The firm expects Williams-Sonoma to maintain sales growth momentum through at least fiscal 2025, supported by its fast scaling businesses and secular tailwinds.
"We believe the market under-appreciates WSM’s ability to sustain its +mid-single-digit to +high-single-digit revenue growth outlook through FY25. Market is skeptical WSM will lock-in FY20’s gains and maintain an implied step-up in comps as 25% of doors will close by FY25," said analyst Max Rakhlenko.
Shares of the home luxury goods retailer were rising 3.4% to $184.65 Thursday afternoon.
The firm estimates fiscal 2025 sales reaching $9.2 billion with a 6.3% compound annual growth rate, on comps of nearly 9%. That estimate is below the mid-point of Williams Sonoma's own guidance, but above Wall Street's view, according to Cowen.
Cowen expects WSM to be able to sustain growth by locking in 30% of the new shoppers it acquired in fiscal 2020. Its core business will be supported by new initiatives including business to business, marketplace and global expansion.
"WSM has done an exceptional job of acquiring millennial shoppers which bodes well for outsized long-term growth and share gains. At WSM, millennials represent the largest percentage of sales and customers, and the median age continues to decrease," Rakhlenko said.
Williams-Sonoma recently announced plans for $1 billion in stock buyback and raised its dividend by 11%. Looking ahead, Cowen expects WSM to have the capacity to buy back at least $3 billion in shares, or about 16% of its float, by 2025.