Williams-Sonoma drops after withdrawing mid-term guidance, analysts cautious

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Williams-Sonoma (NYSE:WSM) dropped 7% pre-market after the home-goods retailer withdrew its guidance through the fiscal year 2024, citing macro uncertainty.

WSM reported an adjusted Q3 EPS of $3.72 on revenue of $2.19 billion. Analysts were expecting an EPS of $3.73 on revenue of $2.15B. Same-store sales were up 8.1% for the quarter.

“These results reflect the continuation of backlog order fulfillment, strong product margins and disciplined cost control,” said Laura Alber, President and Chief Executive Officer.

The adjusted and gross margins came in at 41.5%, both 160 basis points below the consensus, for which the company blamed “higher shipping and freight costs.”

While Williams-Sonoma reiterated its 2022 guidance for mid-to-high single-digit annual net revenue growth, it withdrew its guidance through the fiscal year 2024 amid elevated macro uncertainty.

Morgan Stanley analysts said the Q3 results showed earnings are peaking. The analysts reiterated an Equal Weight rating as “low visibility on the timing and magnitude of sales/margin reversion creates a wide range of possible ’23 EPS outcomes.”

Telsey Advisory Group analysts took note of slowing demand as the company feels the heat from the “tougher consumer environment.” The analysts cut the price target to $155 per share from $195 on Outperform-rated WSM stock.

“Looking ahead, it is likely demand remains subdued in the near-term. However, we believe Williams-Sonoma is managing costs well and has merchandising and specific growth drivers, such as B2B and global, that should allow it to outperform its peer group. We also believe the current valuation at ~8.3x the FS consensus 2023 EPS estimate already embeds a lot of the risks we see in the story,” the analysts said.

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