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On Thursday, Telsey Advisory Group adjusted its outlook on Williams-Sonoma (NYSE:WSM) stock, reducing the price target to $220 from the previous $230, while reaffirming an Outperform rating on the company. According to InvestingPro data, the stock currently trades near $166, with analysts’ targets ranging from $123 to $230. Telsey’s analyst, Cristina Fernandez, cited the robust performance of Williams-Sonoma’s brands and the company’s diversified merchandise mix as key factors enabling a return to growth after two years of declining sales.
Williams-Sonoma reported a 3.1% increase in comparable sales, which the analyst highlighted as a sign of the company’s ability to maintain high levels of full-price selling, leading to high-quality earnings. The company’s strong financial position is reflected in its impressive 46.5% gross profit margin and robust return on equity of 53%. The positive sales trend is noted to have persisted into the first quarter of 2025, although the analyst pointed out that April will be critical due to the shift of Easter from March the previous year.
Despite the company’s operating margin guidance for 2025 being slightly below expectations, ranging between 17.4% and 17.8%, it includes the impact of all known tariffs. InvestingPro analysis shows the company maintains strong financial health with a "GOOD" overall score, operating with moderate debt levels and liquid assets exceeding short-term obligations. Fernandez emphasized that this level of profitability remains significantly higher compared to industry peers. The guidance reflects Williams-Sonoma’s careful consideration of current tariffs, which some competitors have not included in their forecasts.
Fernandez expressed confidence in Williams-Sonoma’s ability to outperform in the current market environment. She highlighted the company’s balanced business between furniture and non-furniture products, flexible cost structure due to in-house advertising capabilities and variable employment costs, and consistent execution as strengths that position Williams-Sonoma favorably for the future.
The revised $220 price target is based on applying an estimated P/E multiple of approximately 25 times to the anticipated 2026 earnings per share (EPS) of $8.80. This price target adjustment follows Williams-Sonoma’s demonstration of resilience and growth potential in a challenging retail landscape.
In other recent news, Williams-Sonoma reported fourth-quarter earnings and revenue that exceeded analyst expectations, with earnings per share at $3.28 compared to the forecasted $2.91 and revenue reaching $2.46 billion against a projected $2.35 billion. Despite this performance, the company’s guidance for fiscal 2025 did not meet investor expectations, leading to a decline in stock value. Williams-Sonoma anticipates annual net revenues to range from a decrease of 1.5% to an increase of 1.5% and comparable sales growth between flat and 3%. The company projects an operating margin between 17.4% and 17.8% for the same period.
In other developments, UBS upgraded Williams-Sonoma’s stock rating from Sell to Neutral, raising the price target to $165, citing the company’s successful transition to a full-priced operating model. Jefferies also adjusted its outlook, reducing the price target to $208 while maintaining a Buy rating, emphasizing the company’s conservative approach to including tariffs in its financial guidance. Evercore ISI revised its price target to $180, maintaining an In Line rating and noting the impact of tariffs on the company’s margins. These recent developments provide a nuanced perspective on Williams-Sonoma’s financial outlook amidst a challenging economic environment.
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