By Tonya Garcia, MarketWatch
With shelter-in-place orders in effect to stop the spread of coronavirus, parents flocked to Pottery Barn Kids and Pottery Barn Teen for furniture upgrades.
Parent company Williams-Sonoma Inc. /zigman2/quotes/202067350/composite WSM +1.94% reported 8.5% comparable revenue growth for the Potter Barn Kids and Teen brands. The namesake Williams Sonoma brand was up 5.4% and West Elm increased 3.3%.
Williams-Sonoma first-quarter earnings and revenue beat expectations, sending shares soaring 14% in Friday trading.
“As a business that’s already predominantly online, we are primed to meet the surge in demand for children’s home furnishings as schools and child care centers closed nationwide and parents turned to us for study and playroom solutions,” said Laura Alber, chief executive of Williams-Sonoma, on the late Thursday earnings call, according to a FactSet transcript.
Williams-Sonoma credited e-commerce growth of more than 30% across the company’s brands for the better-than-expected results. In addition to using its digital capabilities to sell merchandise, Alber said the company leaned on user-generated content, digital marketing and other online tools to engage with customers.
Alber maintains the significance of stores to the company. Since May 1, the company has reopened 364 locations.
However, the company now plans to accelerate store closures.
“In terms of this year, pre-COVID, we expected to close approximately 32 stores,” Alber said. “And we see that number being double now.”
Over the next three years, 293 stores are up for renewal, and 416 are up for lease renewal in five years. Alber said the company will consider what happens at malls, with partners and other factors to determine which stores stay and which shutter.
Stifel analysts wave a red flag with regards to store closures.
“With the virus pushing consumers online and likely accelerating e-commerce adoption more broadly, the company is taking the opportunity to accelerate store closures this year to roughly 2x from original expectations, which should further help on cost control, but weigh on the top line,” analysts led by John Baugh wrote.
“This shift also allows more marketing efficiencies going forward as the company cuts back on more traditional methods (e.g., catalog).”
Stifel rates Williams-Sonoma stock hold, but doubled its price target to $80 from $40.