Analysts Say Williams-Sonoma Is Fairly Valued

Williams-Sonoma, Inc. (NYSE: WSM) gained more than 9 percent Thursday on better-than-expected same-store sales, but a couple of analysts stuck with luke-warm ratings and suggested the shares are fairly valued.

CRT's Lee J. Giordano called the San Francisco-based company "a high-quality retailer with low-double digit long-term growth potential." But Giordano said the shares' valuation "appears reasonable" at current levels.

Giordano raised his price target slightly to $75, but maintained a Fair Value rating on the company.

Credit Suisse's Seth Sigman said the company's improvement in third-quarter earnings, excluding interest costs and taxes, stems mainly from lower spending on advertising, while merchandise margins narrowed.

"It may be difficult accepting the stock's premium valuation based on what appears to be cost cutting," Sigman said in a note maintaining a Neutral rating.

But Sigman raised his target 10 percent to $75, and said the company is "well positioned to deliver upside" in 2014 and potentially next year.

Late Wednesday, the company said comparable-brand revenue grew 8.7 percent, including a 4.3 percent increase at the company's flagship chain and 7 percent at Pottery Barn.

Williams-Sonoma predicted fourth-quarter earnings of $1.42 to $1.50 per share, on revenue of $1.525 billion to $1.575 billion. Analysts expected $1.53 per share on revenue of $1.57 billion.

Third-quarter earnings gained 14 percent to $64.9 million, or $0.70, while sales increased 9 percent to $1.14 billion.