What to Look for When Williams-Sonoma Reports Q3 Results

Williams-Sonoma (WSM)  will likely report third-quarter earnings to be little changed and revenue slightly higher compared with the same period last year when the San Francisco-based home goods retailer releases results after Thursday's market close, analysts said.

Analysts surveyed by FactSet are projecting adjusted earnings of 77 cents per share on revenue of $1.26 billion, compared with earnings of 77 cents per diluted share on revenue of $1.23 billion last year.

Comparable-store sales are estimated to increase 1.4% during the most recent period, according to FactSet. A year ago, comparable-store sales rose 4.5%.

Guggenheim expects Williams-Sonoma's third-quarter results to have little effect on the stock due to the challenges facing the home furnishings group ahead of the "all-important" fourth quarter, which includes the holiday season.

The fourth quarter makes up about 45% of full-year earnings per share, the firm noted.

"In the context of a choppy consumer spending environment and the likelihood of a highly-promotional holiday selling season, we expect cautious investor sentiment to continue to weigh on the shares over the near-term," Guggenheim wrote in a recent analyst note.

The stock was down 3.52% to $51.08 in midday trading today. The shares are down about 12.5% so far this year.

Earnings per share growth is expected to remain modest in the back half of 2016 due to a combination of weak comparable brand revenue growth, except at its West Elm brand, and anticipated gross margin-related difficulties, Guggenheim said. If these headwinds persist, it could be challenging for the retailer to meet current 2017 consensus estimates for earnings per share increasing 9%, according to Guggenheim.

The firm has a "neutral" rating on shares and said it's waiting for a more attractive entry point.

Yesterday, the stock was downgraded to "neutral" from "outperform" at Baird ahead of the quarterly report.

The company's brands include Williams-Sonoma, Pottery Barn, Rejuvenation and Mark and Graham.

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