The retail world has seen a great deal of creative destruction in recent years, with many companies struggling to adapt in the face of competitors such as Amazon (AMZN) and less fortunate souls being run out of business.
Williams-Sonoma (WSM), Barnes & Noble (BKS) and Panera Bread (PNRA) are three retailers which have managed to adapt to changing industry dynamics and stay afloat while others have been weeded out. All have been growth stocks in the past, but are no longer the darlings of Wall Street they once were.
Yet these firms have strong brands and could benefit from rising disposable incomes…more importantly, they have a lot of room for growth overseas which the market may be overlooking.
3 Stocks With Overseas Potential: Williams-Sonoma (WSM)
WSM stock peaked at close to $90 last August before falling below $50 a share in January, and WSM has been slowly regaining lost ground since.
Williams-Sonoma, the San Francisco-based seller of gourmet foods, kitchenware, and home furnishings (under the Pottery Barn brand) has deftly navigated the shift to e-commerce. E-commerce has grown faster than the firm’s other channels over the years, and in 2014, online sales increased to over 50% of revenue for the firm. WSM has succeeded in leveraging technology to drive sales by understanding the buying trends of online customers and personalizing their visits, targeting them with products they may be interested in.
WSM doesn’t have much of a footprint internationally; the firm operates over 600 stores, but most of these are located in the United States. There are only 2 Williams-Sonoma stores in Australia, 2 in Mexico, 7 in Canada, 1 in Kuwait, and 1 in the United Kingdom.
At the end of the day, that means that there’s a lot of room to grow. Don’t be surprised if WSM branches out to other countries and continents in the years ahead.
3 Stocks With Overseas Potential: Panera Bread (PNRA)
Panera Bread stock has zigzagged over the last year, and is up 5.8% year-to-date. PNRA has expanded rapidly in the past few years, even during the recession; while there were only 262 bakery-cafes in 2000, there are now 1,972 in 46 states, the District of Columbia and Ontario, Canada. Revenue growth has cooled in recent years and sales are no longer growing at the double-digit rates they were three years ago.
But that doesn’t mean PNRA is doomed to grow at those tepid rates forever.
Panera Bread has a solid business model and is rolling out Panera 2.0, a technological upgrade of the bakery chain. Customers can now order their meals on mobile apps and pick them up without having to wait in line. Kiosks are supplementing human cashiers, and PNRA is adding delivery. This will free up space in lines; hungry customers don’t enjoy queuing and waiting for their meals.
While Panera Bread may not be able to grow as fast as it did in the past domestically, the firm has hardly begun expanding internationally, with virtually all sales occurring in the United States. Imagine if Panera can replicate its success overseas — that could bring in major coin for investors.
PNRA has brand strength and extremely elite levels of customer satisfaction. As consumer disposable incomes increase, the shift from fast food to fast-casual should continue and PNRA will see more traffic.
3 Stocks With Overseas Potential: Barnes & Noble (BKS)
Barnes & Noble stock has been on a roller-coaster ride the past few years, and is trading 37% off of its 52-week high of $19.00.
Online retail has been disrupting traditional booksellers, but BKS will probably not go the way of Borders. Barnes & Noble sells an experience, not just products; customers can not only read books but also nibble on a scone and sip coffee. They have sentimental value to their customers and communities; people often mourn the closing of a nearby Barnes and Noble store.
It seems that BKS CEO Ron Boire realizes this and is re-imagining the store, finding ways to create value from brick-and-mortar stores through community events and customer experience. Barnes & Noble is engaging the public with coloring book events and the Mini Maker Faire exhibiting 3-D printers. Continuously innovating to improve customer experience will be critical for brick-and-mortar retailers such as BKS.
As of 2014, 100% of Barnes and Noble’s sales came from the United States, so there is plenty of room for international growth. There’s no reason that Barnes & Noble couldn’t take its brand and in-store “experience” abroad, or at least make a concerted effort to test that concept.
Barnes & Noble’s fortunes may be reversing after years of trouble, and growth could resume. The pace with which e-books are displacing paper books has slowed and printed works are now making a comeback after years of decline. Analysts are bullish on Barnes & Noble stock and institutional investors such as Blackrock (BLK), Morgan Stanley (MS) and Gabelli Fund LLC are buying more BKS stock.
As of this writing, Lucas Hahn did not hold a position in any of the aforementioned securities.
