Focusing On Williams-Sonoma's Pottery Barn Brands Ahead Of Earnings

One of the remaining notable companies yet to report earnings is home goods retailer Williams-Sonoma, Inc. (NYSE: WSM), scheduled to report its second-quarter results after market close Aug. 23.

Loop Capital Markets' Anthony Chukumba maintains a Hold rating and $54 price target on Williams-Sonoma's stock heading into the report, but thinks investor focus won't be squarely on the core Williams-Sonoma store.

Specifically, the primary focus will be on the Pottery Barn brands given their recent struggles in which Pottery Barn, Pottery Barn Kids, and PBteen all reported flat to lower comps over the past four quarters, Chukumba said. The West Elm brand has reported two quarters of single-digit-percentage comparable brand revenue growth, which put an end to a 27 quarter streak of double-digit percentage growth.

Many of the company's brands continue to be pressured by the "retail industry boogeyman Amazon.com, Inc. (NASDAQ: AMZN)," especially at a time when the online giant is likely considering a major push into furniture, the analyst added.

Finally, Williams-Sonoma's stock is trading at a 12.5x multiple on the analyst's 2017 earnings per share estimate, which represents a discount versus its historical level and in-line with its peers. While the stock does appear to be "inexpensive" based on a valuation perspective, it's nevertheless "appropriately valued" given expectations for slowing growth and "stagnant" profit margins.

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