Williams-Sonoma, Inc. WSM has been on an impressive run, with its stock surging nearly 45% over the past month. This performance significantly outpaces the Zacks Retail - Home Furnishings industry’s 0.3% growth, the Zacks Retail-Wholesale sector’s increase of 7.7% and the S&P 500’s modest 3.4% rise. Strong earnings and a focus on product innovation, marketing, and e-commerce investments, including AI, have been driving growth.
Since the company’s third-quarter fiscal 2024 earnings release on Nov. 20, investors’ optimism has surged, driving shares close to their 52-week high. The company delivered $1.8 billion in revenue with a 2.9% decline in comparable sales, outperforming the broader home furnishings market, which saw a steeper 7% decline. This relative strength can be attributed to its vertically integrated supply chain, proprietary product design, and focus on delivering consistent value to customers without relying on heavy promotional activity.
As of the last close, WSM hovered at $194.03, just shy of its 52-week peak of $198.70 on Dec. 13. But with the stock nearing its 52-week high, the critical question is whether it remains a compelling investment.
WSM’s 1-Month Share Price Performance
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WSM Trading Above 50-Day & 200-Day Moving Averages
WSM shares are trading well above the 50-day and 200-day moving averages, as you can see below, broadly because of the improvements in retail sales.
WSM Price Movement vs Moving Averages
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What’s Driving Williams-Sonoma?
Much of Williams-Sonoma’s success stems from its ability to innovate while capitalizing on market trends. Product innovation has been a key driver, with brands like West Elm seeing double-digit growth in new furniture collections and Pottery Barn excelling in seasonal decor and lifestyle offerings in the fiscal third quarter. These initiatives have helped the company maintain relevance with customers while enhancing its competitive edge.
The company’s Business-to-Business (B2B) segment is another growth engine. In the fiscal third quarter, B2B achieved its largest quarter to date, growing 9% overall and 17% in its contract business. High-profile partnerships with JW Marriott, Google, and Ritz-Carlton highlight Williams-Sonoma’s ability to penetrate commercial and hospitality markets. This diversification is crucial, especially in uncertain economic times, as it reduces reliance on traditional retail.
Additionally, Williams-Sonoma’s e-commerce dominance continues to shine, contributing 66% of total revenues in the fiscal third quarter. The company’s investments in artificial intelligence for personalization, supply chain optimization, and product discovery have strengthened its position in an increasingly digital market. At the same time, optimized store formats and strong returns from new locations reflect smart retail management.
WSM’s Attractive Valuation & Profitability Metrics
Even after its sharp rally, Williams-Sonoma remains attractively valued compared to industry peers. The stock currently trades at a forward 12-month price-to-earnings (P/E) ratio of 22.9, at the higher end of its three-year range but still below other retail competitors. This suggests room for further upside if the company delivers on its long-term growth goals. Home furnishing companies like RH RH, Sleep Number Corporation SNBR and Arhaus, Inc. ARHS are trading with forward 12-month P/E multiples of 36.76, 46.88, and 20.72, respectively.
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Investors are also encouraged by Williams-Sonoma’s impressive trailing 12-month Return on Equity (ROE) of 51.6%. Such a high ROE reflects the company’s efficient use of shareholder funds, reinforcing confidence in its ability to generate profits.
Estimate Trend Favors WSM
The Zacks Consensus Estimate for Williams-Sonoma’s fiscal 2025 earnings per share has increased over the past 30 days to $8.50. The details of the estimated figures can be observed from the chart below.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Macro Challenges and Market Headwinds for WSM
While Williams-Sonoma has executed well, it faces several challenges. A weak housing market continues to dampen demand for big-ticket furniture items, a segment critical to its revenue growth. Although recent data indicates slight improvements, consumer hesitancy around discretionary spending persists.
The broader macroeconomic environment remains “choppy,” with inflationary pressures and unpredictable consumer behavior adding to uncertainties. The late Thanksgiving this year has also shortened the holiday shopping season, creating logistical pressures during a crucial revenue period.
Additionally, potential tariff increases on Chinese imports could impact costs despite the company’s reduced reliance on Chinese manufacturing. Williams-Sonoma has significantly reduced its reliance on Chinese manufacturing (from 50% to 25%), yet further adjustments may require strategic sourcing shifts, which could impact costs.
Is Williams-Sonoma Stock Still a Buy?
Williams-Sonoma’s recent rally has been impressive, driven by strong earnings, product innovation, and a thriving B2B segment. The stock’s valuation remains reasonable, and its digital-first strategy continues to pay off. However, investors should watch for potential headwinds, including a challenging macroeconomic backdrop and holiday season disruptions.
Looking ahead, Williams-Sonoma remains cautiously optimistic about fiscal 2025. The company expects furniture sales to improve gradually, supported by ongoing product innovation and seasonal assortments. Its B2B segment and e-commerce leadership will likely remain key growth drivers. The company has reiterated its long-term target of mid-to-high single-digit revenue growth, signaling confidence in its operational foundation.
For long-term investors, Williams-Sonoma’s growth story remains compelling. Its strategic initiatives, strong brand portfolio, and efficient operations position it well to weather short-term challenges. With a Zacks Rank #2 (Buy), the stock offers an attractive opportunity for investors seeking solid returns and consistent growth. While near-term volatility cannot be ruled out, Williams-Sonoma’s fundamentals suggest there’s still room to run. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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