Restoration Hardware Holdings Inc (RH), Williams-Sonoma, Inc. (WSM): Restore Your Portfolio With This Company

What about competitors?

Besides Williams-Sonoma, Inc. (NYSE:WSM), the company also competes with Pier 1 Imports Inc (NYSE:PIR). Neither company has the presence though in the high-end furniture market like Restoration Hardware. Williams-Sonoma, Inc. (NYSE:WSM) is primarily in the kitchenware business, which Restoration Hardware is now looking to venture into. Pier 1 Imports Inc (NYSE:PIR) is more known for its fixtures and home décor. The one thing that all three companies have in common is that housing is rebounding and that increases demand for home items.

Williams-Sonoma, Inc. (NYSE:WSM) has built a strong kitchenware business that is seeing increased demand through its online-sales division. Generally consumers know what tableware they like and don’t necessarily need to see the plates or knives in person. That allows them to conveniently shop online with a point and a click. According to an analyst report from Canaccord Genuity, the e-commerce business can boost EBIT margins by 10 basis points this year. Prior expectations were for margins to be flat this year. Earnings per share are now expected to be $0.06 higher at $2.80 per share and long-term forecasts are now 15% higher.

To continue growing its catalog business, Williams-Sonoma, Inc. (NYSE:WSM) has hired RR Donnelley & Sons Co (NASDAQ:RRD) to provide printing and logistics services for all its catalogs. RR Donnelley & Sons Co (NASDAQ:RRD) will also help with other direct-mailing services as Williams-Sonoma continues its aggressive marketing push. Outsourcing the catalog business is a smart move for Williams-Sonoma, Inc. (NYSE:WSM) as RR Donnelley & Sons Co (NASDAQ:RRD) is an expert in helping retailers with their catalog businesses.

Pier 1 Imports Inc (NYSE:PIR) continues to benefit as well from the strong home furnishings market. The company has been working hard to attract more customers. Pier 1 Imports Inc (NYSE:PIR) has expanded its merchandising, reformatted stores, and expanded its online offerings. The company also has instituted a loyalty card program that is helping lure shoppers into the stores. As a result, earnings are forecast to grow more than 18% this year.

What I like about Pier 1 Imports Inc (NYSE:PIR) is that the company is the only one of the the three that pays a dividend. The company pays an annual dividend of $0.20 per share, which is an increase from $0.18 per share previously. The yield is only 0.8%, but there’s room for it to grow as the dividend payout ratio is only 14%. The company just authorized a $100 million share buyback and the balance sheet is in great shape. There’s almost $232 million in cash and only $9.5 million in debt. I see the company continuing to return more cash to shareholders.

What is the Foolish assessment?

I think these specialty retailers have a great niche in the home goods section. My favorite though is Restoration Hardware Holdings Inc (NYSE:RH). It is growing the fastest of the three and has the most upside in my opinion. But all three should continue to benefit as the economy continues to strengthen.


Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Williams-Sonoma.
Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Restore Your Portfolio With This Company originally appeared on Fool.com is written by Mark Yagalla.

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