How Williams-Sonoma Became One Of Retail’s Best-Performing Stocks

Home retailer Williams-Sonoma, which owns Pottery Barn, West Elm and a number of other specialty brands, has outperformed the S&P 500 and the home furnishing industry, along with competitors like Wayfair, Arhaus, Ethan Allen and RH over the past three years. It's even been a winner compared to retail giants like Walmart, Costco, Home Depot, and Amazon. Working on the product. We've been working on the service and the quality, but also the storytelling, and that is also what's attracting many new customers to our brands and then bringing people back to our brands. The traditional investing thesis around home goods and furniture typically revolves around home sales as people buy a new home and move. They also buy new furniture and decor. But in the US, which accounts for almost all of Williams-Sonoma's sales, consumers face rising energy costs, persistent inflation and a sluggish housing market. So how has Williams-Sonoma's business defied this weakness in the housing sector, and how much opportunity does the company have to keep growing? Take a look at performance over the past decade. You can see that operating margins meaning its profitability soared after 2019. The furniture industry's post Covid slump was reflected in Williams-Sonoma's sales falling pretty significantly, but the company was able to prove that it could keep growing profitability in the years that followed. Just look at 2025, sales were about $450 million less than 2021, but its operating income was about the same. Part of Williams-Sonoma's secret is its customers are willing to pay full price. It's been increasingly able to sell products without discounting. When you're not running sales, it tends to spread your overall sales volume out quite evenly. Really also had some positive carryout effects to their supply chain and driven margin expansion there. Economists have talked about this idea of the k-shaped economy a lot over the past year, where high earners are not pulling back in the same way that low income households are. That has benefited Williams-Sonoma. Where they've had success recently, this year, is not only with furniture, which has gotten better, but it is also taking those smaller home furnishings items and expanding them at places like West Elm and Pottery Barn. And so those dynamics have perhaps allowed them to take more share and allowed them to become a bit more detached from the underlying fundamentals of housing. Williams-Sonoma has built a massive e-commerce business that comprises two thirds of its sales. That's important because it started as a brick and mortar store over 70 years ago and now faces competitors like Wayfair, which is a digitally native business. That capability, which combines online shopping and store shopping, is really a strong competitive advantage. That's that's allowing Williams-Sonoma to take share and will continue to allow them to take share. Williams-Sonoma has leveraged AI to improve that online business, too. Last year, the company deployed a sales assistant nicknamed Olive and said customers who engage with it make purchases at three times the rate of customers who don't. It's also personalizing its digital experience for shoppers, and has reported that those website visits generate nine times the revenue of an average site visit. AI has lowered costs to. The company said it saw massive efficiencies come through in the supply chain, transportation and delivery, all thanks to AI. Despite its e-commerce success, new stores have become a renewed focus for the company. That's a reversal from the past few years. It closed about 18% of physical stores between 2019 and 2025. It now aims for its store count to grow between 1 to 3% annually after this year. Williams-Sonoma is also seeing major success with one of its smaller brands called Rejuvenation. It sells furniture and home parts with a special focus on high end hardware and lighting. It's growing double digits. It's profitable when you redo your kitchen and then the adjacent rooms. You want all the finishes to match. You want the brass to be exact. And because we're finishing it in Oregon, we're controlling the finishes. That's the big deal. That's why trade loves it. It's a big trade business for us, Rejuvenation. Trade refers to business-to-business or B2B sales, which have been a bright spot for the company. Its most recent quarter saw nearly 15% growth in the category. Williams-Sonoma says it's going to increase selling to businesses like cruise ships, senior living and student housing. While the company hasn't given a timeline, it says B2B could reach $2 billion in annual sales. During the past few years, Pottery Barn, which is Williams-Sonoma's biggest brand, has been a drag on its portfolio. The company said it leaned into decor to offset furniture declines during the post-COVID housing slump, but now, the company said furniture trends have stabilized and admitted to over rotating its inventory. Pottery barn has returned back to growth in recent quarters. This is really one of the. The more exciting parts of Williams-Sonoma today is this renewed growth in Pottery Barn, which seems like it could continue to accelerate. They've done a nice job of improving the overall product offering, getting a bit back to sort of the roots of Pottery Barn. Tariffs have also been a headwind for the company. Over 80% of its merchandise purchases in 2025 came from foreign manufacturers. Williams-Sonoma also received a tariff refund of $200 million, after the Supreme Court ruled in February that President Donald Trump, who imposed tariffs under the International Emergency Economic Powers Act, did not have the authority to do so. It paid back vendors and gave each employee a $1,000 towards their 401 K, and the company decided to keep that additional cash separate from its reported earnings figures, unlike many other retailers. The vast majority have not, and that's created a lot of noise in operating results. So to Williams-sonoma's credit, the way that they've reported the tariff refunds has kept the results very clean and focused on the strong underlying fundamentals. We think our investors like our transparency, and so we just wanted to put it in a nice little package and put it over here so you could see the earnings without it. I really am looking forward to the tariff stabilizing. If they just stay in one place, it's going to be a lot easier for everybody, including our investors. The housing market isn't expected to improve in the near future, so the home furnishing market likely won't improve dramatically either. Williams-Sonoma says it wants to continue to capture a bigger share of the current market. They've built a model here with multiple brands that all have growth opportunities, all with this omnichannel approach with stores and e-commerce, which we think is a strong competitive advantage for Williams-Sonoma in a highly, highly fragmented furniture industry.