WSM - Williams-Sonoma cut to Sell at Jefferies on consumer spending concerns

Williams-Sonoma ( NYSE: WSM ) is a “poster child” for over-earners in retail since 2019, according to Jefferies analyst Jonathan Matuszewski, which he believes sets it up to disappoint in months ahead.

Citing “demand destruction of discretionary durables”, Matuszewski said that sales, margins, and EPS should all take a hit into 2023. While a backlog might buoy the third quarter results due to be reported in mid-November, Matuszewski expects fourth quarter results to “visibly underwhelm” and portend even poorer results into 2023.

“WSM stock could be in the crosshairs of downward EPS revisions and multiple compression as a discretionary retailer catering to upper-middle income consumer with the macro backdrop softening,” he wrote on Monday. “We believe WSM may be one of the greatest 'overearners' in retail during the pandemic, and as such, encourage investors to avoid the 'unwind'.”

As such, Matuszewski cut his rating on the stock to “Underperform” from “Hold” and reduced his price target to $100 from a prior $160. Shares of the California-based home furnishings retailer fell 3.08% in premarket trading on Monday.

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