Williams-Sonoma, Inc. reports strong results for the first quarter of 2019

Comparable brand revenue growth of 3.5%GAAP operating
margin of 6.0%; Non-GAAP operating margin expansion of 70bps to 7.0%GAAP
diluted EPS of $0.66; Non-GAAP diluted EPS of $0.81, or a 21% increase
over Q1 18Raises fiscal year 2019 EPS guidance

SAN FRANCISCO–(BUSINESS WIRE)–Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for
the first fiscal quarter (“Q1 19”) ended May 5, 2019 versus the first
fiscal quarter (“Q1 18”) ended April 29, 2018.


Laura Alber, President and Chief Executive Officer, commented,
“We have had a strong start to 2019 with comparable revenue growth of
3.5%, operating margin expansion and significant EPS growth. Customer
acquisition and engagement continued to grow as we delivered more
compelling and differentiated experiences to our customers. We also
reached a significant milestone for our company as we were named, for
the first time, to the Fortune 500 largest companies in the U.S. This
accomplishment speaks to the hard work and dedication of all our
associates, the ongoing support of our loyal customers and the power of
our highly differentiated platform in driving long-term, profitable
growth.”


Alber continued, “Given our strong start to the year and the strength we
are seeing early in the second quarter, we are raising our full-year EPS
guidance by $0.05. We believe we are uniquely positioned to capture the
significant opportunities we see in the home furnishings industry, and
we will continue to build on our strong momentum to achieve our goal of
maximizing growth and maintaining high profitability.”


FIRST QUARTER 2019


Net revenue growth of 3.2% to $1.241 billion


Comparable brand revenue growth of 3.5%, including double-digit
comparable growth for West Elm


GAAP operating margin of 6.0%; non-GAAP operating margin expansion of
70bps to 7.0%


GAAP diluted EPS of $0.66; non-GAAP diluted EPS $0.81, a 21% increase
compared to Q1 18


GUIDANCE


Raises fiscal year 2019 EPS guidance and reiterates long-term
financial targets


Fiscal Year 2019*


Total Net Revenues: $5.670 billion – $5.840 billion


Comparable Brand Revenue Growth: 2% – 5%


Non-GAAP Operating Margin: In-line with FY 18


Non-GAAP Diluted EPS: $4.55 – $4.75


Non-GAAP Income Tax Rate: 23% – 24%


Depreciation and Amortization: $185 million – $195 million


Net 30 store closures for a total store count of 595 by the end of FY19


Capital Spending: $200 million – $220 million


Return to Shareholders: quarterly cash dividend of $0.48 per share and
incremental share buybacks under our multi-year share repurchase
authorization of approximately $678 million.


Long-Term Financial Targets*


Total Net Revenues growth of mid to high single digits


Non-GAAP Operating Income growth in-line with revenue growth, driving
Operating Margin stability


Above-industry average ROIC


*We have not provided a reconciliation of non-GAAP guidance measures to
the corresponding GAAP measures on a forward-looking basis due to the
potential variability and limited visibility of excluded items.


CONFERENCE CALL AND WEBCAST INFORMATION


Williams-Sonoma, Inc. will host a live conference call today, May 30,
2019, at 2:00 P.M. (PT). The call, hosted by Laura Alber, President and
Chief Executive Officer, will be open to the general public via live
webcast and can be accessed at
A replay of the webcast will be available at


SEC REGULATION G — NON-GAAP INFORMATION


This press release includes non-GAAP financial measures. Exhibit 1
provides reconciliations of these non-GAAP financial measures to the
most comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in the U.S.
(“GAAP”). We have not provided a reconciliation of non-GAAP guidance
measures to the corresponding GAAP measures on a forward-looking basis
due to the potential variability and limited visibility of excluded
items; these excluded items include estimates related to the operations
of Outward, Inc. and employment-related expense. We believe that these
non-GAAP financial measures, when reviewed in conjunction with GAAP
financial measures, can provide meaningful supplemental information for
investors regarding the performance of our business and facilitate a
meaningful evaluation of current period performance on a comparable
basis with prior periods. Our management uses these non-GAAP financial
measures in order to have comparable financial results to analyze
changes in our underlying business from quarter to quarter. In addition,
certain other items may be excluded from non-GAAP financial measures
when the company believes this provides greater clarity to management
and investors. These non-GAAP financial measures should be considered as
a supplement to, and not as a substitute for or superior to the GAAP
financial measures presented in this press release and our financial
statements and other publicly filed reports. Non-GAAP measures as
presented herein may not be comparable to similarly titled measures used
by other companies.


FORWARD-LOOKING STATEMENTS


This press release contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if they do not
fully materialize or are proven incorrect, could cause our results to
differ materially from those expressed or implied by such
forward-looking statements. Such forward-looking statements include
statements relating to: our ability to capture significant opportunities
in the home furnishings industry; our ability to continue to improve
performance; our focus on operational excellence; our ability to improve
customers’ experience; our optimism about the future; our ability to
maximize growth and maintain high profitability; our FY 2019 and
long-term financial guidance; our stock repurchase program and dividend
expectations; and our proposed store openings and closures.


The risks and uncertainties that could cause our results to differ
materially from those expressed or implied by such forward-looking
statements include: continuing changes in general economic conditions,
and the impact on consumer confidence and consumer spending; new
interpretations of or changes to current accounting rules; our ability
to anticipate consumer preferences and buying trends; dependence on
timely introduction and customer acceptance of our merchandise; changes
in consumer spending based on weather, political, competitive and other
conditions beyond our control; delays in store openings; competition
from companies with concepts or products similar to ours; timely and
effective sourcing of merchandise from our foreign and domestic vendors
and delivery of merchandise through our supply chain to our stores and
customers; effective inventory management; our ability to manage
customer returns; successful catalog management, including timing,
sizing and merchandising; uncertainties in e-marketing, infrastructure
and regulation; multi-channel and multi-brand complexities; our ability
to introduce new brands and brand extensions; challenges associated with
our increasing global presence; dependence on external funding sources
for operating capital; disruptions in the financial markets; our ability
to control employment, occupancy and other operating costs; our ability
to improve our systems and processes; changes to our information
technology infrastructure; general political, economic and market
conditions and events, including war, conflict or acts of terrorism; the
impact of current and potential future tariffs and our ability to
mitigate impacts; and other risks and uncertainties described more fully
in our public announcements, reports to stockholders and other documents
filed with or furnished to the SEC, including our Annual Report on Form
10-K for the fiscal year ended February 3, 2019 and all subsequent
quarterly reports on Form 10-Q and current reports on Form 8-K. All
forward-looking statements in this press release are based on
information available to us as of the date hereof, and we assume no
obligation to update these forward-looking statements.


ABOUT WILLIAMS-SONOMA, INC.


Williams-Sonoma, Inc. is a specialty retailer of high-quality products
for the home. These products, representing distinct merchandise
strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm,
Pottery Barn Teen, Williams Sonoma Home, Rejuvenation, and Mark and
Graham — are marketed through e-commerce websites, direct-mail catalogs
and retail stores. These brands are also part of The Key Rewards, our
free-to-join loyalty program that offers members exclusive benefits
across the Williams-Sonoma family of brands. We operate in the U.S.,
Puerto Rico, Canada, Australia and the United Kingdom, offer
international shipping to customers worldwide, and have unaffiliated
franchisees that operate stores in the Middle East, the Philippines,
Mexico and South Korea, as well as e-commerce websites in certain
locations. In 2017, we acquired Outward, Inc., a 3-D imaging and
augmented reality platform for the home furnishings and décor industry.




 




 




 




Condensed Consolidated Statements of Earnings (unaudited)














 






Thirteen Weeks Ended






May 5, 2019




April 29, 2018


In thousands, except per share amounts


 


$


 


% ofRevenues


 


$


 


% ofRevenues


Net revenues






1,241,132


 


100


%






1,203,000




100


%


Cost of goods sold


 


 


796,801


 


64.2


%


 


 


770,836


 


64.1


%


Gross profit






444,331




35.8


%






432,164




35.9


%


Selling, general and administrative expenses


 


 


370,199


 


29.8


%


 


 


365,614


 


30.4


%


Operating income






74,132




6.0


%






66,550




5.5


%


Interest expense, net


 


 


2,253


 


0.2


%


 


 


1,201


 


0.1


%


Earnings before income taxes






71,879




5.8


%






65,349




5.4


%


Income taxes


 


 


19,223


 


1.5


%


 


 


20,181


 


1.7


%


Net earnings


 


$


52,656


 


4.2


%


 


 


45,168


 


3.8


%


Earnings per share (EPS):














Basic




$


0.67








$


0.54






Diluted


 


$


0.66


 


 


 


$


0.54


 


 


Shares used in calculation of EPS:










Basic






78,683










83,392






Diluted


 


 


79,867


 


 


 


 


84,174


 


 






















 




 




 




1st Quarter Net Revenues and
Comparable Brand Revenue Growth (Decline) by Concept*










 


 


 


Net Revenues(Millions)


 


Comparable Brand Revenue Growth(Decline)


 


 


Q1 19


 


Q1 18


 


Q1 19


 


Q1 18


Pottery Barn




$492


 


$490




1.5%


 


2.7%


West Elm




$309




$273




11.8%




9.0%


Williams Sonoma




$195




$201




(1.6%)




5.6%


Pottery Barn Kids and Teen




$177




$180




1.2%




5.3%


Other


 


$68


 


$59


 


N/A


 


N/A


Total


 


$1,241


 


$1,203


 


3.5%


 


5.5%


















 


*See the Company’s 10-K filing for the definition of comparable
brand revenue, which is calculated on a 13-week to 13-week basis
for Q1 2019.


 




 




 




 




Condensed Consolidated Balance Sheets (unaudited)














 


In thousands, except per share amounts


 


May 5,

2019


 


Feb 3,

2019


 


April 29,

2018


ASSETS




















Current assets




















Cash and cash equivalents




$


107,683




$


338,954




$


290,244


Accounts receivable, net






102,195






107,102






102,630


Merchandise inventories, net






1,155,427






1,124,992






1,052,892


Prepaid expenses






98,213






101,356






56,333


Other current assets


 


 


22,128


 


 


21,939


 


 


21,118


Total current assets


 


 


1,485,646


 


 


1,694,343


 


 


1,523,217


Property and equipment, net






916,030






929,635






926,320


Operating lease right-of-use assets






1,200,972






—






—


Deferred income taxes, net






34,215






44,055






58,842


Goodwill






85,357






85,382






18,811


Other long-term assets, net


 


 


66,145


 


 


59,429


 


 


129,715


Total assets


 


$


3,788,365


 


$


2,812,844


 


$


2,656,905


LIABILITIES AND STOCKHOLDERS’ EQUITY




















Current liabilities




















Accounts payable




$


385,646




$


526,702




$


393,025


Accrued expenses






109,169






163,559






99,823


Gift card and other deferred revenue






291,839






290,445






256,534


Income taxes payable






24,384






21,461






72,036


Current operating lease liabilities






227,427






—






—


Other current liabilities


 


 


75,750


 


 


72,645


 


 


61,403


Total current liabilities


 


 


1,114,215


 


 


1,074,812


 


 


882,821


Deferred rent and lease incentives






30,536






201,374






204,599


Long-term debt






299,670






299,620






299,472


Long-term operating lease liabilities






1,139,625






—






—


Other long-term liabilities


 


 


82,551


 


 


81,324


 


 


72,779


Total liabilities


 


 


2,666,597


 


 


1,657,130


 


 


1,459,671


Stockholders’ equity




















Preferred stock: $.01 par value; 7,500 shares authorized; none issued






—






—






—


Common stock: $.01 par value; 253,125 shares authorized; 78,808,
78,813 and 83,222 shares issued and outstanding at May 5, 2019,
February 3, 2019 and April 29, 2018, respectively






788






789






833


Additional paid-in capital






571,772






581,900






564,685


Retained earnings






564,127






584,333






638,774


Accumulated other comprehensive loss






(13,945)






(11,073)






(6,755)


Treasury stock, at cost


 


 


(974)


 


 


(235)


 


 


(303)


Total stockholders’ equity


 


 


1,121,768


 


 


1,155,714


 


 


1,197,234


Total liabilities and stockholders’ equity


 


$


3,788,365


 


$


2,812,844


 


$


2,656,905




















 




 






Condensed Consolidated Statements of Cash Flows (unaudited)








 






ThirteenWeeks Ended


In thousands


 


May 5,2019


 


April 29,2018


Cash flows from operating activities:








 








Net earnings




$


52,656




$


45,168




Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities:
















Depreciation and amortization






46,838






47,873




(Gain) loss on disposal/impairment of assets






(323)






414




Amortization of deferred lease incentives






(2,306)






(6,724


)


Non-cash lease expense






51,596






—




Deferred income taxes






(4,126)






(3,241


)


Tax benefit related to stock-based awards






14,898






6,126




Stock-based compensation expense






18,529






12,889




Other






69






64




Changes in:
















Accounts receivable






4,684






(9,556


)


Merchandise inventories






(31,460)






2,388




Prepaid expenses and other assets






(4,914)






(4,399


)


Accounts payable






(144,399)






(76,823


)


Accrued expenses and other liabilities






(49,196)






(32,047


)


Gift card and other deferred revenue






1,558






4,815




Deferred rent and lease incentives






—






10,004




Operating lease liabilities






(55,099)






—




Income taxes payable


 


 


2,915


 


 


13,818


 


Net cash (used in) provided by operating activities


 


 


(98,080)


 


 


10,769


 


Cash flows from investing activities:
















Purchases of property and equipment






(36,148)






(34,029


)


Other


 


 


107


 


 


120




Net cash used in investing activities


 


 


(36,041)


 


 


(33,909


)


Cash flows from financing activities:
















Repurchases of common stock






(33,848)






(37,713


)


Payment of dividends






(36,868)






(34,081


)


Tax withholdings related to stock-based awards


 


 


(25,406)


 


 


(7,438


)


Net cash used in financing activities


 


 


(96,122)


 


 


(79,232


)


Effect of exchange rates on cash and cash equivalents






(1,028)






2,480




Net decrease in cash and cash equivalents






(231,271)






(99,892


)


Cash and cash equivalents at beginning of period


 


 


338,954


 


 


390,136


 


Cash and cash equivalents at end of period


 


$


107,683


 


$


290,244


 
















 


 


Retail Store Data (unaudited)


 


 


 


February 3, 2019


 


 


Openings


 


 


Closings


 


 


May 5, 2019


 


 


April 29, 2018


Williams Sonoma


 


 


220


 


 


2


 


 


(3)


 


 


219


 


 


224


Pottery Barn






205






—






—






205






203


West Elm






112






1






—






113






108


Pottery Barn Kids






78






—






—






78






84


Rejuvenation


 


 


10


 


 


—


 


 


—


 


 


10


 


 


8


Total


 


 


625


 


 


3


 


 


(3)


 


 


625


 


 


627
































 




 




 




 




 




Exhibit 1


GAAP to Non-GAAP Reconciliation (unaudited)


(Dollars in thousands, except per share data)


















 






Thirteen Weeks Ended






May 5, 2019




April 29, 2018


 


 


$


 


% ofrevenues


 


$


 


% ofrevenues


Gross profit




$


444,331






35.8


%




$


432,164






35.9


%


Outward-related1





535












582








Employment-related expense2





30
















 


 


 


 


 


 


 


 


 


Non-GAAP gross profit


 


$


444,896


 


 


35.9


%


 


$


432,746


 


 


36.0


%


















 


















 


 


 


$


 


% ofrevenues


 


$


 


% ofrevenues


Selling, general and administrative expenses




$


370,199






29.8


%




$


365,614






30.4


%


Outward-related1





(5,877


)










(6,344


)






Employment-related expense2





(6,496


)










(1,702


)






 


 


 


 


 


 


 


 


 


Non-GAAP selling, general and administrative expenses


 


$


357,826


 


 


28.9


%


 


$


357,568


 


 


29.7


%


















 


















 


 


 


$


 


% ofrevenues


 


$


 


% ofrevenues


Operating income




$


74,132






6.0


%




$


66,550






5.5


%


Outward-related1





6,412












6,926








Employment-related expense2





6,526












1,702








 


 


 


 


 


 


 


 


 


Non-GAAP operating income


 


$


87,070


 


 


7.0


%


 


$


75,178


 


 


6.3


%


















 


















 


 


 


$


 


Tax rate


 


$


 


Tax rate


Income taxes




$


19,223






26.7


%




$


20,181






30.9


%


Outward-related1





1,428












1,467








Employment-related expense2





(289


)










402








Tax legislation3





–












(3,298


)






Impact of equity accounting rules4





–












(1,146


)






 


 


 


 


 


 


 


 


 


Non-GAAP income taxes


 


$


20,362


 


 


24.0


%