Williams Sonoma stocks up to better deal with potential tariff impact

Welcome to Stock Takes, my thrice-monthly take on an individual stock. I look at the big picture, unlike Wall Street analysts who are geared to earnings, and the media that focuses more on news value.

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Note: There will be no early July issue of Stock Takes, as I take a break, and our next issue is scheduled for mid-July (around July 15).

President Trump’s potential tariffs, and the uncertainty of how they might play out, have been roiling the markets and impacting various companies this year. Retailers and other businesses that outsource significant amounts of production or use significant imported inputs are on the frontlines of this uncertainty, and Williams Sonoma, Inc. (NYSE:WSM) has been one of the impacted companies.

The home supplies and furnishing company’s stock started off the year at about $186 and was down to about $162 on June 26 in spite of its addition to the S&P 500 index in March. On the negative side, last April the Federal Trade Commission fined the company “a record” $3.17 million for mislabeling some of its China- sourced goods as American made. It seems the company had engaged in the practice of mislabeling foreign-sourced goods as “Made in the United States” in 2020 too and has been caught violating the terms of an FTC order relating to that incident.

The company got its start in 1956 when Chuck Williams, the company’s founder, set up the first Williams Sonoma store in Sonoma, California. He got the idea after a visit to Europe exposed him to the French cookware that Williams, an enthusiastic cook, could not find in the U.S. Shortly afterwards, Williams relocated the store to San Francisco, savvily choosing a location close to the city’s busy Union Square shopping district. In 1976, Williams sold the company to Howard Lester, an Oklahoma entrepreneur, and a friend of Lester’s.

According to the company, “Today, we bring the latest home furnishing trends to life for customers through the individual lenses of our nine distinct brands, each serving different life stages and rooms of the home and beyond.” In addition to the original Williams Sonoma brand, the company’s nine brands, each catering to a distinct market niche through a total of more than 500 stores, include Williams Sonoma Home, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Mark & Graham, Rejuvenation and GreenRow. The company also has overseas operations.

The company came out with its initial public offering in 1983 on the Over-the-Counter market at $23 a share. It has had eight stock splits since then, making for a split-adjusted IPO price of $0.38 per share. The stock has seen its share of ups and downs, and was especially hit by the high inflation environment of the 1980s, when inflation soared to as high as 14%.

The stock has done well overall though and has outperformed the S&P 500 index over the more than 40-year period since it went public. Today, the company is facing a potential risk from tariffs and has been proactively trying to deal with the situation. Should you buy into Williams Sonoma stock?