Williams-Sonoma Still Has Some Life According To Citi

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Citi’s Kate McShane believes Williams-Sonoma, Inc. WSM represents a robust long-term investment option, “given its portfolio of established brands, well developed e-commerce operations, internally-managed supply chain, & international opportunities.”

McShane reiterated a Buy rating on the company, with a price target of $69.

Takeaways From Management Meetings

Following meetings with management, the analyst mentioned that despite the marginally softer May census data for home furnishings, Williams-Sonoma expects the overall home furnishings industry to continue to be robust.

McShane also believes that the 2Q guidance provided by management “appears appropriately conservative” and that the company is likely to improving trends in 2H improvement, driven by product and marketing initiatives for Pottery Barn.

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According to the Citi report, “WSM does not believe competition has substantially impacted its results, but did note that it can better communicate the higher quality of its products and of its delivery services.”

Improvement In 2H

On the other hand, the company expects the ongoing gross margin pressure to continue in the near term, although improvement is expected to begin in 2H, with Williams-Sonoma making progress on its inventory initiatives, better controls on fulfillment and shipping costs, and ramping its new DC.

McShane also pointed that that the company had significant international growth opportunity, which was currently being underappreciated by the market.

“We’re further encouraged by the growth of WSM’s emerging brands, and the potential upside from the upcoming introduction of new store concepts and hospitality partnerships,” the analyst added.

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Posted In: Analyst ColorLong IdeasGuidanceReiterationAnalyst RatingsTrading IdeasCitiKate McShanePottery Barn
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