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Soft Sales And Weak Guidance Get Williams-Sonoma A Lower Price Target From Jefferies

Williams-Sonoma, Inc. WSM 5.58% reported mixed Q2 results, with sales missing expectations. All the company’s brands, with the exception of West Elm, were about flat or down, Jefferies’ Daniel Binder mentioned in a report. He maintained a Hold rating on Williams-Sonoma, while reducing the price target from $57 to $56.

Williams-Sonoma reported disappointing sales figures, but was able to meet the EPS estimate due to strong cost controls, analyst Binder noted.

Soft Sales, Guidance Lowered

The company cited a weakening retail environment due to softer consumer spending and slower mall traffic. “While this didn’t seem to impact the high growth West Elm stores as much, we have seen a general deceleration in growth rates for the category as government data has revealed,” Binder wrote.

Over the past several quarters, Williams-Sonoma has reduced EPS projection due to either softer sales or lower gross margins. The company has now reduced its full-year guidance. The analyst reduced the EPS estimates for 2017 and 2018 from $3.62 to $3.48 and from $3.91 to $3.75, respectively.

“Sales expectations seem to be more appropriately set and gross margin erosion is getting less severe. Meanwhile, costs are well controlled and we suspect we are getting closer to the bottom on EPS revisions,” the Jefferies report stated.

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