The Ratings Game: Wedding bells are ringing at Williams-Sonoma as registries have potential to bolster business long term

United States

Wedding registries were big for Williams-Sonoma Inc. during the second quarter, with sales nearly doubling, up 98%.

Williams-Sonoma WSM, -2.40% Chief Executive Laura Alber says the company excels at significant points in customers’ lives, also highlighting the company’s baby business during earnings call remarks.

“[I]n those two very important life-stage buying opportunities, we’re seeing tremendous growth, and we’re continuing to support it with technology,” she said, according to a FactSet transcript.

Williams-Sonoma’s lineup includes the eponymous chain, Pottery Barn, which also includes Teen and Kids businesses, and West Elm. Alber also talked up back-to-school and the hybrid work-home lives that consumers are living due to COVID-19.

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Williams-Sonoma reported earnings and revenue that exceeded expectations, sending shares soaring after hours on Wednesday. For the year to date, Williams-Sonoma stock has rallied more than 81% while the benchmark S&P 500 index SPX, +0.78% has gained 19.9%.

KeyBanc Capital Markets sees the wedding registry figure as a signal of more good things to come.

“Encouragingly, drivers such as B2B, incremental advertising, and wedding registry seem positioned to fuel incremental growth beyond nesting trends,” analysts led by Bradley Thomas wrote in a note.

“We are incrementally positive on Williams-Sonoma’s outlook and look to get more positive at a more attractive valuation.”

KeyBanc rates Williams-Sonoma stock sector weight.

“We look favorably on the company’s strategies to drive market share growth, including more aggressive advertising and driving the business-to-business segment,” wrote Wedbush analysts led by Seth Basham.

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“Perhaps most importantly, we see continued pricing power for Williams-Sonoma led by its in-house designed products with value engineering that have resonated with customers and enabled it to pull back on promotions starting in 2019,” Basham wrote. “Undoubtedly, clearance levels will normalize from low levels and promotions may increase from extremely low levels at some point in 2022 as product availability improves, but many of the gross margin gains are likely sustainable.”

Wedbush rates Williams-Sonoma stock outperform with a $ 220 price target.

“Investors have become increasingly accustomed to impressive William-Sonoma results, and Laura Alber & Co. delivered again,” wrote Wells Fargo analysts led by Zachary Fadem.

Still, some analysts are cautious.

“[W]e’re reluctant to chase this [stock]move as a narrative of decelerating comps appears inevitable, supply chain challenges remain and the return of normalized industry promo remains a looming threat as the 2H bar continues to rise.”

Wells Fargo rates Williams-Sonoma stock equal weight with $ 195 price target.