Williams-Sonoma, Inc.

This is our first report on Williams-Sonoma, a major specialty retail company that sells home furnishing and kitchenware in the U.S. The company has been facing a difficult operating environment and delivered a mixed result in the last quarter. Net revenues increased to $2.2 billion, with comparable brand revenue growing at an 8.1% rate for 2-year and 3-year comps of over 25% and 50%, respectively. However, its top-line failed to meet Wall Street expectations. Strong order fulfillment, continuous progress in their growth strategies, and the ability to gain market share all contributed to the revenue increase, despite variable demand across the quarter and their portfolio of brands. Both channels kept up their impressive performance, with retail seeing a comp of 16.9% and e-commerce seeing a comp of 4.4%. They further maintained healthy merchandise margins that were unchanged from the previous year. In addition, they saw a slowing and choppy demand throughout the third quarter, and the management could not predict where the economy would go or how long the uncertainty would persist. The management remains confident in its ability to gain market share in the disjointed home furnishings sector. We initiate coverage on the stock of Williams-Sonoma with a ‘Hold’ rating.