Analyst Applauds Williams-Sonoma's SG&A Management Amid Sluggish 1Q23 Sales

  • Telsey Advisory analyst Cristina Fernandez reiterated an Outperform rating on the shares of Williams-Sonoma Inc WSM with a price target of $135.
  • 1Q EPS came in at $2.64 versus the analyst's estimate at $2.40 and Factset estimate of $2.38; comparable brand sales was (6.0%) versus the analyst's estimate of (5.0%) and FS at (4.5%).
  • Williams-Sonoma saw demand deteriorate as 1Q23 progressed, with comparable brand sales coming in short, said the analyst.
  • However, the company managed SG&A costs very tightly in 1Q23 through lower advertising and a workforce reduction to exceed operating margin and EPS expectations, added the analyst.
  • According to the analyst, the result demonstrates the company's ability to adjust quickly as demand slowed. The slowdown was broad-based, with all brands down Y/Y said the analyst.
  • The analyst noted that the workforce reduction in non-customer facing roles is expected to result in annual savings of $40 million or 50 basis points to the operating margin at the mid-point of the sales guidance.
  • The analyst believes there is risk that sales fall short of the guidance, but more comfort on the ability to hit the operating margin target.
  • Price Action: WSM shares are trading higher by 1.47% at $113.81 on the last check Tuesday.
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