Here’s why Williams-Sonoma’s 2.6% same store sales growth is particularly extraordinary

Home interior and furnishing retailer Williams-Sonoma (WSM) is gaining market share as people shop online to spruce up their homes during the pandemic.

“This allowed Williams-Sonoma to deliver 2.6% same store sales growth, helped by e-commerce growth that reached more than 30%, leading total sales to decline less than 1% despite dislocation from coronavirus,” wrote Morningstar analyst Jaime K Katz in a note to investors.

The company’s first quarter results ending May 3 stand out given the latest economic data shows retail sales in the U.S. plunged in April as consumers pulled back on spending.

“Moreover, this implies market share gains continue, as the home furniture and furnishings industry averaged a 25% decline (census) over the same period,” wrote Katz.

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Williams-Sonoma leaned heavily into e-commerce as all of its 616 stores were closed for more than half of its quarter due to COVID-19 shelter-in-place measures.

“This crisis has accelerated our industry shift to e-commerce and given rise to a newfound appreciation for the home,” Williams-Sonoma’s president and CEO Laura Alber said during the company’s earnings call.

“We saw a significant growth in nearly all merchandise categories with particular strength in electrics, cookware, food and housewares,” said Alber.

The company was quick to pivot digital content around recipes, live demonstrations and family activities.

Katz writes, “All in, this led to an adjusted operating margin in the first quarter of 6.4%, well above the 2% we had forecast, and adjusted earnings per share than handily outpaced our $0.16 estimate, at $0.74.”

A couple walks in the Shadyside shopping district of Pittsburgh past a Williams-Sonoma store that is boarded up temporarily due to social distancing mandated due to COVID-19 on Wednesday, April 29, 2020. (AP Photo/Gene J. Puskar)

Williams-Sonoma isn’t issuing full year guidance due to uncertainties surrounding the pandemic, but did say it has seen “robust trends in e-commerce” and acceleration across all its brands so far this quarter.

“We surmise the company will easily resume top-line growth in the back half of 2020, as COVID-19 subsides and stores begin to function normally (with 364 doors opened already),” wrote Katz.

“In this vein, we expect to bump our $68 fair value estimate up by a high-single-digit clip to account for the outperformance the company achieved in the first quarter, but view shares as fairly valued, particularly after the low-double-digit climb post the print,” he wrote.

Shares of Williams-Sonoma were trading 13% higher during Friday’s session.

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Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre

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