Cooking Up Growth at Williams-Sonoma, Inc. (WSM)

Self Sufficiency

Some homeowners go beyond simply skipping restaurant meals, embracing a do it yourself homesteading ethic that includes home canning, gardening, and even animal raising. A homeowner may get into homesteading to cut expenses or prepare for a disaster as well, such as the catastrophic Hurricane Sandy last year. Anh-Minh Le, at the San Francisco Gate, reported that Williams-Sonoma came out with its Agrarian homesteading line back in April 2012, and some urban gardeners questioned whether an upscale product line fits the do it yourself ethic. Nevertheless, Williams-Sonoma knows how to sell status symbols, and homesteaders in its target market might pay up for higher quality.

Shoppers can find cheap homesteading supplies at chains like The Home Depot, Inc. (NYSE:HD), Wal-Mart Stores, Inc. (NYSE:WMT), and Costco Wholesale Corporation (NASDAQ:COST), although a wealthy gardening hobbyist might still choose Williams-Sonoma over a discount store. Anne Marie Chaker, at the Wall Street Journal, points out (subscription required) that Williams-Sonoma could face future competition from Urban Outfitters, Inc. (NASDAQ:URBN) Terrain stores, which offer pricy products like a $58 garden hose.

Urban Outfitters has niche appeal of its own, along with a manager who understands how Williams-Sonoma’s marketing works. Lisa Gerard, at Home Channel News, reported that John Kinsella, who manages Terrain for Urban Outfitters, once worked as a manager for Williams-Sonoma. Terrain does need more time to become a major challenger to Williams-Sonoma, though. Urban Outfitters only has two Terrain stores right now.

International Growth

The franchise operator M.H. Alshaya helps retailers throughout the world expand into the Middle East, and the M.H. Alshaya store lineup now includes the premium Williams-Sonoma stores. M.H. Alshaya announced that Kuwait got a Williams-Sonoma store in November 2012. M.H. Alshaya also operates other Williams-Sonoma retail concepts in the Middle East, including Pottery Barn and West Elm. Williams-Sonoma also plans an expansion push for Australia, starting with a store in Sydney that opens in 2013, according to a press release.

Takeaway

Williams-Sonoma stands out on income growth in a peer comparison, and this home furnishing retailer also offers a 2% forward dividend yield. Housing remains the growth driver here, as more sales of Viking stoves or upscale gardening equipment would build on this main trend. Stores in the Middle East and Australia help the company benefit from other housing markets, but don’t change the main growth argument. Overall, the dividend looks like the most attractive reason to pick this stock instead of its peers.

The article Cooking Up Growth at Williams-Sonoma originally appeared on Fool.com and is written by Eric Novinson.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.