Williams-Sonoma's Q2 Beat Not Without Its Concerns

Shares of Williams-Sonoma, Inc. (NYSE: WSM) gained more than 7 percent after the company impressed investors in its second-quarter earnings report, but it wasn't good enough to win over some of Wall Street's bears. BTIG's Alan Rifkin maintains a Sell rating on Williams-Sonoma's stock with an unchanged price target, despite an earnings and comp beat (see Rifkin's track record here).

Looking beyond the headline numbers reveals a few concerning metrics for the retailer, Rifkin commented in a research report. Most concerning is a 6.8 percent EBIT margin, which marks a drop of 40 basis points from a year ago and also fell short of the 7.1 percent he had modeled. Margins were negatively impacted by a reduction in the company's shipping income along with the need to keep an elevated digital advertising spend to compete in the highly competitive home furnishing market.

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Meanwhile, the company's core Williams-Sonoma brand and Pottery Barn showed a deceleration of comps compared to the prior quarter, the analyst continued. Specifically, the Williams Sonoma brand comped positive 1.9 percent versus a 6.7 percent comp in the prior quarter. Pottery Barn delivered a 3.6 percent comp decline versus a 1.2 percent decline in the first quarter.

As a whole, the company also grew its ecommerce business 5.2 percent in the quarter but this is a poor reading, at least compared to rival Wayfair Inc (NYSE: W), which grew its direct retail revenue by 46 percent during its second quarter.

Bottom line, investors have valid reason to question if Williams-Sonoma's strategy to turn around its businesses including Pottery Barn is resonating with consumers.

At last check, shares of Williams-Sonoma were up 4.03 percent at $45.24.

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