Why Williams-Sonoma’s Rally Is Just Getting Started
The Covid-19 pandemic was a boon for
as consumers spent lavishly on their homes. Yet, even as the U.S. tiptoes toward an economic reopening, Cowen & Co. argues the retailer’s winning streak isn’t over yet.
Shares of Williams-Sonoma (ticker: WSM) were up 3.4% to $184.59 in midday trading Thursday. The stock has soared 80.8% in 2021 and is up 260.6% in the past year. Cowen’s Max Rakhlenko is joining other analysts who are enthusiastic about the company.
Rakhlenko initiated coverage with an Outperform rating and $210 price target, explaining that the company can sustain mid- to high-single digit sales growth because of “fast scaling new businesses & secular tailwinds” through fiscal 2025.
By that date, the analyst is modeling for sales to reach $9.2 billion, with same- store sales rising 8.8%, and a compound annual growth rate of 6.3%. His forecast is below the midpoint of the company’s guidance, but still meaningfully above consensus estimates, which demonstrate ongoing skepticism that Williams-Sonoma’s pandemic gains will stick. That could allow the company to deliver a series of beat-and-raise quarters, boosting the stock.
Rakhlenko believes Williams-Sonoma will be able to lock in the many new shoppers it gained last year, as well as win more market share as the industry consolidates. The company is also exploring new avenues, including business-to-business sales and global expansion.
The housing market, especially on the upper end, remains strong, and with many professionals likely to have at least some remote work flexibility post-pandemic, both can serve as tailwinds for the company. Demographics are also on Williams-Sonoma’s side. The company has done “an exceptional job” in attracting millennials, who “represent the largest percentage of sales and customers, and the median age continues to decrease,” the analyst writes.
The ongoing shift to e-commerce is another trend that plays to the company’s strength, he notes. Rakhlenko expects the company’s higher-margin online channel will grow to be 80% of its business, up from 72% today as it closes stores and invests in its digital capabilities. That can help it offset pressures like higher labor and transport costs.
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