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Home Goods Retailer Shows Good Growth; Solid Dividend

Posted
4/23/2013 5:42:00 PM
By: Investor's Business Daily
Referenced Stocks:WSM

Life as a publicly traded company in the retail sector isn't easy. Business ebbs and flows with the economy. Sometimes consumers are in the mood to spend; sometimes they're not. And their tastes change like the wind.

After a sharp pullback in 2011 that saw home goods retailerWilliams-Sonoma ( WSM ) correct 39%, the stock has regained Wall Street favor as it flirts with new highs. The stock begins trading ex-dividend Thursday and currently yields 2.4%.

No surprise, really, because fundamentals continue to improve. The owner of the Williams-Sonoma, Pottery Barn, Rejuvenation, West Elm and Mark and Graham brands continues to benefit from a multi-distribution channel model. Williams-Sonoma sells its wares via seven e-commerce websites, eight direct-mail catalogs and 581 stores.

Shares surged 10% on March 20 after the company reported solid earnings, a dividend hike and a new share repurchase program. Fourth-quarter profit rose 15% from a year ago to $1.34 a share. Sales rose 11% to $1.41 billion, the third straight quarter of accelerating sales growth. The e-commerce business was the big winner in Q4, with revenue up 24% to $576 million.

Wall Street also cheered news of a 41% dividend increase to 31 cents a share. The company also announced a three-year $750 million share repurchase program.

Earlier this month, Citi added Williams-Sonoma to its top-picks list, citing continued growth opportunities overseas.

The stock's 10-week moving average around 49 currently sits about 1 point from the stock's last breakout area of 48.17. The 10-week line is a logical support level for the stock. If Williams-Sonoma closes within 1% of last week's closing price of 52.28, a three-weeks-tight pattern would be in place.