Williams-Sonoma's Q2 Beat Not Without Its Concerns - Williams-Sonoma (NYSE:WSM)

Shares of Williams-Sonoma, Inc. (NYSE:WSM) gained more than 7 percent after the company impressed investors in its second-quarter earnings report, but it wasn't good enough to win over some of Wall Street's bears. BTIG's Alan Rifkin maintains a Sell rating on Williams-Sonoma's stock with an unchanged price target, despite an earnings and comp beat (see Rifkin's track record here).

Looking beyond the headline numbers reveals a few concerning metrics for the retailer, Rifkin commented in a research report. Most concerning is a 6.8 percent EBIT margin, which marks a drop of 40 basis points from a year ago and also fell short of the 7.1 percent he had modeled. Margins were negatively impacted by a reduction in the company's shipping income along with the need to keep an elevated digital advertising spend to compete in the highly competitive home furnishing market.

Meanwhile, the company's core Williams-Sonoma brand and Pottery Barn showed a deceleration of comps compared to the prior quarter, the analyst continued. Specifically, the Williams Sonoma brand comped positive 1.9 percent versus a 6.7 percent comp in the prior quarter. Pottery Barn delivered a 3.6 percent comp decline versus a 1.2 percent decline in the first quarter.

As a whole, the company also grew its ecommerce business 5.2 percent in the quarter but this is a poor reading, at least compared to rival Wayfair Inc (NYSE:W), which grew its direct retail revenue by 46 percent during its second quarter.

Bottom line, investors have valid reason to question if Williams-Sonoma's strategy to turn around its businesses including Pottery Barn is resonating with consumers.

At last check, shares of Williams-Sonoma were up 4.03 percent at $45.24.

WSMWilliams-Sonoma Inc

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