Portfolio change -- DWRI bought July 7, 2005 at $18.02.
This was a purchase made using some cash I had available, haven't sold anything to buy this one.
The brief argument? I hadn't realized Design Within Reach was a public company until I saw a Motley Fool article on them a week or so ago, and a quick perusal of their investor information made me want to open a small position as I research more.
DWR provides high quality, signature modern designer furniture at fairly reasonable prices (they target the top 10% of furniture buyers, so it's not that reasonable for all of us). They sell furniture designed by most of the big names in modern design -- Eames, Gehry, Le Corbusier, Starck, etc., and for many of these designers and their iconic designs they are by far the easiest and most affordable place to purchase (for some they are the only place -- about 20% of their designs are exlusive to DWR).
While the furniture is not cheap, it is reasonable when compared to other high quality furniture, and modern interior design is a very hot niche right now as far as I can tell -- shaping the offerings of Target, Pottery Barn and Crate and Barrel as well as the high end furniture companies. And the DWR experience is great, by all accounts -- they sell through the web catalogs, and their own galleries where you can try things out, and all furniture is delivered from their warehouses in Kentucky (or straight from the manufacturer) within a very short time. Virtually everything is perpetually in stock, thanks to a relatively small inventory of about 700 items. They are currently debt-free for all intents and purposes, and they are using their tremendous cash flow and IPO funding, and a credit line as well, to expand their galleries very quickly -- they have spots in some of the hippest (and most lucrative) areas in the country already, but at only about 50 studios today they have lots of room to expand.
Sales in studios (including the growth of new studios, which more than doubled) over the past year were up 92%, and direct sales grew at 24% (with web orders growing twice that fast). Studio growth is going to continue at a rapid pace, and their catalog distribution is expected to be ramped up as well. I see lots of growth ahead for this company, and even while they're in this hyper growth stage they're already making money -- they're guiding for .51 this year, which would put them at a high but reasonable PE of 35 or so for a fast-growing company (and I wouldn't be surprised to see them blow through these estimates).
There are definitely some risks, and we've seen some other furniture companies get clobbered this year (Hooker and the like), but I think this upper tier design-conscious retailing, with lots of flexibility and a consumer friendly experience (you can buy at our store, or online or via phone, and you don't have to carry it home -- everything's shipped right to your house) is a great idea and will continue to prove to be a great business going forward. I'll write more about this one as I have time and as I flesh out what is currently a very small position. And maybe someday I'll be able to buy a nice Le Corbusier lounge chair.
This was a purchase made using some cash I had available, haven't sold anything to buy this one.
The brief argument? I hadn't realized Design Within Reach was a public company until I saw a Motley Fool article on them a week or so ago, and a quick perusal of their investor information made me want to open a small position as I research more.
DWR provides high quality, signature modern designer furniture at fairly reasonable prices (they target the top 10% of furniture buyers, so it's not that reasonable for all of us). They sell furniture designed by most of the big names in modern design -- Eames, Gehry, Le Corbusier, Starck, etc., and for many of these designers and their iconic designs they are by far the easiest and most affordable place to purchase (for some they are the only place -- about 20% of their designs are exlusive to DWR).
While the furniture is not cheap, it is reasonable when compared to other high quality furniture, and modern interior design is a very hot niche right now as far as I can tell -- shaping the offerings of Target, Pottery Barn and Crate and Barrel as well as the high end furniture companies. And the DWR experience is great, by all accounts -- they sell through the web catalogs, and their own galleries where you can try things out, and all furniture is delivered from their warehouses in Kentucky (or straight from the manufacturer) within a very short time. Virtually everything is perpetually in stock, thanks to a relatively small inventory of about 700 items. They are currently debt-free for all intents and purposes, and they are using their tremendous cash flow and IPO funding, and a credit line as well, to expand their galleries very quickly -- they have spots in some of the hippest (and most lucrative) areas in the country already, but at only about 50 studios today they have lots of room to expand.
Sales in studios (including the growth of new studios, which more than doubled) over the past year were up 92%, and direct sales grew at 24% (with web orders growing twice that fast). Studio growth is going to continue at a rapid pace, and their catalog distribution is expected to be ramped up as well. I see lots of growth ahead for this company, and even while they're in this hyper growth stage they're already making money -- they're guiding for .51 this year, which would put them at a high but reasonable PE of 35 or so for a fast-growing company (and I wouldn't be surprised to see them blow through these estimates).
There are definitely some risks, and we've seen some other furniture companies get clobbered this year (Hooker and the like), but I think this upper tier design-conscious retailing, with lots of flexibility and a consumer friendly experience (you can buy at our store, or online or via phone, and you don't have to carry it home -- everything's shipped right to your house) is a great idea and will continue to prove to be a great business going forward. I'll write more about this one as I have time and as I flesh out what is currently a very small position. And maybe someday I'll be able to buy a nice Le Corbusier lounge chair.
This article posted by One Guy @ 7/12/2005 12:17:00 PM 0 comments
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