Williams-Sonoma Has The ability To Sustain Operating Margin Gains, Says Analyst

Telsey Advisory Group analyst Cristina Fernández reiterated an Outperform rating on the shares of Williams-Sonoma Inc WSM with a price target of $142.
The company reported an EPS of $5.50 for Q4 FY22, missing the TAG analyst's estimate of $5.60.
Comparable sales declined 0.6%, below the TAG analyst's estimate of 6% growth, as demand deteriorated through Q4'22.
The analyst said the result demonstrates the company's ability to adjust as demand slowed. The slowdown was broad-based, with three out of the four brands missing the analyst's estimates.
All in, the analyst believes the result was not as bad as feared, and Williams-Sonoma's ability to maintain an operating margin just about 110 bps below last year should provide confidence in its ability to sustain a significant portion of the operating margin gains over the last three years versus the 2019 level of 8.6% in an environment of slowing demand.
The company's 2023 guidance for sales growth of (3.0%) - 3.0% and the operating margin to decline 250 - 350 basis points Y/Y to 14%-15% were largely inline with FactSet expectations of sales to decline 2.6% and the operating margin to contract to 14.4%, the analyst added.
In addition, Williams-Sonoma provided new long-term financial targets of annual sales growth of mid-single-digit to high-single-digit and an operating margin above 15%, noted the analyst.
The sales growth outlook is relatively in line with prior its prior targets, while the operating margin target is below the prior target of 17.7%, but seems more realistic in a normalized environment where demand for home furnishings is slower the during the pandemic and promotions are higher, added the analyst.
Price Action: WSM shares are trading higher by 1.33% at $120.19 on the last check Thursday.
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