Wells Fargo starts Williams-Sonoma, Bed Bath & Beyond

Oct 7 (Reuters) - Wells Fargo Securities started coverage of home furnishing retailers Bed Bath & Beyond Inc (BBBY.O) and Williams-Sonoma Inc (WSM.N) with "market perform" ratings, and forecast a slow recovery for one of the hardest hit sub-sectors in retail.

Wells Fargo sees no catalyst for Bed Bath & Beyond shares until it reports third-quarter results in January, while the brokerage said it will wait on Williams-Sonoma for more holiday visibility or a pullback in shares before getting more constructive.

"We think (Williams Sonoma's) top-line growth could be challenging as the core brands mature, catalog circulation is reduced and consumers continue to shy away from aspirational purchases," Wells Fargo analysts wrote in a note to clients.

For Bed Bath & Beyond, the liquidation of rival Linens 'N Things provides a near-term opportunity to improve sales and margins, masking a longer-term trend that has led to stagnant sales productivity and multi-year margin declines, the brokerage said.

The brokerage resumed coverage of pet products retailer PetSmart Inc (PETM.O) with an "outperform" rating, and said it sees upside to margins and plenty of room to grow the private label business.

Wells Fargo analysts also began coverage of farm supplies retailer Tractor Supply Co (TSCO.O) with a "market perform" rating, saying the farm and ranch supplies retailer is cycling cost cuts and facing investments that may limit operating margin expansion over the next several years.

(Reporting by Viraj Nair in Bangalore; Editing by Anne Pallivathuckal)

((viraj.nair@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: viraj.nair.reuters.com@reuters.net)) Keywords: RETAILERS/WELLSFARGO RESEARCH

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