Bull of the Day: Williams-Sonoma (WSM)
Williams-Sonoma, Inc. (WSM) continues to telegraph strength in the home furnishings market. This Zacks Rank #1 (Strong Buy) just raised its quarterly dividend for the first time this year as business continues to rebound nicely from the COVID pandemic shutdowns.
Williams-Sonoma is a specialty retailer which makes products for the home. It is more than just its namesake, Williams-Sonoma. It also owns several well known furniture brands including Pottery Barn, Pottery Barn Kids, West Elm, Pottery Barn teen, Williams Sonoma Home, Rejuvenation and Mark and Graham.
It sells online, through catalogs and its global retail stores.
It operates in the US, Puerto Rico, Canada and the United Kingdom and has unaffiliated franchisees which operate stores in the Middle East, the Philippines, Mexico and South Korea.
Raised Its Dividend and Re-Starts Share Repurchases
On Oct 12, Williams-Sonoma announced its Board of Directors had raised its quarterly dividend by $0.05 a share to $0.53.
That's a 10% increase.
The dividend is currently yielding 1.9%.
The company was one of the few which continued to pay its dividend earlier this year, even as the pandemic hit.
However, it did suspend its share repurchases at that time but it also announced it would now resume those as well.
Paid Back the $500 Million Revolver
The company also announced it had repaid its short-term borrowing in full on the $500 million revolver.
On Aug 26, when it reported its fiscal second quarter results, it had $948 million in cash on hand.
"Our decisions to increase our quarterly dividend, resume our share buyback program and pay down our revolver reflect the strength of our business and financial position, and our commitment to maximizing returns for our shareholders," said Laura Alber, President and CEO.
"Our strong performance during this pandemic reinforces the relevance of our curated, sustainable products and the power of our digital-first platform. We are seeing an inflection point in our business and are more confident than ever in our strategies to deliver strong, long-term growth with increasing profitability."
Analysts Continue to be Bullish
After posting a big earnings surprise of 81% in fiscal Q2, the analysts continue to be bullish about the fiscal year.
9 estimates have been revised higher for fiscal 2020 in the last 60 days.
That's pushed the Zacks Consensus up to $6.36 which is year-over-year earnings growth of 31.4% as the company only made $4.84 last year.
All of its brands have seen strong demand during the pandemic.
In the fiscal second quarter, Williams-Sonoma, the brand, saw a record 29.4% brand revenue growth, beating even West Elm, it's usual superstar.
Furniture, small kitchen appliances and home accessories have been among the hottest retail items in 2020.
Williams-Sonoma specializes in them all.
Shares Soar to New 10-Year Highs
After Williams-Sonoma announced the dividend increase, the shares surged 6% to new multi-year highs.
They've jumped 44% year-to-date but are still surprisingly cheap with a forward P/E of just 15.7.
All of their competitors continue to report solid numbers.
On Oct 12, Ethan Allen Interiors (ETH) preannounced its fiscal Q1 EPS results and blew by the Zacks Consensus with a guide of $0.34 to $0.36 compared to the consensus of a loss of $0.02.
Sales also topped the consensus.
The company also announced it was paying off its remaining $50 million in debt.
In 2020, there really is no place like home.
For investors looking for a way to play the hot home furnishings market, Williams-Sonoma is one to keep on the short list.
[In full disclosure, the author of this article owns shares of WSM in her personal portfolio.]
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