WSM

We rate WILLIAMS SONOMA INC (WSM) as a Hold with a composite score of 57.6/100 at a current price of $208.91. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (69th percentile) and momentum (63th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (31th percentile) and value (52th percentile) tempers our overall conviction. We assign a Narrow Moat rating (51/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

WILLIAMS SONOMA INC holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 57.6/100 places it at rank #946 in our full 7,333-stock universe. With a $23.7B market capitalization, WILLIAMS SONOMA INC operates at meaningful scale within the Retail Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 5% and favorable momentum (63th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 46% (+9.9pp vs sector) narrow to operating margins of 17% (+13.4pp vs sector) and net margins of 13.4%, yielding a gross-to-net conversion rate of 29%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $208.91, WILLIAMS SONOMA INC is trading near fair value based on current fundamentals. Our value factor score of 52/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 26.5x (a 23% premium to the sector median of 21.4x), EV/EBITDA of 20.4x (at a premium), P/B of 12.4x, P/S of 3.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to WILLIAMS SONOMA INC. Key risk factors include elevated market sensitivity (beta of 1.39), significant leverage (157% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.39); significant leverage (157% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 59th percentile and quality factor at the 69th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 46% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate WILLIAMS SONOMA INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 46.9%, and the balance sheet is managed within acceptable parameters (D/E: 157%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; WILLIAMS SONOMA INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.31% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, WILLIAMS SONOMA INC receives a Hold rating with a composite score of 57.6/100 (rank #946 of 7,333). Our quantitative framework assigns a Narrow Moat (51/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 55/100.

Our analysis supports a neutral stance on WILLIAMS SONOMA INC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.