Jefferies cuts Williams-Sonoma target to $208, maintains Buy

On Wednesday, Jefferies analysts adjusted their outlook on Williams-Sonoma (NYSE:WSM) shares, reducing the price target from $226.00 to $208.00, while still maintaining a Buy rating on the stock. The revision reflects the inclusion of tariff costs in the company’s financial guidance for the year 2025. According to InvestingPro data, seven analysts have recently revised their earnings estimates upward for the upcoming period, with analyst targets ranging from $123 to $230. The stock currently trades at $166.27, suggesting potential upside based on the consensus target.

The analysts noted that while most retailers are choosing to exclude tariffs from their projections, Williams-Sonoma’s Chief Financial Officer, Julie Whalen, has opted to factor these costs into the company’s earnings per share (EPS) estimates. This decision is seen as establishing a conservative baseline for the company’s EPS, considering the potential impact of tariffs on imported goods. The specific tariffs accounted for include a 20% tariff on goods from China and a 25% tariff on goods from Canada, Mexico, as well as steel and aluminum products. The company’s strong financial position, with a gross profit margin of 46.75% and annual revenue of $7.53 billion, provides a solid foundation for managing these additional costs.

The Jefferies team highlighted that the inclusion of tariffs in the company’s guidance is a strategic move that helps de-risk its financial forecast. Given the uncertainty surrounding the longevity of tariffs in the retail sector, Williams-Sonoma’s approach provides a more stable outlook. The analysts also pointed out CFO Whalen’s history of conservative forecasting, suggesting that investors can have confidence in the company’s guidance. InvestingPro analysis reveals the company maintains a strong financial health score, operating with moderate debt levels and maintaining dividend payments for 20 consecutive years.

In their commentary, Jefferies analysts emphasized the strength of Williams-Sonoma’s financial story, which includes margin levers that have sustainability, or "legs," in the industry’s terminology. The analysts reiterated their Buy rating, encouraging investors to stick with the company’s de-risked guidance and overall narrative.

Williams-Sonoma’s decision to include tariffs in its 2025 guidance is a clear differentiation from its peers in the retail industry, which typically exclude such costs. The company’s approach is seen as a transparent effort to set realistic expectations for investors amidst a challenging global trade environment. For deeper insights into Williams-Sonoma’s valuation and financial metrics, including 12 additional ProTips and comprehensive analysis, explore the full research report available on InvestingPro.

In other recent news, Williams-Sonoma, Inc. reported fourth-quarter earnings and revenue that exceeded expectations. The company posted adjusted earnings per share of $3.28, surpassing analyst estimates of $2.91. Revenue reached $2.46 billion, beating the consensus forecast of $2.35 billion, with a 3.1% year-over-year increase in comparable brand revenue. For the full fiscal year 2024, Williams-Sonoma’s comparable brand revenue declined by 1.6%, though it achieved a record annual operating margin of 17.9% and full-year adjusted earnings per share of $8.50. Looking ahead, the company projects fiscal 2025 net revenues to range from -1.5% to +1.5% and expects comparable sales to be flat to grow by 3%, with an operating margin between 17.4% and 17.8%. Additionally, Williams-Sonoma announced a 16% increase in its quarterly dividend to $0.66 per share. Despite these positive earnings results, the company’s stock fell 4.6%, as investors expressed concerns over the cautious outlook for fiscal 2025.

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