Thursday, January 13, 2011

Williams-Sonoma (NYSE:WSM) Comp Acceleration Continues, Although Slower

Williams-Sonoma (NYSE:WSM) reported a 5 percent increase in same-store sales for the Christmas season, and raised guidance to 4 to 5 percent for the fourth quarter of 2010.

FBR said, "Williams-Sonoma (WSM)(Not Rated) reported holiday (eight-week period ended December 26) same-store sales of 5% this morning and raised 4Q10 comp guidance to 4%–5% from 2%–5%. While this reflects a sequential deceleration from 3Q10 comps of 8.1%, it is still an acceleration on a two-year stacked basis. Home furnishings sales trends have decelerated for the group simply on the math, given tough comparisons. Otherwise, sales trends are holding up well, given stacked trends. Gross profit margin expansion, too, is slowing, on the math of comparisons, while Bed Bath & Beyond (Nasdaq:BBBY) is slated for the continuation of gross profit margin contraction, as was seen last quarter from higher year-over-year inventory acquisition costs and mix of lower-margin sales. All in, the home furnishings sector looks 'OK' at best. We prefer home improvement, as these companies are much more likely to withstand and benefit from the pass-through of inflationary costs (steel, copper, aluminum). We rate Home Depot (NYSE:HD) Outperform, Lowe’s (NYSE:LOW) Market Perform, and Bed Bath & Beyond (BBBY) Underperform.

Williams-Sonoma was trading at $32.78, down $1.40, or 4.10 percent, as of 2:14 PM EST.

No comments: