Analysts Cautious On Williams-Sonoma After Q3 Print

Kitchenware and home furnishing retailer Williams-Sonoma, Inc. WSM reported mixed third-quarter results Thursday and cautious guidance for the holiday quarter.

Here's how the Street reacted to the print — and the stock's subsequent sell-off.  

The Analysts

• Barclays' Matthew McClintock maintains an Underweight on Williams-Sonoma with an unchanged $45 price target.
• Wedbush's Seth Basham maintains at Neutral, unchanged $63 price target.
• Raymond James' Budd Bugatch maintains at Market Perform.
• KeyBanc Capital Markets' Bradley Thomas maintains at Sector Weight.

Barclays: Where Are The Catalysts?

Williams-Sonoma's Q3 shows short-term supply chain issues, and several concerning trends in the quarter justify a continued bearish stance, McClintock said in a note.

The negative trends include the following, the analyst said: 

• A deceleration in comp store sales to 3.1 percent, which also missed the Street's estimate.
• A deceleration in e-commerce sales from 8.9 percent last quarter to 8.2 percent.
• The absence of any clear margin catalysts. 

Wedbush: Demand Comps Highlight Positive Trends

Williams-Sonoma's comps on a two-year stacked basis fell sequentially by 100 basis points in Q3, but demand comp — orders placed in the quarter but not fulfilled — were 4.6 percent, Basham said in a note.

The retailer continues to operate in an "intense" competitive retail environment, and Williams-Sonoma has minimal cost savings opportunities, he said.  

The stock has limited upside potential at best in 2019, according to Wedbush.

Raymond James: Wait-And-See Story

The sell off in Williams-Sonoma presents an opportunity for investors to buy the dip, but they should avoid doing so until the company shows it can sustainably grow EBIT through solid execution, Bugatch said in a note. 

The stock is trading at a fair valuation of 13.6 times 2019 estimated EPS, which is roughly in-line with the three- and five-year median multiple of 14.1 times and 15.3 times, respectively, according to Raymond James. 

KeyBanc: Too Many Risks

Williams-Sonoma's Q3 demand comps suggest better trends in the business, and the company remains a leading multichannel retailer with strong brands, Thomas said in a note.

The company also reaffirmed its status as a market share gainer, but at the end of the day, Williams-Sonoma faces too many woes from Chinese tariff risks, heightened competition in the home furnishing sector and potential negative exposure to a downturn in the housing market, the analyst said. 

Price Action

Williams-Sonoma shares were down 11.46 percent at $53.62 at the time of publication Friday. 

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