EX-99.1 2 d199526dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

WILLIAMS-SONOMA, INC.

3250 Van Ness Avenue

San Francisco, CA 94109

 

      CONTACT:
      Julie P. Whalen
      EVP, Chief Financial Officer
      (415) 616-8524
      Beth Potillo-Miller
      SVP, Finance & Corporate Treasurer
      Investor Relations
     

(415) 616-8643

PRESS RELEASE

Williams-Sonoma, Inc. beats first quarter 2016 estimates

Net revenues grow 6.5% with comparable brand revenue growth of 4.5%

GAAP EPS of $0.44, non-GAAP EPS increases 10.4% to $0.53

Reiterates full-year guidance

San Francisco, CA, May 25, 2016 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the first fiscal quarter ended May 1, 2016 (“Q1 16”) versus the first fiscal quarter ended May 3, 2015 (“Q1 15”).

1st QUARTER 2016 RESULTS

 

   

Q1 16 net revenues grew 6.5% to $1.098 billion versus $1.031 billion in Q1 15 with comparable brand revenue growth of 4.5%.

   

Q1 16 operating margin was 5.8% versus 7.0% in Q1 15. Excluding unusual business events due to severance-related reorganization charges of approximately $13 million (see Note 1 in Exhibit 1), non-GAAP operating margin was 7.0% in Q1 16. See Exhibit 1 for a reconciliation of GAAP to non-GAAP operating margin.

   

Q1 16 diluted earnings per share (“EPS”) was $0.44 versus $0.48 in Q1 15. Excluding unusual business events due to severance-related reorganization charges of approximately $0.09 per diluted share, non-GAAP EPS was $0.53 in Q1 16. See Exhibit 1 for a reconciliation of GAAP to non-GAAP EPS.

   

Cash returned to stockholders totaled $75 million, comprising $41 million in stock repurchases and $34 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, “In the first quarter we saw accelerated growth in West Elm and Williams-Sonoma, as well as improvement across the Pottery Barn brands. We also saw positive results from our inventory and supply chain initiatives. We believe our strong brands and profitable multi-channel strategy create a sustainable competitive advantage. We are executing against our key growth and profitability initiatives, and believe we are on track to deliver on both our near and longer-term goals.”


Net revenues increased to $1.098 billion in Q1 16 from $1.031 billion in Q1 15.

Comparable brand revenue growth in Q1 16 increased 4.5% on top of 4.6% in Q1 15 as shown in the table below:

 

 

1st Quarter Comparable Brand Revenue Growth by Concept*

 

      Q1 16              Q1 15 

Pottery Barn

     0.2%            2.4% 

Williams-Sonoma

     3.5%            2.7% 

West Elm

     19.0%            15.3% 

Pottery Barn Kids

     1.7%            0.8% 

PBteen

     1.9%            3.0% 

Total

     4.5%              4.6% 

*  See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue.

 

E-commerce net revenues in Q1 16 increased 8.2% to $576 million from $533 million in Q1 15. E-commerce net revenues generated 52.5% of total company net revenues in Q1 16 and 51.7% of total company net revenues in Q1 15.

Retail net revenues in Q1 16 increased 4.7% to $522 million from $498 million in Q1 15.

Operating margin in Q1 16 was 5.8% compared to 7.0% in Q1 15. Excluding unusual business events, non-GAAP operating margin was 7.0% in Q1 16:

 

   

Gross margin was 35.8% in Q1 16 versus 36.8% in Q1 15, with deleverage primarily resulting from our supply chain and inventory initiatives, fulfillment-related costs, as well as lower margins associated with higher franchise and wholesale revenues. Merchandise margins were down slightly versus Q1 15.

 

   

Selling, general and administrative (“SG&A”) expenses were $329 million, or 30.0% of net revenues in Q1 16, versus $307 million, or 29.8% of net revenues, in Q1 15. Excluding unusual business events due to severance-related reorganization charges of approximately $13 million, non-GAAP SG&A expenses were $316 million, or 28.8% of net revenues, in Q1 16.

EPS in Q1 16 was $0.44 versus $0.48 in Q1 15. Excluding unusual business events, non-GAAP EPS was $0.53 in Q1 16.

Merchandise inventories at the end of Q1 16 increased 0.2% to $945 million from $943 million at the end of Q1 15.

STOCK REPURCHASE PROGRAM

During Q1 16, we repurchased 727,629 shares of common stock at an average cost of $55.85 per share and a total cost of approximately $41 million. As of May 1, 2016, there was approximately $521 million remaining under our current stock repurchase authorizations.

 

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FISCAL YEAR 2016 FINANCIAL GUIDANCE

 

     
   

2nd Quarter 2016 Guidance Financial Highlights

 

   
 

Total Net Revenues (millions)

   $1,145 – $1,175  
 

Comparable Brand Revenue Growth

   1% – 4%  
 

Diluted EPS

   $0.54 – $0.60  
          
 

 

Fiscal Year 2016 Guidance Financial Highlights

 

 
 

Total Net Revenues (millions)

   $5,150 – $5,250     
 

Comparable Brand Revenue Growth

   3% – 6%    
 

Non-GAAP Operating Margin*

   9.8% – 10.0%  
 

Non-GAAP Diluted EPS*

   $3.50 – $3.65    
 

Income Tax Rate

   37.0% – 38.0%   
 

Capital Spending (millions)

   $200 – $220    
 

Depreciation and Amortization (millions)

   $170 – $180    
 

 

*    Excludes severance-related reorganization charges of approximately $13 million (or $0.09 per diluted share) during Q1 2016.

 
          

 

Store Opening and Closing Guidance by Retail Concept*

 

      FY 2015 ACT       

FY 2016 GUID

      Total              New              Close              End  

  Williams-Sonoma

         239              5              (10             234  

  Pottery Barn

     197              6              (2         201  

  Pottery Barn Kids

     89              2              (4         87  

  West Elm

     87              13              (2         98  

  Rejuvenation

     6                1                -              7  

  Total

     618              27              (18         627  

 

*    Included in the FY 15 store count are 19 stores in Australia and one store in the UK.

 

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, May 25, 2016, 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.

 

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SEC REGULATION G — NON-GAAP INFORMATION

This press release includes non-GAAP SG&A, operating margin and diluted EPS. These non-GAAP financial measures exclude the impact of severance-related reorganization charges in Q1 16. We have reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in the text of this release and in Exhibit 1. 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 and FY 16 guidance 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 measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

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 sustainable competitive advantage; our execution of key growth and profitability initiatives; our ability to deliver on near and longer-term goals; our future financial guidance, including Q2 16 and FY 2016 guidance; our stock repurchase programs; 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 16; continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; new interpretations of or changes to current accounting rules; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; changes in consumer spending based on weather, political, competitive and other conditions beyond our control; delays in store openings; competition from companies with concepts or products similar to ours; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management; our ability to manage customer returns; successful catalog management, including timing, sizing and merchandising; uncertainties in e-marketing, infrastructure and regulation; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; challenges associated with our increasing global presence; dependence on external funding sources for operating capital; disruptions in the financial markets; our ability to control employment, occupancy and other operating costs; our ability to improve our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; 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 January 31, 2016 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.

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, 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 624 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 and stores and e-commerce websites in Mexico.

 

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Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirteen weeks ended May 1, 2016 and May 3, 2015

(Dollars and shares in thousands, except per share amounts)

 

     1st Quarter  
     2016     2015  
     $     % of
Revenues
    $      % of
Revenues
 

E-commerce net revenues

   $ 576,234        52.5   $ 532,573         51.7

Retail net revenues

     521,583        47.5        498,103         48.3   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net revenues

     1,097,817        100.0        1,030,676         100.0   

Cost of goods sold

     705,300        64.2        651,835         63.2   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     392,517        35.8        378,841         36.8   

Selling, general and administrative expenses

     328,992        30.0        306,913         29.8   
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     63,525        5.8        71,928         7.0   

Interest (income) expense, net

     (68     —          8         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     63,593        5.8        71,920         7.0   

Income taxes

     23,996        2.2        27,130         2.6   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net earnings

   $ 39,597        3.6   $ 44,790         4.3
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per share (EPS):

         

Basic

   $ 0.44        $ 0.49      

Diluted

   $ 0.44        $ 0.48      

Shares used in calculation of EPS:

         

Basic

     89,298          91,707      

Diluted

     90,514          93,300      

 

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Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(Dollars and shares in thousands, except per share amounts)

 

     May 1, 2016     Jan. 31, 2016     May 3, 2015  

Assets

      

Current assets

      

Cash and cash equivalents

   $ 99,217      $ 193,647      $ 78,851   

Accounts receivable, net

     75,364        79,304        64,720   

Merchandise inventories, net

     944,632        978,138        942,800   

Prepaid catalog expenses

     29,916        28,919        35,648   

Prepaid expenses

     53,689        44,654        59,684   

Deferred income taxes, net

     -        -        130,889   

Other assets

     9,844        11,438        11,627   
  

 

 

   

 

 

   

 

 

 

Total current assets

     1,212,662        1,336,100        1,324,219   
  

 

 

   

 

 

   

 

 

 

Property and equipment, net

     893,640        886,813        876,785   

Non-current deferred income taxes, net

     131,597        141,784        -   

Other assets, net

     52,469        52,730        50,085   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,290,368      $ 2,417,427      $ 2,251,089   
  

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

      

Current liabilities

      

Accounts payable

   $ 339,392      $ 447,412      $ 367,525   

Accrued salaries, benefits and other

     96,577        127,122        87,067   

Customer deposits

     275,116        296,827        258,854   

Borrowings under revolving line of credit

     100,000        -        60,000   

Income taxes payable

     7,764        67,052        8,322   

Current portion of long-term debt

     -        -        1,968   

Other liabilities

     52,907        58,014        45,092   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     871,756        996,427        828,828   
  

 

 

   

 

 

   

 

 

 

Deferred rent and lease incentives

     188,715        173,061        170,528   

Non-current deferred income taxes

     -        -        1,958   

Other long-term obligations

     67,041        49,713        63,143   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     1,127,512        1,219,201        1,064,457   
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity

      

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

     -        -        -   

Common stock: $.01 par value; 253,125 shares authorized; 89,350, 89,563 and 91,644 shares issued and outstanding at May 1, 2016, January 31, 2016 and May 3, 2015, respectively

     894        896        917   

Additional paid-in capital

     534,414        541,307        527,257   

Retained earnings

     636,986        668,545        662,671   

Accumulated other comprehensive loss

     (7,875     (10,616     (2,257

Treasury stock, at cost

     (1,563     (1,906     (1,956
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     1,162,856        1,198,226        1,186,632   
  

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,290,368      $ 2,417,427      $ 2,251,089   
  

 

 

   

 

 

   

 

 

 

 

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Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Thirteen weeks ended May 1, 2016 and May 3, 2015

(Dollars in thousands)

 

     Year-to-Date  
    

2016

   

2015

 

Cash flows from operating activities

    

Net earnings

   $ 39,597      $ 44,790   

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

    

Depreciation and amortization

     41,240        41,478   

Loss on disposal/impairment of assets

     880        1,694   

Amortization of deferred lease incentives

     (5,987     (5,999

Deferred income taxes

     (5,796     (5,498

Tax benefit related to stock-based awards

     20,087        20,572   

Excess tax benefit related to stock-based awards

     (3,824     (8,724

Stock-based compensation expense

     15,732        14,010   

Other

     (418     51   

Changes in:

    

Accounts receivable

     3,781        2,864   

Merchandise inventories

     37,424        (53,746

Prepaid catalog expenses

     (997     (1,706

Prepaid expenses and other assets

     (7,683     (21,439

Accounts payable

     (113,510     (25,030

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

     (20,875     (51,387

Customer deposits

     (22,465     (3,106

Deferred rent and lease incentives

     9,439        8,260   

Income taxes payable

     (59,285     (24,155
  

 

 

   

 

 

 

Net cash used in operating activities

     (72,660     (67,071
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (28,149     (40,384

Other

     294        5   
  

 

 

   

 

 

 

Net cash used in investing activities

     (27,855     (40,379
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under revolving line of credit

     100,000        60,000   

Repurchase of common stock

     (40,639     (52,562

Payment of dividends

     (34,423     (31,934

Tax withholdings related to stock-based awards

     (22,904     (21,734

Excess tax benefit related to stock-based awards

     3,824        8,724   

Proceeds related to stock-based awards

     995        1,836   

Other

     (48     -   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     6,805        (35,670
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     (720     (956

Net decrease in cash and cash equivalents

     (94,430     (144,076

Cash and cash equivalents at beginning of period

     193,647        222,927   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 99,217      $ 78,851   
  

 

 

   

 

 

 

 

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Exhibit 1

 

Reconciliation of 1st Quarter GAAP to Non-GAAP Operating Income and Operating Margin By Segment*

($ in thousands)

 

     E-commerce     Retail     Unallocated     Total  
     Q1 16     Q1 15     Q1 16     Q1 15     Q1 16     Q1 15     Q1 16     Q1 15  

Net Revenues

  $ 576,234      $ 532,573        $ 521,583      $ 498,103       $ -         $ -         $ 1,097,817      $ 1,030,676   

GAAP Operating Income/(Expense)

    131,545        127,574        30,125        28,126        (98,145)        (83,772)        63,525        71,928   

GAAP Operating Margin

    22.8%        24.0%        5.8%        5.6%        (8.9%)        (8.1%)        5.8%        7.0%   
                                                                 

Unusual Business Events (1)

    -        -        -        -        13,221        -        13,221        -   

Non-GAAP Operating Income/ (Expense) Excluding Unusual Business Events (2)

  $ 131,545      $ 127,574        $ 30,125      $ 28,126       $ (84,924)       $ (83,772)       $ 76,746      $ 71,928   

Non-GAAP Operating Margin (2)

    22.8%        24.0%        5.8%        5.6%        (7.7%)        (8.1%)        7.0%        7.0%   
                                                                 

 

  * 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 GAAP to Non-GAAP

Diluted Earnings Per Share**

(Totals rounded to the nearest cent per diluted share)

 

     

        Q1 16

        ACT

        

    Q2 16

    GUID

        

    FY 16  

    GUID  

2016 GAAP Diluted EPS

           $0.44           $0.54 - $0.60           $3.41 - $3.56  

Impact of Unusual Business Events (1)

           $0.09             -             $0.09  
2016 Non-GAAP Diluted EPS Excluding Unusual Business Events (2)            $0.53             $0.54 - $0.60             $3.50 - $3.65  

 

                          
     

        Q1 15

        ACT

        

    Q2 15

    ACT

        

    FY 15  

    ACT  

2015 GAAP Diluted EPS            $0.48             $0.58             $3.37  

 

 

  ** 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 Statistics

 

     

Store Count

          Avg. Leased Square
Footage Per Store
 
      Jan. 31, 2016      Openings      Closings     May 1, 2016      May 3, 2015           May 1, 2016      May 3, 2015  

Williams-Sonoma

     239         2         -        241         241            6,600         6,600   

Pottery Barn

     197         3         -        200         198            13,800         13,700   

Pottery Barn Kids

     89         2         (1     90         87            7,500         7,500   

West Elm

     87         -         -        87         72            13,200         13,600   

Rejuvenation

     6         -         -        6         5            9,000         10,000   

Total

     618         7         (1     624         603              10,000         9,900   
                                                                    

 

          Jan. 31, 2016           May 1, 2016           May 3, 2015  
Total store selling square footage        3,827,000            3,867,000            3,709,000   
Total store leased square footage        6,163,000            6,218,000            5,998,000   

    

Notes:

  (1) Impact of Unusual Business Events – During Q1 16, we incurred severance-related reorganization charges due to the reduction of headcount primarily in our corporate functions of approximately $13 million, or $0.09 per diluted share. These charges were recorded as SG&A expense within the unallocated segment.
  (2) SEC Regulation G – Non-GAAP Information – These tables include non-GAAP operating income, operating margin 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 and FY 16 guidance 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.

 

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