If you were in retail, there were lots of ways to skin the cat. You didn’t have to be roadkill.
Last night, we got two different ways: the Williams-Sonoma (WSM) way and the PVH Corp. (PVH) way. Both worked and produced fantastic results and much higher stock prices.
After several years of fits and starts, good and bad, hit and miss, I though this Williams-Sonoma quarter might have some staying power. WSM is a company that did a total reinvention, embracing customer relations management, time to market, time to delivery, better interface, quicker style turns and, most important, digital advertising, which led to an expanded funnel and much higher than expected numbers. As CEO Laura Alber said about the latter: “We are seeing strong new customer accounts with higher traffic trends and increased orders.”
Of course, these have all been the province, until recently, of Amazon (AMZN) , which understood customer acquisition through a broad funnel years and years ago. This concept of personalization, which you know as the “hello James” or, of course, your name, aspect of Amazon, can be imitated with extraordinary success. Again, Alber: “We’ve experienced an uplift with engagement and higher margins with our new personalization based emails”.
The company now intends to triple those engagements, which should lead to even bigger comparable store sales gains then they have already. Given West Elm’s 10% comparable store sales — among the highest I have seen in 2017 — that’s saying something.
These are all of the tactics, by the way, that Marc Benioff at salesforce.com (CRM) has been advocating for ages, but so many managers have just figured “we are going to do it our way because that’s how it has always worked.”
Why has Williams-Sonoma embraced the new way? I think it’s because it has always been a catalogue company, and catalogue companies have always been about new lists, wider funnel, and targeting. But in retrospect, it has been flying blind. Alber gets what has to happen, and the uplift is immediate and positive.
PVH went about it a totally different way. PVH was an early adopter of both Amazon and Alibaba (BABA) for its flagship Tommy Hilfiger and Calvin Klein brands, as CEO Manny Chirico decided a long time ago that he had to diversify away from reliance on U.S.-based brick-and-mortar based retailers.
The web’s been a good way to get more sales, but the real move he made was to take the bold step of expanding overseas right into one of the great contractions of all time: the European recession-depression. By buying Tommy before the recession and the brands of Calvin right in the huge European downturn, I am sure some thought he made a hugely incorrect bet. He had several miserable quarters as he waited for Europe to take off, the dollar to cool, and the U.S. to hold in. None of that happened.
But now it is all paying off. His European growth is remarkable, both in department stores and standalones. The dollar is now a tailwind. The U.S. continues to fall off, but it is almost down to 50% of total sales. He’s taking share in the U.S. and that’s keeping things humming, but the gross margins overseas are prodigious. Now he’s applying the same skills to China, where a day like Singles’ Day is gigantic for this once largely domestic enterprise.
Warren Buffett has long had vision.
Both of these companies could have been obliterated if they had stood still. Instead, Williams-Sonoma is just about to take off for a sustained flight and PVH is already there.
What distinguishes these two from the others in the pack? How about vision. They knew that quality clothes and quality home goods weren’t enough. They had to do much more, well beyond what looked to be their ken.
Turns out it wasn’t. And, first, it saved them. Now it makes them great investments.
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