Analyst downgrades William-Sonoma to 'Neutral'

Analyst removes William-Sonoma from preferred stocks list, but says sales still strong

• On 1:17 pm EDT, Friday October 16, 2009

NEW YORK (AP) -- Shares of Williams-Sonoma Inc., which operates Pottery Barn and West Elm, declined on Friday after an analyst removed shares of the home furnishings retailer from a list of preferred stocks, but reiterated that sales are improving.

Goldman Sachs analyst Matthew J. Fassler removed the stock from his "Buy" list and gave it a "Neutral" rating, because the stock price has topped his $21 price target. Shares have risen 16 percent since Aug. 28, when Fassler added the company to the "Buy" list.

Fassler reiterated that sales have accelerated, referring to the company's 9.9 percent gain in sales at stores open more than a year for the month of September.

"Williams-Sonoma often occupies real estate alongside specialty softlines operators, and may have benefited from improved apparel traffic," Fassler wrote in a client note.

Across the industry, retail sales of furniture and home furnishings have improved, as well, Fassler said.

Fassler raised his price target to $24 from $21, implying shares have room to rise 7.9 percent from Thursday's close of $22.25.

In August, Williams-Sonoma said profit tumbled in the second quarter on charges related to underperforming stores, but topped Wall Street expectations when adjusted. The company also lifted its full-year and third-quarter earnings outlook because of stronger sales.

Shares of the company declined 66 cents, or 3 percent, to $21.59.

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