Williams-Sonoma No Longer Immune To Promotional Pressures

Williams-Sonoma Inc.

closed down nearly 12 percent Thursday on a weaker than expected outlook suggesting the hardlines retailer is no-longer immune to mounting competitive pressures in the sector. Street estimates and management guidance "could prove optimistic in an aggressively promotional Holiday 2014," Oppenheimer's Brian Nagel said in a note Thursday. Nagel maintained a Market Perform rating and $68 target. "The stock suffers from high expectations," said UBS' Michael Lasser who, despite sympathy, nonetheless maintains a Neutral rating and $68 target. Lasser called second-quarter results "very respectable" but "just not totally consistent with what the market has come to expect." Same-store sales growth of 5.7 percent were below Lasser's estimate but its operating margin was slightly wider than his forecast. Appearing as something of an outlier, Suntrust's David Magee maintained a Buy rating Thursday although he said the stock recently "had somewhat gotten ahead of itself." An improved fall merchandise assortment and backlog clearance "could help the business accelerate modestly" in the third quarter. If so, the shares "should recover from today's divot," Magee said in a note maintaining a $78.89 target. Williams-Sonoma closed Thursday down $8.96 at $65.93 a share. Although analysts generally remained cautious, the company's declining expenses were widely noted. Selling, general and administrative expenses fell to 28.6 percent of revenue in the recent period from 29.6 percent a year earlier. "We remain on the sidelines" Canaccord's Laura Champine said in a note maintaining a Hold, citing the current stock price. But Champine boosted her target to $67 a share, from $65 as lower costs spurred her to raise long-term projections.