WSM - Williams-Sonoma is slotted at Hold by Needham in first ratings look

Needham initiated coverage on Williams-Sonoma ( NYSE: WSM ) on Tuesday with a Hold rating.

Analyst Anna Andreeva said the retailer's market positioning in unique given its proprietary brands (95% of sales) and its vertically integrated, digital-first operating model that is nearly 70% e-commerce in an industry dominated by brick-and-mortar or pure e-commerce players. However, demand slowdown already seen by other home furnishings companies is just now catching up to WSM and if the home space deteriorates further into 2023, negative earnings revisions on top of difficult top line and margin comparisons are seen potentially keeping valuation pressured.

Needham's base case for WSM assumes top line slows to flat on average in 2023 and 2024 on choppy demand for home furnishings. Of note, Andreeva and team look for the EBITDA margin to erode on top of difficult multi-year stacks as WSM brands step up discounting to compete in an over-inventoried and promotionally driven industry.

Wall Street analyst ratings scorecard on WSM: 6 Buy-equivalent ratings, 13 Hold-equivalent ratings, and 6 Sell-equivalent ratings.

The Seeking Alpha Quant Rating on Williams-Sonoma has been at Hold since November 21.

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