In this MarketFoolery segment, host Chris Hill and Motley Fool Total Income's Ron Gross are upbeat on the specialty retail chain operator behind Pottery Barn, Rejuvenation, and West Elm, among others -- and, of course, its eponymous kitchen and housewares brand. It had close to flat comps growth overall, but with pockets of strong growth. Its e-commerce successes are also fairly significant.
A full transcript follows the video.
This video was recorded on May 25, 2017.
Chris Hill: Williams-Sonoma's (WSM 0.29%) first quarter looked good. Their guidance was a little stronger than expected. Odd to watch the stock this morning, because right at the open, it was up somewhere in the neighborhood of 8%. It is still in positive territory, but it's come back down from that. Again, that's what you want to see -- good results over the past three months, and nice guidance going forward.
Ron Gross: Yeah, they're doing a fine job. They've not been knocking the cover off the ball, they've gone in and out, had some struggles here and there. Their same-store sales, which they actually call comparable brand revenue, I don't know why they have to be all unique about it -- was basically flat, 0.1%, that's versus 4.5% growth last quarter. So, I think investors are looking at that and saying, what's going on sequentially? It doesn't look that great. But, you do have some pockets of strength. Williams-Sonoma, the actual store brand itself, was up 3.2% in terms of same-store sales. But there was also struggles. PBteen, which I'm not sure is really needed at this point, is down 14%. Pottery Barn Kids down 6%. It seems like the brands that are focusing on the youth are really struggling.
Hill: West Elm did pretty well, didn't they?
Gross: 6% comp sales up, that's pretty strong, without a doubt. That's one of their pockets of growth, it has been pretty strong lately. I think they're counting on it to remain strong to make up for some of these other lackluster results.
Hill: Isn't that high end furniture, it's a little bit on the expensive side?
Gross: A little bit, I wouldn't necessarily call it high end, but on the pricier end of discount, and certainly not discount.
Hill: But that's the sort of thing where, if you have that in your portfolio, you don't need it to be double-digit same-store sales growth. If you're selling stuff at a little bit of a premium, then every 1-2% higher makes a bigger impact.
Gross: Yeah, double-digit same-store sales growth just in general is difficult to put up time and time again. That's not really realistic in an economy that does 2% GDP overall.
Hill: Yeah, but, people got their tax refunds.
Gross: There you go. But, I will say, the one thing that Williams-Sonoma, years and years ago, said they needed to do and have done, is to push toward online sales. That was essential. Now, online sales do make up 52% of overall sales. So, nicely done there.
Hill: Is that just in the name brand, or is that across all?
Gross: That's across. I was actually skeptical years ago when I saw that was really the thesis, and I stayed away from the stock, I guess to my peril. Again, it hasn't done that great, it's only up 5% this year, 40% over the last five years, so it hasn't really done great. But to their credit, they did do what they said they needed to do.
