Williams-Sonoma stock target cut to $180 by Evercore ISI

On Thursday, Evercore ISI made an adjustment to Williams-Sonoma’s (NYSE:WSM) financial outlook, reducing the company’s price target from $185.00 to $180.00 while maintaining an In Line rating. Evercore ISI’s analysis indicates that despite the pressure from various tariffs, including those on China, Canada, Mexico, and steel/aluminum, the company’s margin guidance appears more favorable than initially perceived. The research firm has factored in cost savings and efficiencies that could mitigate some of the tariff impacts. According to InvestingPro data, Williams-Sonoma maintains strong profitability with a gross margin of 46.45% and operates with a moderate level of debt, suggesting financial resilience amid market challenges.

Williams-Sonoma’s adjusted margin impact is projected to be approximately 10 basis points year-over-year at the mid-point of the 2025 guide, assuming tariffs remain constant throughout the year. Adjusting for out-of-period freight impact in the first quarter, Williams-Sonoma’s operating margins were 17.9% in 2024, marking a 150 basis points increase year-over-year. Additionally, when adjusted for the 20 basis points impact from an extra week, operating income (OI) margins were at 17.7% in 2024, in contrast to the reported 18.5%. The company’s financial strength is further evidenced by its impressive return on invested capital of 31% and a healthy current ratio of 1.44, as reported by InvestingPro.

According to Evercore ISI’s projections, the top end of Williams-Sonoma’s 2025 margin guidance, which ranges from 17.4% to 17.8%, could result in margins being up 10 basis points or down 30 basis points at the lower end. With a mid-point guidance of 1.5% comparable sales, margins would only be down 10 basis points from the 2024 all-time high. The firm also suggests that if the announced tariffs are reduced through 2025, Williams-Sonoma could see an upside to margins. Conversely, additional tariffs on Chinese imports or other sourcing countries would exert further pressure.

Williams-Sonoma has strategically reduced its Chinese imports to 23% of its cost of goods sold (COGS), down from 50% in 2018, while increasing sourcing from the United States to 18%. The company’s exposure to Mexico and Canada is described as immaterial. Evercore ISI estimates a 9% earnings risk from a 30% increase in tariffs on Chinese goods and 25% on the rest of the world, which aligns with the 9% median risk for the firm’s entire coverage area. With total revenue of $7.71 billion and an EBITDA of $1.66 billion in the last twelve months, the company demonstrates robust operational performance. For deeper insights into Williams-Sonoma’s financial health and future prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.

In other recent news, Williams-Sonoma reported fourth-quarter earnings and revenue that exceeded expectations, with adjusted earnings per share of $3.28, beating analyst estimates of $2.91, and revenue of $2.46 billion, surpassing the forecast of $2.35 billion. However, despite these positive results, the company’s outlook for fiscal 2025 did not meet investor expectations, contributing to a decline in its stock. The company projects annual net revenues to range from -1.5% to +1.5% for fiscal 2025, with comparable sales expected to be flat to 3% growth.

In related developments, UBS upgraded Williams-Sonoma’s stock rating from Sell to Neutral, raising the price target to $165, acknowledging the company’s successful transition to a full-priced operating model. Meanwhile, Jefferies adjusted their price target for Williams-Sonoma to $208 from $226, maintaining a Buy rating. Jefferies highlighted the company’s decision to include tariff costs in its financial guidance for 2025 as a strategic move to provide a conservative baseline for earnings per share estimates.

Williams-Sonoma’s approach, which includes accounting for tariffs, sets it apart from other retailers and is seen as a transparent effort to manage expectations amid a challenging trade environment. The company also announced a 16% increase in its quarterly dividend to $0.66 per share. These recent developments reflect a mix of strong financial performance and cautious future guidance for Williams-Sonoma.

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