EX-99.1 2 d137529dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Williams-Sonoma, Inc. announces strong fourth quarter and fiscal year 2020 results

Q4 comparable brand revenue growth accelerates to 25.7%, including e-commerce comp growth of 47.9%

Q4 GAAP operating margin of 17.5%; Q4 non-GAAP operating margin expansion of 630bps to 17.9%

Q4 GAAP diluted EPS of $3.92; Q4 Non-GAAP diluted EPS of $3.95

Quarterly dividend increase of 11.3%; new stock repurchase authorization of $1 billion

Accelerated path to $10 billion in net revenues and 15% non-GAAP operating margins in five years

San Francisco, CA, March 17, 2021 – Williams-Sonoma, Inc. (NYSE: WSM), the world’s largest digital-first, design-led and sustainable home retailer, today announced operating results for the fourth fiscal quarter (“Q4 20”) and fiscal year 2020 (“FY 20”) ended January 31, 2021 versus the fourth fiscal quarter (“Q4 19”) and fiscal year 2019 (“FY 19”) ended February 2, 2020.

“2020 was a year of challenges and dramatic changes in the way we live. It was also a year where we were pushed to adapt and clarify what is important to us. I could not be prouder of the accomplishments of the team here at Williams-Sonoma. Their dedication was a vital part of our ability to substantially outperform the industry and gain market share. In Q4, despite shipping constraints and low retail traffic, we delivered another quarter of accelerating revenue and profitability with 26% comp growth and over 85% EPS growth. This strong end to the year, combined with our outperformance throughout 2020, drove record fiscal year revenue growth, substantial operating margin expansion and EPS that was almost double that of last year,” said Laura Alber, President and Chief Executive Officer.

“These record results reflect the power of our three key differentiators, which set us apart and have become increasingly relevant. They are:

 

  1.

Our in-house design;

 

  2.

Our digital-first channel strategy; and

 

  3.

Our values.

We will continue to invest in these differentiators to drive growth and gain market share,” Alber continued.

Alber concluded, “Looking ahead, we are very optimistic about our runway for growth and profitability. All of our brands are starting the year strong, and we expect this strength to continue through 2021 and beyond based on a number of factors. First, it is the ongoing momentum of our growth initiatives and the increasing relevance of our three key differentiators. Second, it is the recovery in our retail traffic and our inventory levels as we move throughout the year. And third, it is the favorable macro trends that are expected to continue to benefit our business for the long-term, including high consumer confidence, a strong housing market, an accelerating shift to e-commerce, the expected continuation of working from home in some capacity post pandemic, and the importance of sustainability and values to the consumer. Against this backdrop, we are confident that we will deliver mid-to-high single digit revenue growth and operating margin expansion in 2021. Longer-term, we have accelerated our path to $10 billion in net revenues and see us hitting this milestone in the next five years, with operating margins at 15%.”

FOURTH QUARTER 2020

 

   

Comparable brand revenue growth accelerates to 25.7%, with all brands driving comparable revenue growth of over 20%, including Williams Sonoma at 26.2%, Pottery Barn at 25.7%, Pottery Barn Kids and Teen at 25.7% and West Elm at 25.2%

   

Demand comparable brand revenue growth of nearly 30%, which includes orders placed but not yet filled or charged to the customer in the quarter (See Exhibit 1)

   

E-commerce comparable brand revenue growth of 47.9% with e-commerce penetration holding at almost 70% of total net revenues

   

Gross margin of 42.1%, expanding 450bps and driven by higher year-over-year merchandise margins and occupancy leverage of approximately 190bps; occupancy costs were $181 million, flat to last year

   

GAAP SG&A rate of 24.6%; non-GAAP SG&A rate of 24.2%, leveraging approximately 190bps and reflecting the strength of our topline performance and ongoing financial discipline

   

GAAP operating margin of 17.5%; non-GAAP operating margin of 17.9%, leveraging approximately 630bps to the highest ever quarterly operating margin performance

   

GAAP diluted EPS of $3.92; non-GAAP diluted EPS of $3.95, or 85% higher than last year

 

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FISCAL YEAR 2020

 

   

Comparable brand revenue growth accelerates to 17.0%, with double-digit comparable revenue growth in all brands, including Williams Sonoma at 23.8%, Pottery Barn Kids and Teen at 16.6%, Pottery Barn at 15.2% and West Elm at 15.2%

   

GAAP operating margin of 13.4%; non-GAAP operating margin of 14.2%, leveraging approximately 560bps to an all-time high

   

GAAP diluted EPS of $8.61; non-GAAP diluted EPS of $9.04, or almost double that of last year

   

Robust liquidity position with over $1.2 billion in cash, reflecting approximately $1.3 billion in operating cash flow resulting from a year of record performance, enabling a quarterly dividend increase for the second time in six months and a new stock repurchase authorization of $1 billion, as announced in a separate press release today

   

Strong returns to shareholders of over $307 million, evenly split between dividends and share repurchases

   

GAAP ROIC of 35.6%; non-GAAP ROIC of 38.1%, compared to 22.4% last year, driven by record earnings and inventory optimization (See Exhibit 1)

GUIDANCE

Fiscal Year 2021

Given the ongoing strength of our business as we enter fiscal year 2021, the expected recovery in our retail traffic and inventory levels as we move throughout the year, as well as the macro trends that we believe will continue to benefit our business, we are planning for fiscal year 2021 financial performance to be in line with our long-term financial guidance of mid-to-high single digit net revenue growth and year-over-year non-GAAP operating margin expansion.

Long-Term Financial Guidance

For the long-term, we are planning for continued net revenue growth of mid-to-high single digits and non-GAAP operating margin expansion. Our strong results, combined with our three key differentiators of in-house design, digital-first channel strategy and values, and the macro trends that should benefit our business over the long-term, give us confidence in these future growth projections and an accelerated path to $10 billion in net revenues and 15% non-GAAP operating margins in the next five years.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, March 17, 2021, 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 http://ir.williams-sonomainc.com/events. A replay of the webcast will be available at http://ir.williams-sonomainc.com/events.

CONTACT INFORMATION

Julie Whalen EVP, Chief Financial Officer – (415) 616 8524

Elise Wang VP, Investor Relations – (415) 616 8571

 

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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 may include expenses related to the acquisition and operations of Outward, Inc., employment-related expense, tax legislation, a deferred tax asset and liability adjustment, impact of inventory write-offs, and impairment and early termination charges. 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; increase our market share; 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 fiscal year 2021 guidance and long-term financial targets, including projected net revenue growth and operating margin expansion; our stock repurchase program and dividend expectations; our planned capital investments, 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; the impact of the coronavirus on our global supply chain, retail store operations and customer demand, 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 2, 2020 and all subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. We have not filed our Form 10-K for the fiscal year ended January 31, 2021. As a result all financial results described here should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates that are identified prior to the time we file the Form 10-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.

 

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ABOUT WILLIAMS-SONOMA, INC.

Williams-Sonoma, Inc. is the world’s largest digital-first, design-led and sustainable home retailer. The company’s products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, 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, South Korea and India, as well as e-commerce websites in certain locations. We are also proud to lead the industry with our Environmental, Social and Governance (“ESG”) efforts. Our company is Good By Design — we’ve deeply engrained sustainability into our business. From our factories to your home, we’re united in a shared purpose to care for our people and our planet.

For more information on our ESG efforts, please visit: https://sustainability.williams-sonomainc.com/

WSM-IR

 

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Condensed Consolidated Statements of Earnings (unaudited)

 

     Thirteen Weeks Ended     Thirteen Weeks Ended  
     January 31, 2021     February 2, 2020  
            % of
Revenues
           % of
Revenues
 

In thousands, except per share amounts

   $     $  

Net revenues

   $ 2,292,673        100   $ 1,843,590        100

Cost of goods sold

     1,327,449        57.9       1,150,862        62.4  
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     965,224        42.1       692,728        37.6  

Selling, general and administrative expenses

     563,137        24.6       489,042        26.5  
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     402,087        17.5       203,686        11.0  

Interest expense, net

     2,264        0.1       1,367        0.1  
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     399,823        17.4       202,319        11.0  

Income taxes

     90,868        4.0       36,274        2.0  
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

   $ 308,955        13.5   $ 166,045        9.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share (EPS):

          

Basic

   $ 4.04        $ 2.15     

Diluted

   $ 3.92        $ 2.10     
  

 

 

      

 

 

    

Shares used in calculation of EPS:

 

       

Basic

     76,507          77,364     

Diluted

     78,845          78,912     
  

 

 

      

 

 

    

 

4th Quarter Net Revenues and Comparable Brand Revenue Growth by Concept*

 

     

Net Revenues

(Millions)

     Comparable Brand Revenue
Growth
 
        Q4 20        Q4 19      Q4 20     Q4 19   

Pottery Barn

   $ 799      $ 640        25.7     6.7

West Elm

     511        409        25.2       13.9  

Williams Sonoma

     540        441        26.2       3.3  

Pottery Barn Kids and Teen

     340        276        25.7       7.9  

Other**

     103        78        N/A       N/A  

Total

   $ 2,293      $ 1,844        25.7     7.6
   

 

  *

See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue, which is calculated on a 13-week to 13-week basis for Q4 2020 and Q4 2019.

  **

Primarily consists of net revenues from our international franchise operations, Rejuvenation and Mark and Graham.

 

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Condensed Consolidated Statements of Earnings (unaudited)

 

     Fifty-Two Weeks Ended     Fifty-Two Weeks Ended  
     January 31, 2021     February 2, 2020  
            % of
Revenues
           % of
Revenues
 

In thousands, except per share amounts

   $     $  

Net revenues

   $ 6,783,189        100   $ 5,898,008        100

Cost of goods sold

     4,146,920        61.1       3,758,916        63.7  
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     2,636,269        38.9       2,139,092        36.3  

Selling, general and administrative expenses

     1,725,572        25.4       1,673,218        28.4  
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     910,697        13.4       465,874        7.9  

Interest expense, net

     16,231        0.2       8,853        0.2  
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     894,466        13.2       457,021        7.7  

Income taxes

     213,752        3.2       100,959        1.7  
  

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

   $ 680,714        10.0   $ 356,062        6.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per share (EPS):

          

Basic

   $ 8.81        $ 4.56     

Diluted

   $ 8.61        $ 4.49     
  

 

 

      

 

 

    

Shares used in calculation of EPS:

 

Basic

     77,260          78,108     

Diluted

     79,055          79,225     
  

 

 

      

 

 

    

 

Fiscal Year Net Revenues and Comparable Brand Revenue Growth by Concept*

 

     

Net Revenues

(Millions)

     Comparable Brand Revenue
Growth
      FY 20      FY 19      FY 20           FY 19      

Pottery Barn

   $ 2,526      $ 2,214        15.2     4.1

West Elm

     1,682        1,467        15.2       14.4  

Williams Sonoma

     1,242        1,032        23.8       0.4  

Pottery Barn Kids and Teen

     1,043        909        16.6       4.5  

Other**

     290        276        N/A       N/A  

Total

   $ 6,783      $ 5,898        17.0     6.0
                                    

 

  *

See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue, which is calculated on a 52-week to 52-week basis for fiscal 2020 and fiscal 2019.

  **

Primarily consists of net revenues from our international franchise operations, Rejuvenation and Mark and Graham.

 

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Condensed Consolidated Balance Sheets (unaudited)

 

In thousands, except per share amounts

   Jan. 31, 2021     Feb. 2, 2020  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 1,200,337     $ 432,162  

Accounts receivable, net

     143,728       111,737  

Merchandise inventories, net

     1,006,299       1,100,544  

Prepaid expenses

     93,822       90,426  

Other current assets

     22,894       20,766  
  

 

 

   

 

 

 

Total current assets

     2,467,080       1,755,635  
  

 

 

   

 

 

 

Property and equipment, net

     873,894       929,038  

Operating lease right-of-use assets

     1,086,009       1,166,383  

Deferred income taxes, net

     61,854       47,977  

Goodwill

     85,446       85,343  

Other long-term assets, net

     87,141       69,666  
  

 

 

   

 

 

 

Total assets

   $ 4,661,424     $ 4,054,042  
  

 

 

   

 

 

 

Liabilities and Stockholders’ equity

    

Current liabilities

    

Accounts payable

   $ 542,992     $ 521,235  

Accrued expenses

     267,592       175,003  

Gift card and other deferred revenue

     373,164       289,613  

Income taxes payable

     69,476       22,501  

Current debt

     299,350       299,818  

Operating lease liabilities

     209,754       227,923  

Other current liabilities

     85,672       73,462  
  

 

 

   

 

 

 

Total current liabilities

     1,848,000       1,609,555  
  

 

 

   

 

 

 

Deferred lease incentives

     20,612       27,659  

Long-term operating lease liabilities

     1,025,057       1,094,579  

Other long-term liabilities

     116,570       86,389  
  

 

 

   

 

 

 

Total liabilities

     3,010,239       2,818,182  
  

 

 

   

 

 

 

Stockholders’ equity

    

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

     —         —    

Common stock: $.01 par value; 253,125 shares authorized; 76,340 and 77,137 shares issued and outstanding at January 31, 2021 and February 2, 2020, respectively

     764       772  

Additional paid-in capital

     638,375       605,822  

Retained earnings

     1,019,762       644,794  

Accumulated other comprehensive loss

     (7,117     (14,587

Treasury stock, at cost

     (599     (941
  

 

 

   

 

 

 

Total stockholders’ equity

     1,651,185       1,235,860  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 4,661,424     $ 4,054,042  
  

 

 

   

 

 

 

 

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Retail Store Data

(unaudited)

 

 
      November 1, 2020      Openings      Closings     January 31, 2021      February 2, 2020  

Williams Sonoma

     210        —          (12     198        211  

Pottery Barn

     201        —          (6     195        201  

West Elm

     122        —          (1     121        118  

Pottery Barn Kids

     71        —          (14     57        74  

Rejuvenation

     10        —                10        10  

Total

     614        —          (33     581        614  
                                             

 

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Condensed Consolidated Statements of Cash Flows (unaudited)

 

In thousands

   Fiscal 2020     Fiscal 2019  

Cash flows from operating activities:

    

Net earnings

   $ 680,714     $ 356,062  

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

    

Depreciation and amortization

     188,655       187,759  

(Gain) loss on disposal/impairment of assets

     32,365       1,755  

Amortization of deferred lease incentives

     (5,783     (7,714

Non-cash lease expense

     216,368       215,810  

Deferred income taxes

     (13,061     (2,557

Stock-based compensation expense

     73,185       64,163  

Other

     (264     (26

Changes in:

    

Accounts receivable

     (31,503     (5,034

Merchandise inventories

     99,144       24,219  

Prepaid expenses and other assets

     (16,388     (3,189

Accounts payable

     25,489       (11,051

Accrued expenses and other liabilities

     129,142       13,259  

Gift card and other deferred revenue

     82,841       (640

Operating lease liabilities

     (232,989     (226,257

Income taxes payable

     46,933       735  
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,274,848       607,294  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (169,513     (186,276

Other

     629       728  
  

 

 

   

 

 

 

Net cash used in investing activities

     (168,884     (185,548
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under revolving line of credit

     487,823       100,000  

Repayments of borrowings under revolving line of credit

     (487,823     (100,000

Payments of dividends

     (157,645     (150,640

Repurchases of common stock

     (150,000     (148,834

Tax withholdings related to stock-based awards

     (31,729     (27,752

Debt issuance costs

     (3,645     —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (343,019     (327,226
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     5,230       (1,312

Net increase in cash and cash equivalents

     768,175       93,208  

Cash and cash equivalents at beginning of period

               432,162               338,954  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,200,337     $ 432,162  
  

 

 

   

 

 

 

 

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Exhibit 1

GAAP to Non-GAAP Reconciliation

(unaudited)

(Dollars in thousands, except per share data)

 

     Thirteen Weeks Ended     Fifty-two Weeks Ended  
     January 31, 2021     February 2, 2020     January 31, 2021     February 2, 2020  
     $     % of
revenues
    $     % of
revenues
    $     % of
revenues
    $     % of
revenues
 

Gross profit

   $ 965,224       42.1   $ 692,728       37.6   $ 2,636,269       38.9   $ 2,139,092       36.3

Outward-related 1

     —           895         —           3,035    

Inventory write-off 2

     —           —           11,378         —      

Employment-related expense 3

     —                 —                 —                 30          

Non-GAAP gross profit

   $ 965,224       42.1   $ 693,623       37.6   $ 2,647,647       39.0   $ 2,142,157       36.3
                                                                  
                                                                  

Selling, general and administrative expenses

   $ 563,137       24.6   $ 489,042       26.5   $ 1,725,572       25.4   $ 1,673,218       28.4

Outward-related 1

     (3,174       (8,206       (12,092       (27,070  

Asset impairment 4

     (5,094       —           (27,069       —      

Employment-related expense 3

     —           (624       —           (8,366  

Non-GAAP selling, general and administrative expenses

   $ 554,869       24.2   $ 480,212       26.1   $ 1,686,411       24.9   $ 1,637,782       27.8
                                                                  
                                                                  

Operating income

   $ 402,087       17.5   $ 203,686       11.0   $ 910,697       13.4   $ 465,874       7.9

Outward-related 1

     3,174         9,101         12,092         30,105    

Inventory write-off 2

     —           —           11,378         —      

Asset impairment 4

     5,094         —           27,069         —      

Employment-related expense 3

     —                 624               —                 8,396          

Non-GAAP operating income

   $ 410,355       17.9   $ 213,411       11.6   $ 961,236       14.2   $ 504,375       8.6
                                                                  
             Tax rate            Tax rate            Tax rate            Tax rate  

Income taxes

   $ 90,868       22.7   $ 36,274       17.9   $ 213,752       23.9   $ 100,959       22.1

Outward-related 1

     248         1,484         1,913         5,959    

Inventory write-off 2

     —           —           2,940         —      

Asset impairment 4

     1,269         —           6,593         —      

Employment-related expense 3

     —           (200       —           (502  

Deferred tax asset/liability adjustment5

     4,383         6,046         5,030         6,046    

Tax legislation6

     —           (64       —           (162  

Non-GAAP income taxes

   $ 96,768       23.7   $ 43,540       20.5   $ 230,228       24.4   $ 112,300       22.7
                                                                  
                

Diluted EPS

   $ 3.92             $ 2.10             $ 8.61             $ 4.49          

Outward-related 1

     0.04         0.10         0.13         0.30    

Inventory write-off 2

     —           —           0.11         —      

Asset impairment 4

     0.05         —           0.26         —      

Employment-related expense 3

     —           0.01         —           0.11    

Deferred tax asset/liability adjustment5

     (0.06             (0.08             (0.06             (0.08        

Non-GAAP Diluted EPS*

   $ 3.95             $ 2.13             $ 9.04             $ 4.84          
                                                                  
*

Per share amounts may not sum due to rounding to the nearest cent per diluted share

 

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LOGO

 

SEC Regulation G – Non-GAAP Information

These tables include non-GAAP gross profit, gross margin, selling, general and administrative expense, operating income, operating margin, income taxes, effective tax rate and diluted EPS. We believe that these non-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of our quarterly actual results 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. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Notes to Exhibit 1:

 

1

During Q4 2020 and FY2020, we incurred approximately $3.2 million and $12.1 million, respectively, associated with acquisition-related compensation expense and the amortization of acquired intangibles for Outward, Inc. During Q4 2019 and FY2019, we incurred approximately $9.1 million and $30.1 million, respectively, associated with acquisition-related compensation expense and the amortization of acquired intangibles, as well as the operations of Outward, Inc.

 

2

During FY2020, we incurred approximately $11.4 million of inventory write-offs for inventory with minor damage that we could not liquidate through our outlets due to store closures resulting from COVID-19.

 

3

During Q4 2019 and FY2019, we incurred approximately $0.6 million and $8.4 million, respectively, of employment-related expense that was primarily associated with severance-related reorganization expenses.

 

4

During Q4 2020 and FY2020, we incurred approximately $5.1 million and $27.1 million, respectively, of expense associated with store asset impairments due to the impact that COVID-19 had on our retail stores.

 

5

During Q4 2020 and FY2020, we recorded approximately $4.4 million and $5.0 million, respectively, of tax benefit resulting from a non-recurring adjustment to certain deferred tax assets and liabilities. During Q4 2019, we recorded an approximate $6.0 million tax benefit resulting from a non-recurring adjustment to a deferred tax liability.

 

6

During Q4 2019 and FY2019, we recorded a net income tax expense of approximately $0.1 million and $0.2 million, respectively, associated with tax legislation changes.

Return on Invested Capital (“ROIC”)

We believe ROIC is a useful financial measure for investors in evaluating the efficient and effective use of capital,and is an important component of long-term shareholder return. We define ROIC as non-GAAP net operating profit after tax (NOPAT), divided by our average invested capital. NOPAT is defined as non-GAAP operating income, plus rent expense, less estimated taxes at the company’s effective tax rate. Average invested capital is defined as the two-year average of total assets less current liabilities, plus capitalized leases, less cash in excess of $200 million.

ROIC is not a measure of financial performance under GAAP, and should be considered in addition to, and not as a substitute for other financial measures prepared in accordance with GAAP. Our method of determining ROIC may differ from other companies’ methods and therefore may not be comparable.

Demand Comparable Revenue

Demand comparable revenue is a metric we use to reference the total value of merchandise orders placed on a comparable period over period basis. These transactions reflect the demand for an order, and may not be indicative of when an order is fulfilled, shipped, or charged to the customer.

 

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