Analyst Note| Jaime M. Katz, CFA |
We are lifting our fair value estimate for narrow-moat Williams-Sonoma to $104 from $81 per share. There are three factors that have led to this change. The first stems from our prior underestimation of the business-to-business opportunity Williams-Sonoma is pursuing. While set to represent $300 million in 2020, management believes the effort can reach $1 billion in sales in the next five years. Our prior forecast included total sales that rose by roughly $850 million between 2019-24, implying modest annual sales growth outside of the B2B expectations. But we think this is unlikely, and as such we have raised our 2024 sales forecast to $7.5 billion from $7.2 billion prior to include this expansion segment tailwind. In a post-COVID-19 environment (2022), our forecast now includes sales growth that average 4%-5%, in line with the mid- to high-single-digit forecast the firm targets to achieve (from 3%-4% prior). The sales lift accounted for roughly $5 of the fair value change.