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8-K - FORM 8-K - WILLIAMS SONOMA INCd589083d8k.htm

Exhibit 99.1

 

PRESS RELEASE

WILLIAMS-SONOMA, INC.

3250 Van Ness Avenue

San Francisco, CA 94109

       

CONTACT:

Julie P. Whalen

EVP, Chief Financial Officer

(415) 616-8524

 

Gabrielle L. Rabinovitch

Director, Investor Relations

(415) 616-7727

FOR IMMEDIATE RELEASE

Williams-Sonoma, Inc. Announces Second Quarter 2013 Results

Revenues Grow 12%, EPS Increases 14% to $0.49

Raises Financial Guidance for Fiscal Year 2013

San Francisco, CA, August 28, 2013 -- Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the 13 weeks ended August 4, 2013 (“Q2 13”) versus the 13 weeks ended July 29, 2012 (“Q2 12”).

Q2 13 Results

 

    Net revenues grew 12.3% to $982 million versus $874 million in Q2 12 with comparable brand revenue growth of 8.4%.
    Operating margin was 8.0%, equal to Q2 12.
    Diluted earnings per share (“EPS”) grew 14.0% to $0.49 compared to Q2 12.
    Cash returned to stockholders totaled $120 million comprising $90 million in stock repurchases and $30 million in dividends.

Laura Alber, President and Chief Executive Officer commented, “Our second quarter results demonstrate the strong demand for our brands and the profitability of our multi-channel, multi-brand platform. We generated a 12% increase in revenue and a 14% increase in diluted EPS over last year. We achieved sales and profit levels that exceeded our expectations while making investments in our growth objectives and in the infrastructure to support them.”

Alber continued, “We are on track to achieve another record year of revenue and deliver a double-digit increase in earnings per share. Due to our performance year-to-date and our confidence in the remainder of the year, we are raising our FY 2013 revenue guidance to a range of $4.26 billion to $4.34 billion and our non-GAAP diluted EPS guidance to a range of $2.69 to $2.79.”

Alber concluded, “Longer term, we remain confident in our ability to continue to grow sales, maximize profitability and capture market share as we build on our successes across brands and geographies. We are looking forward to expanding our company-owned retail presence in Australia and entering a new market in the United Kingdom later this year. Additionally, in advancement of our global expansion objectives, we are excited about today’s announcement of a multi-year franchise agreement with Store Specialists, Inc. as the franchisee for our brands in the Philippines.”


Comparable brand revenue growth in Q2 13 increased 8.4% on top of 7.4% in Q2 12 as shown in the table below:

Second Quarter Comparable Brand Revenue Growth by Concept*

 

        Q2 13         Q2 12  

Pottery Barn

    9.9%        11.7%   

Williams-Sonoma

    (0.4%     (1.5%

Pottery Barn Kids

    8.2%        3.8%   

West Elm

    16.5%        15.6%   

PBteen

    16.3%        0.8%   

Total

    8.4%        7.4%   
  * See the company’s 10-K and 10-Q filings for the definition of
       comparable brand revenue growth.

Direct-to-customer (“DTC”) net revenues in Q2 13 increased 15.3% to $478 million from $414 million in Q2 12, primarily driven by Pottery Barn, West Elm, PBteen and Pottery Barn Kids. DTC net revenues generated 49% of total company net revenues in Q2 13, compared to 47% in Q2 12.

Retail net revenues in Q2 13 increased 9.7% to $505 million from $460 million in Q2 12, driven primarily by Pottery Barn, West Elm and our international franchise operations, partially offset by a decrease in Williams-Sonoma. Including three net new stores within Q2 13, retail leased square footage increased 2% from the end of Q2 12.

Operating margin in Q2 13 was 8.0%, equal to Q2 12:

 

    Gross margin decreased 70 basis points to 37.6% from 38.3% in Q2 12.

 

    Selling, general and administrative (“SG&A”) expenses were $291 million or 29.6% of net revenues versus $264 million or 30.2% in Q2 12.

EPS in Q2 13 increased 14.0% to $0.49 from $0.43 in Q2 12.

Merchandise inventories increased 19.6% to $737 million versus $616 million at the end of Q2 12. Excluding the impact of additional inventory in transit due to taking ownership of our inventory earlier in the supply chain in Q2 13 versus Q2 12, merchandise inventories increased 13.4% on a comparable basis.

STOCK REPURCHASE PROGRAM

During Q2 13, we repurchased 1.6 million shares of common stock at an average cost of $55.66 per share and a total cost of approximately $90 million. As of August 4, 2013, $619 million remained under the three-year $750 million stock repurchase program announced in March 2013.

 

2


FY 13 FINANCIAL GUIDANCE

 

    Third Quarter 2013 Guidance (13 weeks)

 

    Net revenues in the third quarter of fiscal 2013 (“Q3 13”) are expected to be in the range of $1,020 million to $1,040 million.
    Comparable brand revenue growth in Q3 13 is expected to be in the range of 4% to 6%.
    Diluted EPS in Q3 13 is expected to be in the range of $0.51 to $0.54.

 

    Fiscal Year 2013 Guidance (52 weeks)

 

    

FY 13

          GUID          

Total Net Revenues (millions)

   $4,260 - $4,340

Comparable Brand Revenue Growth

(52-week vs. 52-week)

   4 - 6 %

Operating Margin

   10.0 - 10.3 %

Non-GAAP Diluted EPS

   $2.69 - $2.79

Income Tax Rate

   38.0 - 38.5 %

Capital Spending (millions)

   $200 - $220

Depreciation and Amortization (millions) 

   $150 - $160

 

    Fiscal Year 2013 Store Opening and Closing Guidance by Retail Concept

 

   

    FY 12    

ACT

   

FY 13

GUID

     Total         New           Close           End    

Williams-Sonoma

    253           7   (15)   245

Pottery Barn

    192           7     (5)   194

Pottery Barn Kids

    84           5     (7)     82

West Elm

    48           11     (1)     58

Rejuvenation

    4           -       -        4

Total

    581           30   (28)   583

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, August 28, 2013, 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 www.williams-sonomainc.com/webcast. A replay of the webcast will be available at www.williams-sonomainc.com/webcast.

SEC REGULATION G -- NON-GAAP INFORMATION

This press release includes non-GAAP diluted EPS. This non-GAAP financial measure excludes the impact of employee separation charges. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in Exhibit 1. We believe that this non-GAAP financial measure provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of our quarterly and FY 13 diluted EPS actual results and FY 13 guidance on a comparable basis with our quarterly and FY 12 actual results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

 

3


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 prove 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 growth potential; our ability to maximize profitability and capture market share; our global expansion; our future financial guidance, including Q3 13 and FY 13 guidance; our three-year stock repurchase program; 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: accounting adjustments as we close our books for Q2 13; recent 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; 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; 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, 2013 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 eight distinct merchandise strategies – Williams-Sonoma (cookware and wedding registry), Pottery Barn (furniture and wedding registry), Pottery Barn Kids (kids’ furniture and baby registry), PBteen (girls’ bedding and boys’ bedding), West Elm (modern furniture and room decor), Williams-Sonoma Home (luxury furniture and decorative accessories), Rejuvenation (lighting and hardware) and Mark and Graham (personalized gifts and gifts for the home) – are marketed through e-commerce websites, direct mail catalogs and 590 stores. Williams-Sonoma, Inc. currently operates in the United States, Canada and Australia, offers international shipping to customers worldwide, and has an unaffiliated franchisee that operates 25 stores in the Middle East.

 

4


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

THIRTEEN WEEKS ENDED AUGUST 4, 2013 AND JULY 29, 2012

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

     SECOND QUARTER  
    

2013

   

2012

 
     (13 Weeks)     (13 Weeks)  
             $              % of
  Revenues  
            $              % of
  Revenues  
 

Direct-to-customer net revenues

       $  477,657           48.6         $  414,361           47.4  

Retail net revenues

     504,552           51.4          459,922           52.6     
  

 

 

    

 

 

   

 

 

    

 

 

 

Net revenues

     982,209           100.0          874,283           100.0     

Cost of goods sold

     613,285           62.4          539,803           61.7     
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross margin

     368,924           37.6          334,480           38.3     

Selling, general and administrative expenses

     290,838           29.6          264,377           30.2     
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     78,086           8.0          70,103           8.0     

Interest (income), net

     (125)          -          (168)           -     
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     78,211           8.0          70,271           8.0     

Income taxes

     29,292           3.0          26,891           3.1     
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

       $    48,919           5.0         $    43,380           5.0  
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share:

          

Basic

       $        0.50               $        0.44        

Diluted

       $        0.49               $        0.43        

Shares used in calculation of earnings per share:

          

Basic

     96,892             99,209        

Diluted

     98,957             100,818        

 

5


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

TWENTY-SIX WEEKS ENDED AUGUST 4, 2013 AND JULY 29, 2012

(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

     YEAR-TO-DATE  
    

2013

   

2012

 
     (26 Weeks)     (26 Weeks)  
             $              % of
  Revenues  
            $              % of
  Revenues  
 

Direct-to-customer net revenues

       $    896,741           48.0         $    788,768           46.6  

Retail net revenues

     973,276           52.0          903,129           53.4     
  

 

 

    

 

 

   

 

 

    

 

 

 

Net revenues

     1,870,017           100.0          1,691,897           100.0     

Cost of goods sold

     1,166,908           62.4          1,048,151           62.0     
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross margin

     703,109           37.6          643,746           38.0     

Selling, general and administrative expenses

     561,240           30.0          524,320           31.0     
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     141,869           7.6          119,426           7.1     

Interest (income), net

     (314)          -          (359)           -     
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     142,183           7.6          119,785           7.1     

Income taxes

     53,798           2.9          45,689           2.7     
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

       $      88,385           4.7         $      74,096           4.4  
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share:

          

Basic

       $          0.91               $          0.74        

Diluted

       $          0.89               $          0.73        

Shares used in calculation of earnings per share:

          

Basic

     97,470             99,815        

Diluted

     99,365             101,541        

 

6


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(DOLLARS IN THOUSANDS)

 

     August 4,
2013
     February 3,
2013
     July 29,
2012
 

Assets

        

Current assets

        

Cash and cash equivalents

     $ 205,364           $ 424,555           $ 336,550     

Restricted cash

     16,967           16,055           16,043     

Accounts receivable, net

     62,808           62,985           53,424     

Merchandise inventories, net

     736,871           640,024           616,355     

Prepaid catalog expenses

     37,266           37,231           39,362     

Prepaid expenses

     61,725           26,339           33,805     

Deferred income taxes, net

     99,699           99,764           91,728     

Other assets

     11,029           9,819           9,103     
  

 

 

    

 

 

    

 

 

 

Total current assets

     1,231,729           1,316,772           1,196,370     

Property and equipment, net

     829,951           812,037           743,915     

Non-current deferred income taxes, net

     7,509           12,398           11,483     

Other assets, net

     54,989           46,472           38,116     
  

 

 

    

 

 

    

 

 

 

Total assets

     $             2,124,178           $             2,187,679           $             1,989,884     
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities

        

Accounts payable

     $ 318,532           $ 259,162           $ 201,905     

Accrued salaries, benefits and other

     95,762           120,632           85,598     

Customer deposits

     225,822           207,415           202,590     

Income taxes payable

     2,955           41,849           26,442     

Current portion of long-term debt

     1,817           1,724           1,652     

Other liabilities

     35,531           26,345           27,682     
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     680,419           657,127           545,869     

Deferred rent and lease incentives

     170,817           171,198           178,996     

Long-term debt

     1,968           3,753           5,421     

Other long-term obligations

     51,599           46,463           49,131     
  

 

 

    

 

 

    

 

 

 

Total liabilities

     904,803           878,541           779,417     

Stockholders’ equity

     1,219,375           1,309,138           1,210,467     
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

     $ 2,124,178           $ 2,187,679           $ 1,989,884     
  

 

 

    

 

 

    

 

 

 

ADDITIONAL INFORMATION

 

     Store Count      Average Leased
Square Footage
Per Store
 

Retail Concept

   May 5,
2013
     Openings      Closings      August 4,
2013
     July 29,
2012
     August 4,
2013
     July 29,
2012
 

Williams-Sonoma

     254         -         (1)         253         259         6,600         6,500   

Pottery Barn

     195         1                 196         193         13,800         13,800   

Pottery Barn Kids

     85         1                 86         83         8,000         8,100   

West Elm

     49         3         (1)         51         40         14,600         16,400   

Rejuvenation

     4         -                     4                 4             13,200           13,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

           587                     5                     (2)         590         579         9,900         9,900   
     Total Store Square Footage                
     May 5,
2013
                   August 4,
2013
     July 29,
2012
               

Total store selling square footage

     3,586,000               3,600,000         3,526,000         

Total store leased square footage

     5,840,000               5,863,000         5,738,000         

 

7


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

TWENTY-SIX WEEKS ENDED AUGUST 4, 2013 AND JULY 29, 2012

(DOLLARS IN THOUSANDS)

 

     YEAR-TO-DATE  
    

2013

    

2012

 
     (26 Weeks)      (26 Weeks)  

Cash flows from operating activities

     

Net earnings

       $ 88,385           $ 74,096    

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

     

Depreciation and amortization

     73,832          65,318    

Loss on sale/disposal of assets

     1,233          794    

Amortization of deferred lease incentives

     (12,621)         (13,179)   

Deferred income taxes

     (6,937)         (5,843)   

Tax benefit from exercise of stock-based awards

     11,733          12,940    

Excess tax benefit from exercise of stock-based awards

     (5,173)         (6,390)   

Stock-based compensation expense

     18,472          15,092    

Changes in:

     

Accounts receivable

     (1,284)          (6,953)   

Merchandise inventories

     (97,653)         (62,778)   

Prepaid catalog expenses

     (35)          (5,068)   

Prepaid expenses and other assets

     (40,191)         (10,533)   

Accounts payable

     52,336         (22,781)   

Accrued salaries, benefits and other current and long-term liabilities

     (10,677)         (22,658)   

Customer deposits

     18,710          12,218    

Deferred rent and lease incentives

     12,823          10,449    

Income taxes payable

     (38,890)         4,012    
  

 

 

    

 

 

 

Net cash provided by operating activities

     64,063         38,736   
  

 

 

    

 

 

 

Cash flows from investing activities:

     

Purchases of property and equipment

     (97,777)         (69,608)   

Restricted cash deposits

     (912)          (1,311)    

Proceeds from insurance reimbursement

     1,232            

Other

     42          (54)    
  

 

 

    

 

 

 

Net cash used in investing activities

     (97,415)         (70,973)   
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Repurchase of common stock

     (131,006)         (93,076)   

Payment of dividends

     (52,196)         (44,449)   

Repayments of long-term obligations

     (1,692)         (200)   

Proceeds from exercise of stock-based awards

     6,541          8,980    

Tax withholdings related to stock-based awards

     (11,135)         (11,073)   

Excess tax benefit from exercise of stock-based awards

     5,173          6,390    

Other

             (394)    
  

 

 

    

 

 

 

Net cash used in financing activities

     (184,315)         (133,822)   
  

 

 

    

 

 

 

Effect of exchange rates on cash and cash equivalents

     (1,524)          (148)    

Net decrease in cash and cash equivalents

     (219,191)         (166,207)   

Cash and cash equivalents at beginning of period

     424,555         502,757    
  

 

 

    

 

 

 

Cash and cash equivalents at end of period

       $     205,364           $     336,550   
  

 

 

    

 

 

 

 

8


Exhibit 1

Operating Margin By Segment*

(Dollars in thousands)

 

     DTC      RETAIL      UNALLOCATED      TOTAL  
     Q2 13      Q2 12      Q2 13      Q2 12      Q2 13      Q2 12      Q2 13      Q2 12  

Net Revenues

   $ 477,657       $ 414,361       $ 504,552       $ 459,922       $ -       $ -       $ 982,209       $ 874,283   

Operating Income/(Expense)  

     114,491         95,223         34,609         38,602         (71,014)         (63,722)         78,086         70,103   

Operating Margin

     24.0%         23.0%         6.9%         8.4%         (7.2%)         (7.3%)         8.0%         8.0%   
  * See the company’s 10-K and 10-Q filings for additional information on segment reporting and for the definition of Operating Income/(Expense) and Operating Margin.

Reconciliation of FY 13 Guidance and FY 12 Actual GAAP to Non-GAAP

Diluted Earnings Per Share*

(Totals rounded to the nearest cent per diluted share)

 

   

Q1 13

ACT
  (13 Weeks)  

 

Q2 13

ACT
  (13 Weeks)  

 

Q3 13

GUID
  (13 Weeks)  

 

FY 13

GUID
  (52 Weeks)  

2013 GAAP Diluted EPS

  $0.40   $0.49   $0.51 - $0.54   $2.68 - $2.78

Impact of Employee Separation Charges (Note 1)

  $0.02   -   -   $0.02
2013 Non-GAAP Diluted EPS Excluding Unusual Business Events (Note 3)**   $0.41   $0.49   $0.51 - $0.54   $2.69 - $2.79
                 
   

Q1 12

ACT
(13 Weeks)

 

Q2 12

ACT
(13 Weeks)

 

Q3 12

ACT
(13 Weeks)

 

FY 12

ACT
(53 Weeks)

2012 GAAP Diluted EPS

  $0.30   $0.43   $0.49   $2.54

Impact of Employee Separation Charges (Note 2)

  $0.04   -   -   $0.04
2012 Non-GAAP Diluted EPS Excluding Unusual Business Events (Note 3)   $0.34   $0.43   $0.49   $2.58

 

* Due to the differences between quarterly share counts and the effect of quarterly rounding to the nearest cent per diluted share, the year-to-date calculation of GAAP and non-GAAP diluted EPS may not equal the sum of the quarters.

 

** Due to rounding to the nearest cent per diluted share, totals may not equal the sum of the line items in the table above.

 

Note 1: Impact of Employee Separation Charges – During Q1 13, we incurred charges of approximately $0.02 per diluted share associated with the previously announced retirement of the former President of the Williams-Sonoma brand. These charges were recorded within the unallocated segment.

 

Note 2: Impact of Employee Separation Charges – During Q1 12 and FY 12, we incurred charges of approximately $0.04 per diluted share primarily associated with the previously announced retirement of our former Executive Vice President, Chief Operating and Chief Financial Officer. These charges were recorded within the unallocated segment.

 

Note 3: SEC Regulation G – Non-GAAP Information – This table includes Non-GAAP Diluted EPS Excluding Unusual Business Events. We believe that this non-GAAP financial measure provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of our quarterly and FY 13 diluted EPS actual results and FY 13 guidance on a comparable basis with our quarterly and FY 12 actual results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

 

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