Luxury Goods in Lean Stock Market Times
Adversity separates exceptional stock from the market crowd. Bulls are infamous for lacking discretion when they trade. Bears and fear of bears encourages caution. Any sales person can beat a target when the going is good. Superior executives come to the fore in trying times. An investor knows stock value for certain when a company performs in hostile territory.
What will happen to luxury goods in 2008? Imagine paying exorbitant amounts when budgets are stretched. Who will spend on discretionary stuff when wolves are at the door? Is it curtains for the likes of Williams-Sonoma Incorporated (NYSE: WSM).
Far from it: the company is in the midst of aggressive expansion. It has ambitious plans to remodel its business. Obviously, unproductive expenses must go. However, it is business as usual when it comes to customer integration. That is why you can sit back and bask in the glory of this star stock from the Retail (Specialty) Industry.
WSM plans to use the slack real estate market to snap up new store sites at prime locations. The company will convert advertising dollars into websites, electronic commerce, and powerful direct marketing initiatives. Furniture repair, remodeling, and recycling services will be upgraded. The plans read as though North America is on the verge of a boom.
The management is forthright and honest. There are no exaggerated claims or promises that cannot be kept. There is a frank admission that 2008 will not be one of the best years the company has ever had. However, the management will implement logical plans to ride out the demand trough. It will also be in position to take best advantage of the eventual business cycle upswing.
Would you buy or sell such stock?