Williams-Sonoma Hold Rating: Merchandise Margin Decline Overshadows Strong Sales and EBIT Margin Expansion

Simeon Gutman, an analyst from Morgan Stanley, maintained the Hold rating on Williams-Sonoma (WSM – Research Report). The associated price target remains the same with $185.00.

Simeon Gutman has given his Hold rating due to a combination of factors affecting Williams-Sonoma’s financial performance. One of the primary concerns is the decline in merchandise margin, which has overshadowed an otherwise solid first quarter performance. Despite the acceleration in comparable sales and an expansion in EBIT margin, the compression in merchandise margin remains a critical issue.
Gutman acknowledges that Williams-Sonoma is facing challenging multi-year comparisons, which have impacted their promotional strategies and full-price selling. While the company has managed to maintain gross margins effectively, the sustainability of using lower SG&A as a margin lever is questionable. Additionally, the reiterated guidance, despite the modest EBIT beat, suggests limited upside potential, justifying the Hold rating.

Gutman covers the Consumer Cyclical sector, focusing on stocks such as Home Depot, Advance Auto Parts, and Lowe’s. According to TipRanks, Gutman has an average return of 2.3% and a 59.15% success rate on recommended stocks.

In another report released today, Barclays also maintained a Hold rating on the stock with a $166.00 price target.