guidance means investors shouldn't expect many more breakouts like this one this year.


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