High-end home furniture and kitchenware retailer Williams-Sonoma is not immune to the pressures of the retail industry.
A note out March 16 by a group of Credit Suisse equity research analysts led by Seth Sigman indicates that the firm seems to be in the same boat as a lot of other brick-and-mortar retailers.
“Results for Q4 were weak and guidance suggests elevated investments will continue to weigh on growth into 2017, keeping us on the sidelines,” the bank said.
“The company does seem to be taking some more aggressive actions to try to stabilise its weaker brands,” they added.
But those efforts will come at a cost. The bank said the actions will likely have an unexpected negative effect on earnings per share and valuation. As such, their target price for the firm stands at $US44, down from the current price of $US48.12.
The bank identified a number of “concerning underlying trends” that investors should take a look at. Those include weaker comparable store-sales for some of its weaker brands such as Pottery Barn.
“Brand comps weakened (incl. very weak Pottery Brand trends, and moderating West Elm growth,)” the bank said.
There is also an imbalance between sales and margins, according to Credit Suisse. “While merchandise margin was up 20 bps, comps were still negative. The company is allocating promotional dollars to advertising, but we would think that pricing is as important given competitive pressure/changing consumer price perception,” the bank said.