Lowering Williams-Sonoma's FVE in Response to Ongoing Industry Pressures; Shares Undervalued
We recently lowered our fair value estimate on narrow-moat Williams-Sonoma to $65 from $76 in response to ongoing industry pressures, including price competitiveness and the proliferation of e-commerce competitors, along with low switching costs across the retail landscape. While we contend that Williams-Sonoma is a best-in-breed capital allocator, delivering midteens ROICs over the past five years (and over the forward five years in our forecast), we believe peers in the home furnishing and fur...Williams-Sonoma is a retailer of products for the home. The company has two reportable segments, e-commerce and retail. The e-commerce segment has the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams Sonoma Home, Rejuvenation and Mark and Graham, which sell the company's products through its e-commerce websites and direct-mail catalogs. The retail segment, which includes the company's franchise operations, has the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation, which sell the company's products through its retail stores.
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