Williams-Sonoma (WSM), mcap=$7.7bn, price $116 vs $134

$WSM pitch:
– Furniture and home décor retailer – the owner of William Sonoma and Pottery Barn.
– 5th most shorted retail stock on the consensus that furniture demand was pulled forward.
– At bet that furniture demand will prove to be more sustainable and that most of WSM’s margin gains will remain.
– The latest quarterly results with +11% SSS comps appear supportive of that notion.
– At single-digit earnings, multiple is cheap vs peers and historically.
– 66% of revenues are from e-commerce.
– Steady performer remaining FCF positive since 2007 and delivering positive SSS growth since 2010.
– The New B2B initiative provides further upside & eclipses the entire enterprise value within a couple of years.

$WSM valuation:
– Trades near an all-time low valuation at 6.5x ’23 EBIT vs. 10x hist average.
– Also at nearly 50% discount to lower quality retailers.
– $242/share target derived by valuing the B2B segment at 12x, core business at 6.5x, & 20% reduction in share count through buybacks.

Exp. gain: +80% to $242/share

Full WSM write-up (free guest account required):

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