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Williams-Sonoma Shares Climb on Price Target Hikes

Williams-Sonoma shares are higher Friday. Analysts raised their share-price targets after the retailer reported strong same-store sales.

Williams-Sonoma  (WSM) - Get Report shares were higher Friday after analysts raised their price targets as the owner of West Elm and Pottery Barn reported a surprise increase in same-store sales driven by the coronavirus lockdown.

Shares of the San Francisco company at last check were up 9.4% to $79.88.

Williams-Sonoma reported that same-store sales rose 2.6% in the first quarter, while analysts had expected an 11.5% fall. 

Comparable sales in the e-commerce segment surged 31%.

Chief Executive Laura Alber said the coronavirus pandemic shutdown "has accelerated our industry's shift to e-commerce, and given rise to a newfound appreciation for the home." 

The company "crushed consensus expectations for first-quarter 2020," said Wedbush analyst Seth Basham, who affirmed his outperform rating while raising his price target to $90 from $80.

"Consumers are not only shifting their spending online, but they are also shifting spending to their homes as they reduce travel and entertainment," Basham said in a note to clients. 

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That puts Williams-Sonoma "in a sweet spot with a well-merchandised, well-priced assortment of home furnishings and furniture, a mid-high income customer base and a robust online business (about 55% of total sales in 2019)."

RBC Capital analyst Scot Ciccarelli raised the firm's price target on Williams-Sonoma to $76 from $70 but affirmed a sector-perform rating on the company.

Ciccarelli said that Williams-Sonoma's first-quarter earnings beat was supported by "home-centric purchases," with e-commerce providing an even bigger sales lift than anticipated. 

The analyst warned, however, that discretionary big-ticket item spending could be challenged for the foreseeable future.

JPMorgan analyst Christopher Horvers had concerns about the company's position as he lowered his price target to $65 from $67 and affirmed an underperform rating. 

"We continue to believe that investors are far too optimistic on the sustainability of the nesting trend in light of unemployment levels and J.P. Morgan economists expecting disposable personal income down 9% year over year in second-half 2020 (vs. flat in 2009 and up 4% in 2001)," he said in a note to investors

He was impressed with "the top line and numerous strategies WSM is executing across the organization.

But Horvers said "the margin performance still shows that the category is under pressure from competitors like underweight-rated Wayfair  (W) - Get Report and Amazon  (AMZN) - Get Report and we don’t believe the covid-19 driven e-commerce lift is sustainable."