WSM - Williams-Sonoma: Growth Could Accelerate In The Coming Quarters

2024-04-06 05:31:38 ET

Summary

• WSM operates home furnishing stores with a diverse portfolio of brands and generates 96% of its revenue in the United States.
• Despite a decline in revenue and comparable sales, WSM has shown strong gross margin expansion and improved cost structure.
• I recommend a buy rating for WSM, expecting a turnaround in the demand cycle with the help of rate cuts and increased home upgrades.

Summary

Williams-Sonoma (WSM) business operates home furnishing stores that sell a wide assortment of products, ranging from cooking equipment to tableware, storage, etc. As of FY24, WSM has nine brands in its portfolio and a total of 518 stores, with the with the majority in the United States, where it generates 96% of its revenue. WSM is a capital-intensive business, as it needs to invest in physical stores for customers to view the products and also invest in working capital to have inventories available for sale or viewing. CAPEX as a percentage of sales has generally trended at low to mid-single-digit percentages of sales, and inventory days are usually around ~100 days. Because of the nature of the business, WSM has held a net cash position (excluding operating leases) for the past 2 years. As of FY23, the business had $1.26 billion in cash and no debt....

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