Williams-Sonoma Down To Neutral At Baird Ahead Of Q3 Earnings

Ahead of Williams-Sonoma Inc. WSM earnings announcement on Thursday, Baird pointed out that the sector witnessed a slower demand. The firm thinks there were signs of easing despite intense promotional activity. Therefore, the firm is more cautious on top-line and EBIT margin profile.

As a result, analysts Peter Benedict and Justin Kleber downgraded the stock to Neutral and cut the target price by $9 from $61 to $51.

The brokerage supported its argument by pointing out the slowing growth rate of furniture/home furnishings to 1.8 percent in the third-quarter-to-date period compared to 2.7 percent growth recorded in the second quarter. In the first quarter, the retailer sales in the sector witnessed 4.4 percent uptick.

The firm pointed out the cautious outlook provided by digital-channel disruptor, Wayfair Inc. W and decelerating trends in the sector. These factors reinforced Baird’s thinking that the demand has moderated.

The analysts said, “The recent introduction/piloting of loyalty/membership programs (BBBY's "Beyond+", RH's "Members Program", WSM's "The Key") and changes to shipping economics (PB/WS-Home now offering flat rate shipping for furniture vs. prior tiered rate) represent examples of how traditional players like WSM are trying to adapt to the evolving competitive landscape.”

The brokerage slashed EPS estimate for third quarter from $0.77 to $0.75 and for the fourth quarter from $1.60 to $1.57.