Williams-Sonoma stock slumps after Wedbush downgraded about a week before earnings are due

Shares of Williams-Sonoma Inc. slumped 3.7% in afternoon trading Tuesday, after Wedbush analyst Seth Basham recommended investors "move to the sidelines," about a week before the household products retailer is expected to report fiscal third-quarter results. Basham cut his rating to neutral, after being at outperform from the past 2 1/2 years, saying that while Williams-Sonoma is expected to outperform its peers, "the company is not immune to an intensifying promotional environment as inventories pile up and as potential drop in industry sales next year. Basham slashed his stock price target to $110, which implies 7.6% downside from current levels, from $190. The company is expected to earnings in the back half of next week, with the FactSet consensus for earnings per share of $3.68, revenue growth of 4.3% to $2.14 billion and same-store sales growth of 6.1%. Basham expects "a slight beat" for the third quarter, but "the darkening macro outlook and heavily over-inventoried industry leads us to sharply reduce forward estimates. Basham cut his 2022 estimates for EPS to $16.67 from $16.83 and for revenue to $8.79 billion from $8.86 billion. The stock has tumbled 23.1% over the past three months while the S&P 500 has lost 7.9%.

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