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8-K - 8-K - WILLIAMS SONOMA INCd631003d8k.htm

Exhibit 99.1

 

LOGO

 

PRESS RELEASE        CONTACT:
WILLIAMS-SONOMA, INC.        Julie P. Whalen
3250 Van Ness Avenue        EVP, Chief Financial Officer
San Francisco, CA 94109        (415) 616-8524
      
       Gabrielle L. Rabinovitch
       Director, Investor Relations
       (415) 616-7727

FOR IMMEDIATE RELEASE

Williams-Sonoma, Inc. Announces Third Quarter 2013 Results

Revenues Grow 11%, EPS Increases 18% to $0.58

Raises Financial Guidance for Fiscal Year 2013

San Francisco, CA, November 20, 2013 -- Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the 13 weeks ended November 3, 2013 (“Q3 13”) versus the 13 weeks ended October 28, 2012 (“Q3 12”).

Q3 13 Results

 

    Net revenues grew 11.3% to $1.052 billion versus $945 million in Q3 12 with comparable brand revenue growth of 8.2%.

 

    Operating margin increased to 8.8% from 8.4% in Q3 12.

 

    Diluted earnings per share (“EPS”) grew 18.4% to $0.58 compared to $0.49 in Q3 12.

 

    Cash returned to stockholders totaled $115 million comprising $85 million in stock repurchases and $30 million in dividends.

Laura Alber, President and Chief Executive Officer commented, “Our strong third quarter and our performance year-to-date illustrate the power of our business model and the relevancy of our brands. We delivered an 11% increase in revenue and EPS growth in excess of 18%. Importantly, we delivered this revenue growth and accompanying operating margin expansion while simultaneously investing in our multi-faceted growth initiatives.”

Alber continued, “We believe we are well-positioned heading into the holiday season and will continue to execute our key strategies to deliver an exceptional experience for our customers. We are focused on generating top-line results in conjunction with operational and capital discipline to deliver long-term shareholder value.”

Alber concluded, “Given our year-to-date results, and our confidence in the fourth quarter, we are raising our fiscal year 2013 revenue and EPS guidance to reflect our outperformance in the third quarter. We are now guiding fiscal year 2013 revenue to a range of $4.290 billion to $4.350 billion and our non-GAAP diluted EPS guidance to a range of $2.76 to $2.83.”


Comparable brand revenue growth in Q3 13 increased 8.2% on top of 8.5% in Q3 12 as shown in the table below:

Third Quarter Comparable Brand Revenue Growth by Concept*

 

          Q3  13               Q3  12    
Pottery Barn     8.4%     11.1%
Williams-Sonoma     1.4%       0.8%
Pottery Barn Kids     3.9%     10.1%
West Elm   22.2%     13.0%
PBteen   16.7%       2.0%

Total

    8.2%       8.5%

 

*      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 Q3 13 increased 14.5% to $512 million from $447 million in Q3 12, with growth across all brands, primarily driven by Pottery Barn and West Elm. DTC net revenues generated 49% of total company net revenues in Q3 13, compared to 47% in Q3 12.

Retail net revenues in Q3 13 increased 8.5% to $540 million from $497 million in Q3 12, primarily driven by Pottery Barn and West Elm. Including five net new stores within Q3 13, retail leased square footage increased 1.6% from the end of Q3 12.

Operating margin in Q3 13 was 8.8% compared to 8.4% in Q3 12:

 

    Gross margin was 38.6% versus 39.0% in Q3 12.

 

    Selling, general and administrative (“SG&A”) expenses were $313 million or 29.8% of net revenues versus $289 million or 30.6% in Q3 12.

EPS in Q3 13 increased 18.4% to $0.58 from $0.49 in Q3 12.

Merchandise inventories increased 30.5% to $899 million versus $688 million at the end of Q3 12. Excluding the impact of additional inventory in transit due to taking ownership of our inventory earlier in the supply chain in Q3 13 versus Q3 12, merchandise inventories increased 18.5% on a comparable basis.

STOCK REPURCHASE PROGRAM

During Q3 13, we repurchased 1.5 million shares of common stock at an average cost of $55.89 per share and a total cost of approximately $85 million. As of November 3, 2013, $534 million remained under the three-year $750 million stock repurchase program announced in March 2013.

 

2


FY 13 FINANCIAL GUIDANCE

 

    Fourth Quarter 2013 Guidance (13 weeks)

 

    Net revenues in the fourth quarter of fiscal 2013 (“Q4 13”) are expected to be in the range of $1.370 billion to $1.430 billion.

 

    Comparable brand revenue growth in Q4 13 is expected to be in the range of 3% to 6%.

 

    Diluted EPS in Q4 13 is expected to be in the range of $1.30 to $1.37.

 

    Fiscal Year 2013 Guidance (52 weeks)

 

    

FY 13

GUID

Total Net Revenues (millions)

   $4,290 - $4,350    

Comparable Brand Revenue Growth

(52-week vs. 52-week)

   5 - 7 %

Operating Margin

   10.1 - 10.3 %

Non-GAAP Diluted EPS

   $2.76 - $2.83

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                6            (5 )           193    

Pottery Barn Kids

       84                4            (8 )           80    

West Elm

       48                11            (1 )           58    

Rejuvenation

       4                -                    4    

Total

       581                28            (29 )           580    

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, November 20, 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 diluted EPS results and guidance on a comparable basis with prior periods. 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 expectations for the holiday season; execution of our key strategies; our future financial guidance, including Q4 13 and fiscal year 2013 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 Q3 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 595 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 27 stores in the Middle East.

 

4


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

THIRTEEN WEEKS ENDED NOVEMBER 3, 2013 AND OCTOBER 28, 2012

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

 

    THIRD QUARTER      
   

2013

       

2012

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

Direct-to-customer net revenues

    $   511,874          48.7        %     $   447,115          47.3        %  

Retail net revenues

    539,674          51.3            497,439          52.7       
 

 

 

   

 

 

     

 

 

   

 

 

   

Net revenues

    1,051,548          100.0            944,554          100.0       

Cost of goods sold

    646,160          61.4            576,556          61.0       
 

 

 

   

 

 

     

 

 

   

 

 

   

Gross margin

    405,388          38.6            367,998          39.0       

Selling, general and administrative expenses

    312,894          29.8            288,702          30.6       
 

 

 

   

 

 

     

 

 

   

 

 

   

Operating income

    92,494          8.8            79,296          8.4       

Interest (income), net

    (103)         -            (173)         -       
 

 

 

   

 

 

     

 

 

   

 

 

   

Earnings before income taxes

    92,597          8.8            79,469          8.4       

Income taxes

    35,878          3.4            30,569          3.2       
 

 

 

   

 

 

     

 

 

   

 

 

   

Net earnings

    $ 56,719          5.4        %     $ 48,900          5.2        %  
 

 

 

   

 

 

     

 

 

   

 

 

   

Earnings per share:

           

Basic

    $ 0.59              $ 0.50         

Diluted

    $ 0.58              $ 0.49         

Shares used in calculation of earnings per share:

           

Basic

    95,453              98,444         

Diluted

    97,863              100,418         

 

5


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2013 AND OCTOBER 28, 2012

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

 

    YEAR-TO-DATE      
   

2013

       

2012

     
    (39 Weeks)         (39 Weeks)      
          % of               % of      
    $       Revenues           $       Revenues        

Direct-to-customer net revenues

    $   1,408,615          48.2        %     $   1,235,883          46.9        %  

Retail net revenues

    1,512,950          51.8            1,400,568          53.1       
 

 

 

   

 

 

     

 

 

   

 

 

   

Net revenues

    2,921,565          100.0            2,636,451          100.0       

Cost of goods sold

    1,813,068          62.1            1,624,707          61.6       
 

 

 

   

 

 

     

 

 

   

 

 

   

Gross margin

    1,108,497          37.9            1,011,744          38.4       

Selling, general and administrative expenses

    874,134          29.9            813,022          30.8       
 

 

 

   

 

 

     

 

 

   

 

 

   

Operating income

    234,363          8.0            198,722          7.5       

Interest (income), net

    (417)         -            (532)         -       
 

 

 

   

 

 

     

 

 

   

 

 

   

Earnings before income taxes

    234,780          8.0            199,254          7.6       

Income taxes

    89,676          3.1            76,258          2.9       
 

 

 

   

 

 

     

 

 

   

 

 

   

Net earnings

    $ 145,104          5.0        %     $ 122,996          4.7        %  
 

 

 

   

 

 

     

 

 

   

 

 

   

Earnings per share:

           

Basic

    $ 1.49              $ 1.24         

Diluted

    $ 1.46              $ 1.21         

Shares used in calculation of earnings per share:

           

Basic

    97,080              99,528         

Diluted

    99,075              101,285         

 

 

 

6


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(DOLLARS IN THOUSANDS)

 

         November 3,  
2013   
         February 3,  
2013   
         October 28,  
2012  
 

Assets

        

Current assets

        

Cash and cash equivalents

       $ 128,759             $ 424,555             $ 262,484     

Restricted cash

     14,283           16,055           16,049     

Accounts receivable, net

     74,886           62,985           59,562     

Merchandise inventories, net

     898,625           640,024           688,437     

Prepaid catalog expenses

     40,613           37,231           44,452     

Prepaid expenses

     49,317           26,339           34,370     

Deferred income taxes, net

     99,003           99,764           91,718     

Other assets

     11,698           9,819           9,741     
  

 

 

    

 

 

    

 

 

 

Total current assets

     1,317,184           1,316,772           1,206,813     

Property and equipment, net

     843,563           812,037           763,576     

Non-current deferred income taxes, net

     10,931           12,398           13,691     

Other assets, net

     54,764           46,472           39,342     
  

 

 

    

 

 

    

 

 

 

Total assets

       $ 2,226,442             $ 2,187,679             $ 2,023,422     
  

 

 

    

 

 

    

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities

        

Accounts payable

       $ 433,926             $ 259,162             $ 236,562     

Accrued salaries, benefits and other

     110,116           120,632           96,534     

Customer deposits

     244,609           207,415           208,239     

Income taxes payable

     2,897           41,849           1,467     

Current portion of long-term debt

     1,793           1,724           1,753     

Other liabilities

     36,137           26,345           28,734     
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     829,478           657,127           573,289     

Deferred rent and lease incentives

     165,445           171,198           177,912     

Long-term debt

     1,968           3,753           3,755     

Other long-term obligations

     59,506           46,463           50,609     
  

 

 

    

 

 

    

 

 

 

Total liabilities

     1,056,397           878,541           805,565     

Stockholders’ equity

     1,170,045           1,309,138           1,217,857     
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

       $     2,226,442             $     2,187,679             $     2,023,422     
  

 

 

    

 

 

    

 

 

 

ADDITIONAL INFORMATION

 

            Average Leased Square  
     Store Count      Footage Per Store  

Retail Concept

       August 4,
2013
     Openings      Closings      November 3,
2013
     October 28,
2012
     November 3,
2013
     October 28,
2012
 

Williams-Sonoma

     253         3         -           256         259         6,600         6,600   

Pottery Barn

     196         1         (1)          196         193         13,800         13,900   

Pottery Barn Kids

     86         -         (2)          84         83         8,000         8,100   

West Elm

     51         4         -           55         45         14,300         15,600   

Rejuvenation

     4         -         -           4         4         13,200         13,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     590         8         (3)          595         584         9,900         10,000   

 

     Total Store Square Footage  
         August 4,  
2013  
         November 3,  
2013  
         October 28,  
2012  
 

Total store selling square footage

     3,600,000           3,632,000           3,566,000     

Total store leased square footage

     5,863,000           5,908,000           5,813,000     

 

7


WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2013 AND OCTOBER 28, 2012

(DOLLARS IN THOUSANDS)

 

     YEAR-TO-DATE
    

2013

  

2012

     (39 Weeks)    (39 Weeks)

Cash flows from operating activities

         

Net earnings

         $ 145,104              $ 122,996    

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

         

Depreciation and amortization

       111,412            98,653    

Loss on sale/disposal of assets

       1,737            1,567    

Amortization of deferred lease incentives

       (19,055)           (19,785)   

Deferred income taxes

       (10,722)           (8,767)   

Tax benefit from exercise of stock-based awards

       14,393            14,497    

Excess tax benefit from exercise of stock-based awards

       (6,617)           (7,399)   

Stock-based compensation expense

       28,440            22,778    

Changes in:

         

Accounts receivable

       (13,498)           (13,045)   

Merchandise inventories

       (258,876)           (134,545)   

Prepaid catalog expenses

       (3,382)           (10,157)   

Prepaid expenses and other assets

       (28,251)           (12,883)   

Accounts payable

       163,592            4,832    

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

       12,017            (9,069)   

Customer deposits

       37,519            17,773    

Deferred rent and lease incentives

       13,833            15,866    

Income taxes payable

       (38,971)           (20,929)   
    

 

 

      

 

 

 

Net cash provided by operating activities

       148,675            62,383    
    

 

 

      

 

 

 

Cash flows from investing activities:

         

Purchases of property and equipment

       (145,236)           (116,398)   

Restricted cash deposits

       1,772            (1,317)   

Proceeds from insurance reimbursement

       1,418            -    

Other

       45            (231)   
    

 

 

      

 

 

 

Net cash used in investing activities

       (142,001)           (117,946)   
    

 

 

      

 

 

 

Cash flows from financing activities:

         

Repurchase of common stock

       (216,369)           (124,293)   

Payment of dividends

       (82,030)           (66,185)   

Repayments of long-term obligations

       (1,716)           (1,765)   

Proceeds from exercise of stock-based awards

       6,541            12,009    

Tax withholdings related to stock-based awards

       (14,162)           (12,327)   

Excess tax benefit from exercise of stock-based awards

       6,617            7,399    

Other

       (42)           (405)   
    

 

 

      

 

 

 

Net cash used in financing activities

       (301,161)           (185,567)    
    

 

 

      

 

 

 

Effect of exchange rates on cash and cash equivalents

       (1,309)           857    

Net decrease in cash and cash equivalents

       (295,796)           (240,273)   

Cash and cash equivalents at beginning of period

       424,555            502,757    
    

 

 

      

 

 

 

Cash and cash equivalents at end of period

         $     128,759              $     262,484    
    

 

 

      

 

 

 

 

8


Exhibit 1

Operating Margin By Segment*

(Dollars in thousands)

 

     DTC     RETAIL     UNALLOCATED     TOTAL
     Q3 13     Q3 12     Q3 13     Q3 12     Q3 13     Q3 12     Q3 13     Q3 12

Net Revenues

    $ 511,874      $  447,115      $  539,674      $  497,439      $ -      $ -      $  1,051,548      $ 944,554

Operating Income/(Expense) 

    117,086        100,769        49,300        44,003        (73,892)        (65,476)        92,494      79,296

Operating Margin

    22.9%        22.5%        9.1%        8.8%        (7.0%)        (6.9%)        8.8%      8.4%

 

  * 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

ACT
(13 Weeks) 

 

Q4 13

GUID

(13 Weeks)

  Weighted 
Share
Effect
 

  FY 13

  GUID

  (52 Weeks)

2013 GAAP Diluted EPS   $0.40   $0.49   $0.58   $1.30 - $1.37    ($0.02)   $2.74 - $2.81 

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   $0.58   $1.30 - $1.37    ($0.02)   $2.76 - $2.83 
                         
   

Q1 12

ACT

(13 Weeks) 

 

Q2 12

ACT

(13 Weeks) 

 

Q3 12

ACT

(13 Weeks) 

 

Q4 12

ACT

(14 Weeks)

  Weighted 
Share
Effect
 

  FY 12

  ACT

  (53 Weeks)

2012 GAAP Diluted EPS

  $0.30   $0.43   $0.49   $1.34   ($0.02)   $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   $1.34   ($0.02)   $2.58

 

*    Due to the differences between quarterly share counts and the year-to-date weighted average share count calculations 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 diluted EPS results and guidance on a comparable basis with prior periods. 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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