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Matthew McClintock of Barclays is no fan of Williams-Sonoma, Inc.'s (NYSE: WSM) business model.
In a report published Friday, McClintock maintained an Underweight rating on the retailer with a $45 price target because of what he perceives to be a lack of transparency and competitiveness in its shipping promotions.
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The analyst believes the company's acceleration of free shipping offerings has not only the potential to put pressure on gross margins, but it's spending hundreds of millions of dollars in advertising to reinforce the notion that free shipping will remain a standard feature.
McClintock added that at Pottery Barn alone he observed the equivalent of 38 weighted days of free shipping email offers in the second quarter compared to just 10 in the same quarter a year ago. He also noted the ramp in these e-mails began in the third quarter last year, which was the exact same time the company's gross margin performance worsened.
McClintock further stated that Williams-Sonoma's pricing model is also "confusing" and consumers will seek companies that offer a more "simplistic" pricing model. In fact, the analyst's checks also revealed a "wide variance" in out the door pricing versus in-store and online.
"In a world where delivery times increasingly matter to the consumer, WSM is an industry laggard," the analyst stated.
Bottom line, the analyst stated that his channel checks conclude the company "was generally worse" than many of its peers on furniture delivery times and also lagged its peers in delivery times on national brands and like-for-like items.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.