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Williams-Sonoma, Inc. Stock Is Still Amazon Proof

A high-end customer base is keeping Williams-Sonoma cooking

WSM Stock Is Still Amazon Proof

Source: Mike Mozart via Flickr

There’s no denying the power of e-commerce and Amazon.com, Inc. (NASDAQ:AMZN). As more and more consumers start clicking “buy” rather than visit physical retail locations, the number of closures, bankruptcies and empty storefronts has grown considerably over the last few years. Retail has become a wasteland.

Or has it?

There are plenty of retailers not only surviving but thriving in the current environment. And one of the best happens to be Williams-Sonoma, Inc. (NYSE:WSM). The high-end retailer of kitchen goods and home products continues to see rising revenues from its fanatic customer base. If investors are looking for an Amazon-proof retailer, they should consider buying WSM stock.

A Strong Base of Customers at Williams-Sonoma

Long before being a “foodie” was a thing, Williams-Sonoma was the only game in town to find new kitchen appliances, high-end imported foods and other now-common kitchen items.

And what Williams-Sonoma did for kitchens, it’s Pottery Barn brand did for home furnishings. “Shiplap” may be part of lexicon today, but Pottery Barn has provided traditional home goods and styled products for years.

This early start has been critical for WSM’s continued success today.

That’s because it’s created a sort of fanatical customer base of shoppers who will hit WSM first before looking elsewhere. These shoppers tend to be older and more affluent than the typical Wayfair Inc (NYSE:W) customer. And they tend to transfer their love of the brand down to their children when they finally grow up and get homes.

WSM’s West Elm brand is targeted at college students and young adults. As a result, WSM has realized a steady base of shoppers that tend to spend more than average.

These loyal shoppers have continued to provide Williams-Sonoma a steady base of profits and revenues over the years. The last quarter was a prime example of that.

During the quarter, WSM saw comparable-brand revenues surge across the broad. That included a 4.1% and 4.3% at its two core brands — Pottery Barn and Williams-Sonoma — as well as a big 12.3% jump at West Elm. Those strong revenues allowed WSM to reap a 8.4% increase in year-over-year profits.

Williams-Sonoma Can Do It Again

The best part is that WSM has the potential to keep those revenue and profit gains going. And its customer base and what it sells is the reason why. And it’s also the reason why it can keep Amazon and other e-commerce players at bay.

For starters, buying a couch or other furniture item at Williams-Sonoma is a rather personal experience. It’s going through hundreds of fabric and other accent choices to “build” your custom couch. Often that needs a human guiding hand. This is something you just can’t replicate online. Nor can you replicate the firm’s interior design services.

Secondly, as the first mover into the kitchen goods spaces decades ago, many manufacturers of high-end products only sell their goods or certain models at Williams-Sonoma stores. For its affluent customer base, that means if you’re looking for a certain espresso machine or professional sous vide device, WSM is the only place to go.

And then there is e-commerce itself. Williams-Sonoma has been successful in getting its affluent customer base to head online to its websites. E-commerce revenue surged 8.4% to come in at $877 million during the quarter. This is roughly 52.2% of WSM’s total sales and represents an increase over the year-ago period.

To keep its customers hitting up its online stores, WSM has started to invest in some heavy-duty tech initiatives.

That includes its $112-million acquisition of augmented reality and 3D-imaging startup Outward. The idea is that Outward’s tech will allow customers to create digital and virtual reality rooms in order to see potential purchases and how they impact their décor. This should help keep their loyal fans — especially tech-savvy millennials — happy as more migrate to online channels.

Buying WSM Stock

In the end, WSM has carved out a very successful niche for itself. By focusing on the high-end world of kitchen and home goods, it’s created a very loyal fan base. New plans in digital and e-commerce will help Williams-Sonoma retain those customers — and their children — into the future.

It really is an Amazon-proof retailer.

And that could mean that WSM stock deserves your attention. Shares trade for a cheap forward P/E of just 12 and offer a 3.04% yield.

Even better is that the firm has continuously upped that payout and increased buyback programs thanks to its robust cash flows/sales. At the end of the quarter, Williams-Sonoma’s board authorized a 10% jump to its dividend and a new $500-million buyback program.

All in all, the retailer continues to fire on all cylinders, and WSM stock represents one of the true best-in-class plays in the sector. A very loyal and affluent customer base plus new tech initiatives is a recipe for success.

Disclosure: None


Article printed from InvestorPlace Media, https://investorplace.com/2018/03/williams-sonoma-is-still-amazon-proof/.

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