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
Vice President, Investor Relations
(415) 616-7727
PRESS RELEASE Williams-Sonoma, Inc. announces first quarter 2015 results Net revenues grow 5.8% with comparable brand revenue growth of 4.6%, operating margin of 7.0%, and diluted EPS of $0.48
San Francisco, CA, May 20, 2015 - Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the first fiscal quarter ended May 3, 2015 ("Q1 15") versus the first fiscal quarter ended May 4,
2014 ("Q1 14").
− Q1 15 net revenues grew 5.8% to $1.031 billion versus $974 million in Q1 14 with comparable brand revenue growth of 4.6%.
− Q1 15 operating margin was 7.0% versus 7.6% in Q1 14.
− Q1 15 diluted earnings per share ("EPS") was $0.48 versus $0.48 in Q1 14.
− Cash returned to stockholders totaled $85 million, comprising $53 million in stock repurchases and
$32 million in dividends.
Ms. Alber concluded, "We believe our strong brands and profitable multi-channel strategy create a sustainable competitive advantage. We are focused on executing our long-term growth initiatives and we believe we are well-positioned for consistent market share gains."
Net revenues increased to $1.031 billion in Q1 15 from $974 million in Q1 14. Comparable brand revenue growth in Q1 15 increased 4.6% on top of 10.0% in Q1 14 as shown in the table below: 1st Quarter Comparable Brand Revenue Growth by Concept*Q1 15 | Q1 14 | |
Pottery Barn | 2.4% | 9.7% |
Williams-Sonoma | 2.7% | 6.0% |
West Elm | 15.3% | 18.8% |
Pottery Barn Kids | 0.8% | 8.1% |
PBteen | 3.0% | 12.0% |
Total | 4.6% | 10.0% |
* See the Company's 10-K and 10-Q filings for the definition of comparable brand revenue growth.
E-commerce net revenues in Q1 15 increased 8.4% to $533 million from $491 million in Q1 14. E- commerce net revenues generated 52% of total company net revenues in Q1 15, compared to 50% in Q1 14. Retail net revenues in Q1 15 increased 3.1% to $498 million from $483 million in Q1 14. Operating margin in Q1 15 was 7.0% compared to 7.6% in Q1 14:
− Gross margin was 36.8% in Q1 15 versus 37.8% in Q1 14.
− Selling, general and administrative ("SG&A") expenses were $307 million, or 29.8% of net revenues in Q1 15, versus $294 million, or 30.2% of net revenues, in Q1 14.
During Q1 15, we repurchased 664,402 shares of common stock at an average cost of $79.11 per share and a total cost of approximately $53 million. As of May 3, 2015, there was approximately $234 million remaining under the three-year, $750 million stock repurchase program announced in March 2013.
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FISCAL YEAR 2015 FINANCIAL GUIDANCE 2nd Quarter 2015 Guidance Financial Highlights (Includes impact of the west coast port slowdown)*
Total Net Revenues (millions) $1,085 - $1,105
Comparable Brand Revenue Growth 4% - 6% Diluted EPS $0.53 - $0.57
Total Net Revenues (millions) | $4,950 | - | $5,020 |
Comparable Brand Revenue Growth | 4% | - | 6% |
Operating Margin | 10.2% | - | 10.5% |
Diluted EPS | $3.35 | - | $3.45 |
Income Tax Rate | 38.3% | - | 38.8% |
Capital Spending (millions) | $200 | - | $220 |
Depreciation and Amortization (millions) | $170 | - | $180 |
* We have estimated the impact of the west coast port slowdown to be an approximate $30 to $40 million reduction in net revenues and a $0.10 to $0.12 reduction in EPS in fiscal year 2015. The second quarter 2015 impact is estimated to be a $5 to $10 million reduction in net revenues and a $0.02 to $0.04 reduction in EPS.
Store Opening and Closing Guidance by Retail Concept*FY 2014 ACT | FY 2015 GUID |
Total | New Close End |
Williams-Sonoma 243 Pottery Barn 199 Pottery Barn Kids 85 West Elm 69 Rejuvenation 5 | 5 (10) 238 4 (6) 197 6 (4) 87 19 - 88 1 - 6 |
Total 601 | 35 (20) 616 |
* Included in the FY 14 store count are 13 stores in Australia and one store in the UK. FY 15 guidance includes six additional Australian stores.
CONFERENCE CALL AND WEBCAST INFORMATIONWilliams-Sonoma, Inc. will host a live conference call today, May 20, 2015, 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.
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SEC REGULATION G - NON-GAAP INFORMATION
We have reconciled non-GAAP diluted EPS with the most directly comparable GAAP financial measure in Exhibit 1. This non-GAAP financial measure excludes the impact of unusual business events which occurred in FY 14. 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 FY 15 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 measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
This press release contains forward-looking statements that involve risks and uncertainties, as well as as- sumptions that, if they do not fully materialize or are proven incorrect, could cause our results to differ mate- rially from those expressed or implied by such forward-looking statements. Such forward-looking state- ments include statements relating to: our confidence in the fundamentals of our business; our growth strategies; our competitive advantage; our execution of long-term growth initiatives and our market share positioning; our future financial guidance, including Q2 15 and FY 2015 guidance; our three-year stock repurchase program; the impact of the west coast port slowdown; 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 Q1 15; con- tinuing 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 merchan- dise; 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 mer- chandise 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 pres- ence; 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 1, 2015 and all subsequent 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.
Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, repre- senting eight distinct merchandise strategies - Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams-Sonoma Home, Rejuvenation, and Mark and Graham - are marketed through
e-commerce websites, direct mail catalogs and 603 stores. Williams-Sonoma, Inc. currently operates in the
United States, Canada, Australia and the United Kingdom, offers international shipping to customers worldwide, and has unaffiliated franchisees that operate stores in the Middle East and the Philippines.
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Williams-Sonoma, Inc. Condensed Consolidated Statements of Earnings (unaudited) Thirteen weeks ended May 3, 2015 and May 4, 2014 (Dollars and shares in thousands, except per share amounts) 1st Quarter 2015 2014
% of
% of
$ Revenues $
Revenues
E-commerce net revenues $ 532,573 51.7% $ 491,289 50.4% Retail net revenues 498,103 48.3 483,041 49.6
Cost of goods sold 651,835 63.2 605,922 62.2
Selling, general and administrative expenses 306,913 29.8 294,082 30.2
Interest (income) expense, net 8 - (69) -
Income taxes 27,130 2.6 28,233 2.9
Basic $0.49 $0.49
Diluted $0.48 $0.48
Basic 91,707 93,993
Diluted 93,300 95,618
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Williams-Sonoma, Inc. Condensed Consolidated Balance Sheets (unaudited) (Dollars and shares in thousands, except per share amounts) Assets
Current assets
Cash and cash equivalents $ 78,851 $ 222,927 $ 112,870
Restricted cash - - 14,295
Accounts receivable, net 64,720 67,465 54,725
Merchandise inventories, net 942,800 887,701 850,416
Prepaid catalog expenses 35,648 33,942 34,986
Prepaid expenses 59,684 36,265 79,491
Deferred income taxes, net 130,889 130,618 121,443
Other assets 11,627 13,005 9,261
Property and equipment, net 876,785 883,012 837,012
Non-current deferred income taxes, net - 4,265 -
Other assets, net 50,085 51,077 53,601
Current liabilities
Accounts payable $ 367,525 $ 397,037 $ 369,279
Accrued salaries, benefits and other 87,067 136,012 88,796
Customer deposits 258,854 261,679 233,563
Borrowings under revolving line of credit 60,000 - - Income taxes payable 8,322 32,488 2,571
Current portion of long-term debt 1,968 1,968 1,785
Other liabilities 45,092 46,764 40,232
Deferred rent and lease incentives 170,528 166,925 158,339
Long-term debt - - 1,968
Non-current deferred income taxes 1,958 - 2,850
Other long-term obligations 63,143 62,698 60,425
Preferred stock: $.01 par value; 7,500 shares authorized;
none issued - - - Common stock: $.01 par value; 253,125 shares authorized;
91,644, 91,891 and 94,184 shares issued and outstanding | |||
at May 3, 2015, February 1, 2015 and May 4, 2014, | |||
respectively | 917 | 919 | 942 |
Additional paid-in capital | 527,257 | 527,261 | 509,178 |
Retained earnings | 662,671 | 701,214 | 693,670 |
Accumulated other comprehensive income | (2,257) | (2,548) | 7,391 |
Treasury stock, at cost | (1,956) | (2,140) | (2,889) |
Total stockholders' equity | 1,186,632 | 1,224,706 | 1,208,292 |
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Williams-Sonoma, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) Thirteen weeks ended May 3, 2015 and May 4, 2014 (Dollars in thousands) Year-to-DateCash flows from operating activities Net earnings | $ 44,790 | $ 46,162 |
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization | 41,478 | 38,630 |
Loss on disposal/impairment of assets | 1,694 | 644 |
Amortization of deferred lease incentives | (5,999) | (5,782) |
Deferred income taxes | (5,498) | (4,649) |
Tax benefit related to stock-based awards | 20,572 | 43,223 |
Excess tax benefit related to stock-based awards | (8,724) | (21,371) |
Stock-based compensation expense | 14,010 | 12,368 |
Other | 51 | 173 |
Changes in: Accounts receivable | 2,864 | 5,692 |
Merchandise inventories | (53,746) | (36,108) |
Prepaid catalog expenses | (1,706) | (1,430) |
Prepaid expenses and other assets | (21,439) | (41,951) |
Accounts payable | (25,030) | (19,276) |
Accrued salaries, benefits and other current and long-term liabilities | (51,387) | (48,164) |
Customer deposits | (3,106) | 5,216 |
Deferred rent and lease incentives | 8,260 | 3,092 |
Income taxes payable | (24,155) | (46,798) |
Net cash used in operating activities | (67,071) | (70,329) |
Cash flows from investing activities: Purchases of property and equipment | (40,384) | (38,119) |
Other | 5 | 133 |
Net cash used in investing activities | (40,379) | (37,986) |
Cash flows from financing activities: Borrowings under revolving line of credit | 60,000 | - |
Repurchase of common stock | (52,562) | (53,309) |
Payment of dividends | (31,934) | (32,891) |
Tax withholdings related to stock-based awards | (21,734) | (46,730) |
Excess tax benefit related to stock-based awards | 8,724 | 21,371 |
Net proceeds related to stock-based awards | 1,836 | 2,997 |
Other | - | (6) |
Net cash used in financing activities | (35,670) | (108,568) |
Effect of exchange rates on cash and cash equivalents | (956) | (368) |
Net decrease in cash and cash equivalents | (144,076) | (217,251) |
Cash and cash equivalents at beginning of period | 222,927 | 330,121 |
Cash and cash equivalents at end of period | $ 78,851 | $ 112,870 |
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Exhibit 1 1st Quarter Operating Margin By Segment*($ in thousands)
E-commerce Retail Unallocated Total
Q1 15 Q1 14 | Q1 15 Q1 14 | Q1 15 Q1 14 | Q1 15 Q1 14 |
Net Revenues $532,573 $491,289 Operating Income/(Expense) 127,574 121,136 | $498,103 $483,041 28,126 30,196 | $ - $ - (83,772) (77,006) | $1,030,676 $974,330 71,928 74,326 |
Operating Margin 24.0% 24.7% | 5.6% 6.3% | (8.1%) (7.9%) | 7.0% 7.6% |
* See the Company's 10-K and 10-Q filings for additional information on segment reporting and the definition of Operating Income/(Expense) and Operating Margin.
Reconciliation of Quarterly and Fiscal Year Actual GAAP to Non-GAAP Diluted Earnings Per Share**(Totals rounded to the nearest cent per diluted share)
Q1 15
ACT
Q2 15
GUID
FY 15
GUID
2015 GAAP Diluted EPS $0.48 $0.53 - $0.57 $3.35 - $3.45
Q1 14
ACT
Q2 14
ACT
FY 14
ACT
2014 GAAP Diluted EPS $0.48 $0.53 $3.24
Impact of Unusual Business Events (1) - - (0.04)
2014 Non-GAAP Diluted EPS Excluding Unusual
Business Events (2) $0.48 $0.53 $3.20
** Due to the differences between the quarterly and year-to-date weighted average share count calculations and rounding to the nearest cent per diluted share, totals may not equal the sum of the line items and fiscal year diluted EPS may not equal the sum of the quarters.
Store StatisticsStore Count
Avg. Leased Square Footage
Per Store
Feb. 1, 2015 | Openings | Closings | May 3, 2015 | May 4, 2014 | May 3, 2015 | May 4, 2014 | |
Williams-Sonoma | 243 | - | (2) | 241 | 248 | 6,600 | 6,600 |
Pottery Barn | 199 | - | (1) | 198 | 195 | 13,700 | 13,800 |
Pottery Barn Kids | 85 | 2 | - | 87 | 84 | 7,500 | 7,700 |
West Elm | 69 | 3 | - | 72 | 58 | 13,600 | 14,100 |
Rejuvenation | 5 | - | - | 5 | 4 | 10,000 | 13,200 |
Total | 601 | 5 | (3) | 603 | 589 | 9,900 | 9,900 |
Feb. 1, 2015 | May 3, 2015 | May 4, 2014 | |
Total store selling square footage | 3,684,000 | 3,709,000 | 3,600,000 |
Total store leased square footage | 5,965,000 | 5,998,000 | 5,850,000 |
Notes:
(1) Impact of Unusual Business Events - During FY 14, we received our share of the VISA/MasterCard antitrust litigation settlement. This settlement (a benefit)
totaled approximately $0.04 per diluted share in FY 14, and is recorded in SG&A expenses within the unallocated segment.
(2) SEC Regulation G - Non-GAAP Information - This table includes non-GAAP diluted EPS. 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 FY 15 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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