Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

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Williams-Sonoma Prospers during a Pandemic

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Williams Sonoma Inc. (NYSE: WSM) is prospering during a pandemic. Notably, Williams-Sonoma’s quarterly gross profit grew from $691.73 million on 31 January 2020 to $965.22 million a year later.

Similarly, Williams-Sonoma’s quarterly operating income grew from $203.69 million to $402.09 million in the same period. Overall, Williams-Sonoma’s quarterly revenues grew from $1.843 billion on 31 January 2020 to $2.293 billion on 31 January 2021.

Incredibly, Stockrow estimates Williams-Sonoma’s revenues grew by 24.36% in the quarter ending on 31 January 2021. The revenue growth rate from rose from 22.33% on 31 October 2020 and 8.75% on 31 July 2020. In comparison, Williams-Sonoma’s revenues grew by 0.39% in the quarter ending on 31 January 2020.

Williams-Sonoma is an E-commerce Company

I think Williams-Sonoma (WSM) is prospering because it is an e-commerce company.

For instance, Williams-Sonoma claims online sales comprised 70% of its business in the fourth quarter of 2020, Business of Home reports. Moreover, Williams-Sonoma claims its e-commerce sales grew by 47% in the 4th Quarter of 2020.

Hence, I think Williams-Sonoma is no longer a brick and mortar retailer. Tellingly, Business of Home notes Williams-Sonoma’s business model of 50% online and 50% in-store is dead.

Given that paradigm shift, I have to wonder how Williams-Sonoma management can justify the existence the 614 stores it operated in 2019. Interestingly, Statista estimates Williams-Sonoma’s store count fell from 631 stores in 2017 to 614 in 2019. The store count was falling before coronavirus.

Consequently, I think Williams-Sonoma will close enormous numbers of stores soon. A probable outcome is that many Williams-Sonoma stores will not reopen after COVID-19.

How Much Money Does Williams-Sonoma Make?

Williams-Sonoma (NYSE: WSM) is making more cash. Its quarterly operating cash flow rose from $517.34 million on 31 January 2020 to $548.22 million on 31 January 2021.

Similarly, Williams-Sonoma’s quarterly ending cash flow grew from $277.14 million on 31 January 2020 to $427.17 million a year later. Thus, Williams-Sonoma generates more cash without brick and mortar.

Williams-Sonoma borrowed some money in 2020, but paid it back fast. Williams-Sonoma reported a quarterly financing cash flow of $419.52 million on 30 April 2020. Conversely, Williams-Sonoma reported quarterly financing cash flows of -$637.92 million on 31 October 2020 and  -$83.01 million on 31 January 2021.

The Pandemic Makes Williams-Sonoma Stronger

Impressively, Williams-Sonoma’s total debt fell from $1.394 billion on 31 January 2020 to $299.35 million on 31 January 2021. Thus, Williams-Sonoma paid $1.095 billion in debt during a pandemic.

Similarly, Williams-Sonoma’s cash and short-term investments grew from $432.16 million on 31 January 2020 to $1.2 billion on 31 January 2021. Hence, Williams-Sonoma came out of the COVID-19 pandemic healthier than it when it entered.

Finally, Williams-Sonoma’s total assets grew from $4.054 billion on 31 January 2020 to $4.661. billion on 31 January 2021. Hence, Williams-Sonoma (WSM) added value during a pandemic.

Does Mr. Market Overprice Williams-Sonoma?

I think Mr. Market overprices Williams-Sonoma Inc. (WSM) despite the price. To explain, Mr. Market paid $172.24 a share for WSM on 25 March 2021.

Williams-Sonoma has experienced incredible share value growth over the past year. Mr. Market paid $43.74 for WSM on 25 March 2020. Thus, I consider Williams-Sonoma a great growth stock.

However, I see nothing in Williams-Sonoma’s financial number that justifies the $172.24 Mr. Market paid for it on 25 March 2021. Instead, I think WSM is worth around $100 a share. Instead, I advise investors to wait until the share price falls below $100.

An Excellent Dividend Stock

On the other hand, I believe Williams-Sonoma (WSM) is an excellent dividend stock. Appealingly, Williams-Sonoma’s dividend has grown over the past year.

Williams-Sonoma shares will pay a 59₵ quarterly dividend on 28 May 2021. That dividend grew from 53₵ on 26 February 2021 and 48₵ on 28 August 2020. Thus the dividend grew by 11₵ in less than a year. Overall, Williams-Sonoma shares offered a forward annualized dividend of $2.36 and a forward dividend yield of 1.31% on 24 March 2021.

In the final analysis, I think Williams-Sonoma is an incredible value investment. Williams-Sonoma is an incredible value investment because its dividend, share price, and value grew in 2020. If you are seeking a value investment in retail, I think Williams-Sonoma is worth a look.