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Williams-Sonoma Inc WSM

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Morningstar’s Analysis

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Brand Prowess Continues to Drive Sales Growth at Williams-Sonoma; Adjusting Shares Materially

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to make a material change to our $104 per share fair value estimate for narrow-moat Williams-Sonoma after incorporating its 2020 fourth-quarter results into our model. The addition of the quarter’s 24% sales growth (to $2.3 billion) and massive operating margin expansion (630 basis points, to 17.9%) achieved by Williams-Sonoma is set to increase our intrinsic value by about $10 per share. Moreover, with company guidance calling for sales growth in the mid- to high-single-digit range and operating margin expansion in 2021, a revision of our outlook to align more closely to these stated ranges would  add an additional $10 per share to our fair value (we had expected a low-single-digit percentage sales decline and a 12% operating margin).

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Company Profile

Business Description

With a wide retail and direct-to-consumer presence, Williams-Sonoma is a leader in the $112 billion domestic home furnishings category. Namesake Williams-Sonoma (198 stores) offers high-end cooking essentials, while Pottery Barn (195) provides casual home accessories. Brand extensions include Pottery Barn Kids (57) and PBteen. West Elm (121) is an emerging concept for young professionals, and Rejuvenation (10) offers lighting and house parts. Williams-Sonoma also has a business-to-business team that supports projects that range from residential to large-scale commercial.

3250 Van Ness Avenue
San Francisco, CA, 94109
T +1 415 421-7900
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 31, 2022
Stock Type Cyclical
Employees 21,000