1 Reason to Buy Williams-Sonoma Stock

Résumé détaillé

When Williams-Sonoma (NYSE:WSM) reported second-quarter results in late August, CEO Laura Alber said the company continues to "compound results quarter after quarter despite the s…

When Williams-Sonoma (NYSE:WSM) reported second-quarter results in late August, CEO Laura Alber said the company continues to "compound results quarter after quarter despite the stagnant housing market." That's the one reason to buy the stock.

That's a bold claim for the retailer behind Pottery Barn, West Elm, and its namesake kitchen brand, which normally depends on people buying and furnishing homes. Yet the stock is up 37% over the past year as of Nov. 11 and sits about 3% below a new high.

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The reason the stock is up and worth buying is its resilience in a weak market. In the second quarter (ended Aug. 2), comparable brand revenue -- sales growth at established stores and websites -- rose 6.2% over the year-ago quarter.

This growth came amid a flat home furnishings industry, according to CFO Jeff Howie. That suggests it is taking more customers from competitors without charging lower prices. "We are driving growth and market share gains without discounting," Howie said.

Avoiding promotions to drive sales means steadier margins. Adjusted operating margin, which excludes one-time tariff refunds, was a healthy 17%. That translated to adjusted earnings per share rising 5% year over year to $2.10.

Management raised its full-year comparable brand revenue outlook to 4% to 6.5% growth, up from its previous guidance of 2% to 6%, without counting on a housing recovery. It makes you wonder how much higher this growth would be in a strong housing market.

After a 49% run over six months, the stock could pull back if the third-quarter report shows slowing growth.

Still, Alber believes the company has "proven that our business can succeed regardless of the housing market." Management targets mid-to-high single-digit annual revenue…

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