WSM
$42.85
Williams-Sonoma
($.95)
(2.17%)
Earnings Details
1st Quarter April 2017
Wednesday, May 24, 2017 4:15:12 PM
Tweet Share Watch
Summary

Williams-Sonoma Beats

Williams-Sonoma (WSM) reported 1st Quarter April 2017 earnings of $0.51 per share on revenue of $1.1 billion. The consensus earnings estimate was $0.48 per share. The Earnings Whisper number was $0.50 per share. Revenue grew 1.2% on a year-over-year basis.

The company said it expects second quarter earnings of $0.55 to $0.61 per share on revenue of $1.195 billion to $1.23 billion. The current consensus earnings estimate is $0.59 per share on revenue of $1.19 billion for the quarter ending July 31, 2017. The company also said it continues to expect fiscal year earnings of $3.45 to $3.65 per share on revenue of $5.165 billion to $5.265 billion. The current consensus earnings estimate is $3.54 per share on revenue of $5.20 billion for the year ending January 31, 2018.

Williams-Sonoma Inc is a multi-channel specialty retailer of home furnishings in the United States and Canada.

Results
Reported Earnings
$0.51
Earnings Whisper
$0.50
Consensus Estimate
$0.48
Reported Revenue
$1.11 Bil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Williams-Sonoma, Inc. announces first quarter 2017 resultsNet revenues grow 1.2% with comparable brand revenue growth of 0.1%Pottery Barn comparable brand revenue sequentially improves 270bpsGAAP EPS of $0.45, non-GAAP EPS of $0.51

Williams-Sonoma, Inc. (WSM) today announced operating results for the first fiscal quarter ended April 30, 2017 ("Q1 17") versus the first fiscal quarter ended May 1, 2016 ("Q1 16").

1st QUARTER 2017 RESULTS

-
Q1 17 net revenues grew 1.2% to $1.112 billion versus $1.098 billion
in Q1 16 with comparable brand revenue growth of 0.1%.
-
Q1 17 operating margin was 5.6% versus 5.8% in Q1 16. Excluding
certain items affecting comparability, non-GAAP operating margin was
6.1% in Q1 17 and 7.0% in Q1 16 (see Notes 1 and 2 in Exhibit 1).
See Exhibit 1 for a reconciliation of GAAP to non-GAAP operating
margin.
-
Q1 17 diluted earnings per share ("EPS") was $0.45 versus $0.44 in
Q1 16. Excluding certain items affecting comparability, non-GAAP EPS
was $0.51 in Q1 17 and $0.53 in Q1 16 (see Notes 1-3 in Exhibit 1).
See Exhibit 1 for a reconciliation of GAAP to non-GAAP EPS.
-
Cash returned to stockholders totaled $72 million, comprising $38
million in stock repurchases and $34 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, "In the first quarter, we saw strong sequential improvement in the Pottery Barn brand, demonstrating the effectiveness of the brand initiatives that we are implementing. West Elm, our newer businesses (Rejuvenation and Mark and Graham), and our company-owned global operations delivered another quarter of double-digit growth, and Williams Sonoma started the year off strongly. We also continued to realize positive results from our supply chain initiatives, as we drive continuous improvements across the organization to deliver increased efficiencies and a superior customer experience."

Alber continued, "We remain highly focused on delivering innovative, high-quality products that are inspiring, relevant and competitively priced. We believe that our iconic multi-aesthetic brands and profitable multi-channel model, together with our lifestyle merchandising approach and high-touch service model, create a sustainable competitive advantage. As we continue to make strong progress against our key strategic initiatives, we believe we are well positioned to deliver on both our near and longer-term goals."

Net revenues increased to $1.112 billion in Q1 17 from $1.098 billion in Q1 16.

Comparable brand revenue in Q1 17 increased 0.1% on top of 4.5% in Q1 16 as shown in the table below:

1st Quarter Comparable Brand Revenue
Growth by Concept*
Q1 17
Q1 16
Pottery Barn
(1.4 %)
0.2 %
Williams Sonoma
3.2 %
3.5 %
West Elm
6.0 %
19.0 %
Pottery Barn Kids
(5.7 %)
1.7 %
PBteen
(14.3 %)
1.9 %
Total
0.1 %
4.5 %
* See the Company’s 10-K and 10-Q filings for the definition of
comparable brand revenue.

E-commerce net revenues in Q1 17 increased 0.7% to $581 million from $576 million in Q1 16. E-commerce net revenues generated 52.2% of total company net revenues in Q1 17 and 52.5% of total company net revenues in Q1 16.

Retail net revenues in Q1 17 increased 1.8% to $531 million from $522 million in Q1 16.

Operating margin in Q1 17 was 5.6% compared to 5.8% in Q1 16. Excluding certain items affecting comparability, non-GAAP operating margin was 6.1% in Q1 17 and 7.0% in Q1 16:

-
Gross margin was 35.6% in Q1 17 versus 35.8% in Q1 16.
-
Selling, general and administrative ("SG&A") expenses were $333
million, or 30.0% of net revenues in Q1 17, versus $329 million, or
30.0% of net revenues, in Q1 16. Excluding certain items affecting
comparability, non-GAAP SG&A expenses were $328 million, or 29.5% of
net revenues in Q1 17, and $316 million, or 28.8% of net revenues,
in Q1 16 (see Notes 1 and 2 in Exhibit 1).

The effective income tax rate in Q1 17 was 36.8% versus 37.7% in Q1 16. Excluding certain items affecting comparability, the effective tax rate in Q1 17 was 34.5% (see Note 3 in Exhibit 1). See Exhibit 1 for a reconciliation of GAAP to non-GAAP effective income tax rate. The year-over-year tax rate improvement was driven by the incremental benefits we are seeing from improved profitability across our international operations, which are taxed at a lower tax rate.

EPS in Q1 17 was $0.45 versus $0.44 in Q1 16. Excluding certain items affecting comparability, non-GAAP EPS was $0.51 in Q1 17 and $0.53 in Q1 16 (see Notes 1-3 in Exhibit 1).

Merchandise inventories at the end of Q1 17 increased 9.8% to $1.037 billion from $945 million at the end of Q1 16. On-hand and available for sale inventory grew 3.5%, driven by our higher growth brands. On-hand and available for sale inventory decreased 0.4% across the Pottery Barn brands.

STOCK REPURCHASE PROGRAM

During Q1 17, we repurchased 764,543 shares of common stock at an average cost of $50.16 per share and a total cost of approximately $38 million. As of April 30, 2017, there was approximately $372 million remaining under our current stock repurchase authorization.

FISCAL YEAR 2017 FINANCIAL GUIDANCE

2nd Quarter 2017 Financial Guidance
Total Net Revenues (millions)
$1,195 - $1,230
Comparable Brand Revenue Growth
2% - 5%
Diluted EPS
$0.55 - $0.61
Fiscal Year 2017 Financial Guidance
Total Net Revenues (millions)
$5,165 - $5,265
Comparable Brand Revenue Growth
1% - 3%
Non-GAAP Operating Margin*
9.4% - 9.6%
Non-GAAP Diluted EPS*
$3.45 - $3.65
Income Tax Rate
36.5% - 37.5%
Capital Spending (millions)
$200 - $220
Depreciation and Amortization (millions)
$185 - $195
* Excludes certain items affecting comparability. See Notes 2 and
3 in Exhibit 1. Including
these items, GAAP operating margin guidance would be 9.3% to 9.5%.
See Exhibit 1 for a
reconciliation of GAAP to non-GAAP EPS.
Store Opening and Closing Guidance by Retail Concept*
FY 2016 ACT
FY 2017 GUID
Total
New
Close
End
Williams Sonoma
234
4
(7)
231
Pottery Barn
201
8
(6)
203
West Elm
98
10
(3)
105
Pottery Barn Kids
89
-
(4)
85
Rejuvenation
7
2
-
9
Total
629
24
(20)
633
* Included in the FY 16 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 24, 2017, 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.

SEC REGULATION G -- NON-GAAP INFORMATION

This press release includes non-GAAP SG&A, operating income, operating margin, income taxes, effective tax rate and diluted EPS. These non-GAAP financial measures exclude the impact of severance-related charges in Q1 16, Q3 16 and Q1 17, a one-time tax adjustment associated with intercompany transactions in Q4 16, and tax expense related to the adoption of new accounting rules related to stock-based compensation in Q1 17. 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 17 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 product strategy, our multi-brand, multi-aesthetic strategy, our sustainable competitive advantage; our execution of key strategic initiatives; our ability to deliver on near and longer-term goals; our future financial guidance, including Q2 17 and FY 2017 guidance; our 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 Q1 17; 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 29, 2017 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 retail 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

Williams-Sonoma, Inc.
Condensed Consolidated Statements of Earnings (unaudited)
Thirteen weeks ended April 30, 2017 and May 1, 2016
(Dollars and shares in thousands, except per share amounts)
1st Quarter
2017
2016
$
% of
$
% of
Revenues
Revenues
E-commerce net revenues
$
580,510
52.2 %
$
576,234
52.5 %
Retail net revenues
530,997
47.8
521,583
47.5
Net revenues
1,111,507
100.0
1,097,817
100.0
Cost of goods sold
715,747
64.4
705,300
64.2
Gross profit
395,760
35.6
392,517
35.8
Selling, general and administrative expenses
333,286
30.0
328,992
30.0
Operating income
62,474
5.6
63,525
5.8
Interest (income) expense, net
(103 )
-
(68 )
-
Earnings before income taxes
62,577
5.6
63,593
5.8
Income taxes
23,022
2.1
23,996
2.2
Net earnings
$
39,555
3.6 %
$
39,597
3.6 %
Earnings per share (EPS):
Basic
$0.45
$0.44
Diluted
$0.45
$0.44
Shares used in calculation of EPS:
Basic
86,962
89,298
Diluted
87,710
90,514
Williams-Sonoma, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(Dollars and shares in thousands, except per share amounts)
Apr. 30, 2017
Jan. 29, 2017
May 1, 2016
Assets
Current assets
Cash and cash equivalents
$
93,975
$
213,713
$
99,217
Accounts receivable, net
63,982
88,803
75,364
Merchandise inventories, net
1,037,107
977,505
944,632
Prepaid catalog expenses
23,066
23,625
29,916
Prepaid expenses
62,014
52,882
53,689
Other assets
10,901
10,652
9,844
Total current assets
1,291,045
1,367,180
1,212,662
Property and equipment, net
920,531
923,283
893,640
Deferred income taxes, net
124,977
135,238
131,597
Other assets, net
54,624
51,178
52,469
Total assets
$ 2,391,177
$ 2,476,879
$
2,290,368
Liabilities and stockholders’ equity
Current liabilities
Accounts payable
$
399,336
$
453,710
$
339,392
Accrued salaries, benefits and other liabilities
91,038
130,187
96,577
Customer deposits
289,852
294,276
275,116
Borrowings under revolving line of credit
45,000
-
100,000
Income taxes payable
37,792
23,245
7,764
Other liabilities
49,647
59,838
52,907
Total current liabilities
912,665
961,256
871,756
Deferred rent and lease incentives
195,201
196,188
188,715
Other long-term obligations
73,160
71,215
67,041
Total liabilities
1,181,026
1,228,659
1,127,512
Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized;
-
-
-
none
issued
Common stock: $.01 par value; 253,125 shares authorized;
869
873
894
86,883,
87,325 and 89,350 shares issued and outstanding
at April 30,
2017, January 29, 2017 and May 1, 2016,
respectively
Additional paid-in capital
549,281
556,928
534,414
Retained earnings
671,758
701,702
636,986
Accumulated other comprehensive loss
(10,830 )
(9,903 )
(7,875 )
Treasury stock, at cost
(927 )
(1,380 )
(1,563 )
Total stockholders’ equity
1,210,151
1,248,220
1,162,856
Total liabilities and stockholders’ equity
$ 2,391,177
$ 2,476,879
$
2,290,368
Williams-Sonoma, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
Thirteen weeks ended April 30, 2017 and May 1, 2016
(Dollars in thousands)
Year-to-Date
2017
2016
Cash flows from operating activities
Net earnings
$
39,555
$
39,597
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization
44,950
41,240
Loss on disposal/impairment of assets
519
880
Amortization of deferred lease incentives
(6,477 )
(5,987 )
Deferred income taxes
(3,848 )
(5,796 )
Tax benefit related to stock-based awards
13,742
20,087
Excess tax benefit related to stock-based awards
-
(3,824 )
Stock-based compensation expense
9,817
15,732
Other
(76 )
(418 )
Changes in:
Accounts receivable
24,610
3,781
Merchandise inventories
(60,246 )
37,424
Prepaid catalog expenses
559
(997 )
Prepaid expenses and other assets
(12,472 )
(7,683 )
Accounts payable
(65,990 )
(113,510 )
Accrued salaries, benefits and other liabilities
(47,235 )
(20,875 )
Customer deposits
(4,154 )
(22,465 )
Deferred rent and lease incentives
5,806
9,439
Income taxes payable
14,564
(59,285 )
Net cash used in operating activities
(46,376 )
(72,660 )
Cash flows from investing activities:
Purchases of property and equipment
(32,153 )
(28,149 )
Other
5
294
Net cash used in investing activities
(32,148 )
(27,855 )
Cash flows from financing activities:
Borrowings under revolving line of credit
45,000
100,000
Repurchase of common stock
(38,350 )
(40,639 )
Payment of dividends
(34,189 )
(34,423 )
Tax withholdings related to stock-based awards
(13,780 )
(22,904 )
Excess tax benefit related to stock-based awards
-
3,824
Proceeds related to stock-based awards
-
995
Other
-
(48 )
Net cash provided by (used in) financing activities
(41,319 )
6,805
Effect of exchange rates on cash and cash equivalents
105
(720 )
Net decrease in cash and cash equivalents
(119,738 )
(94,430 )
Cash and cash equivalents at beginning of period
213,713
193,647
Cash and cash equivalents at end of period
$
93,975
$
99,217
Exhibit 1
(Unaudited)
Reconciliation of 1st Quarter GAAP to
Non-GAAP Operating Income and Operating Margin By Segment*
($ in thousands)
E-commerce
Retail
Unallocated
Total
Q1 17
Q1 16
Q1 17
Q1 16
Q1 17
Q1 16
Q1 17
Q1 16
Net Revenues
$
580,510
$
576,234
$
530,997
$
521,583
$
-
$
-
$ 1,111,507
$ 1,097,817
GAAP Operating Income/(Expense)
132,004
131,545
21,714
30,125
(91,244 )
(98,145 )
62,474
63,525
GAAP Operating Margin
22.7 %
22.8 %
4.1 %
5.8 %
(8.2 %)
(8.9 %)
5.6 %
5.8 %
Severance-related Charges(1,2)
-
-
-
-
5,705
13,221
5,705
13,221
Non-GAAP Operating Income/
$
132,004
$
131,545
$
21,714
$
30,125
$
(85,539 )
$
(84,924 )
$
68,179
$
76,746
(Expense) (5)
Non-GAAP Operating Margin(5)
22.7 %
22.8 %
4.1 %
5.8 %
(7.7 %)
(7.7 %)
6.1 %
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 1st Quarter GAAP to
Non-GAAP Effective Tax Rate
($ in thousands)
Q1 17
Q1 16
Earnings Before Income Taxes
$62,577
$63,593
GAAP Income Taxes
23,022
23,996
GAAP Effective Tax Rate
36.8%
37.7%
==================================================================== ==================== ==================== ==================== ==================== ==================== ======= ==================== ==================== ====================
Unfavorable Tax Impact from the Adoption of New Accounting Rules (3)
1,429
-
Non-GAAP Income Taxes Excluding Adoption of New Accounting Rules (5)
$21,593
$23,996
Non-GAAP Effective Tax Rate Excluding Adoption of New Accounting
34.5%
37.7%
Rules (5)
==================================================================== ==================== ==================== ==================== ==================== ==================== ======= ==================== ==================== ====================
Reconciliation of Quarterly and Fiscal Year GAAP to Non-GAAP
Diluted Earnings Per Share**
(Totals rounded to the nearest cent per diluted share)
Q1 17
FY 17
ACT
GUID
2017 GAAP Diluted EPS
$0.45
$3.39 - $3.59
Impact of Severance-related Charges(2)
$0.04
$0.04
Unfavorable Tax Impact from the Adoption of New
$0.02
$0.02
Accounting
Rules (3)
2017 Non-GAAP Diluted EPS (5)
$0.51
$3.45 - $3.65
=============================================== ==================== ==================== ==================== ==================== ==================== ===================================================================================================================================================================== ==================== ==================== ==================== ==================== ==================== ====================
Q1 16
FY 16
ACT
ACT
2016 GAAP Diluted EPS
$0.44
$3.41
Impact of Severance-related Charges(1)
$0.09
$0.10
One-time Favorable Tax Adjustment(4)
-
($0.08)
2016 Non-GAAP Diluted EPS (5)
$0.53
$3.43
=============================================== ==================== ==================== ==================== ==================== ==================== ===================================================================================================================================================================== ==================== ==================== ==================== ==================== ==================== ====================

** 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
Avg. Leased Square Footage
Store Count
Per Store
Jan. 29, 2017
Openings
Closings
Apr. 30, 2017
May 1, 2016
Apr. 30, 2017
May 1, 2016
Williams Sonoma
234
2
(3)
233
241
6,600
6,600
Pottery Barn
201
1
(3)
199
200
13,800
13,800
West Elm
98
1
-
99
87
13,300
13,200
Pottery Barn Kids
89
-
-
89
90
7,400
7,500
Rejuvenation
7
1
-
8
6
8,800
9,000
Total
629
5
(6)
628
624
10,100
10,000
Jan. 29, 2017
Apr. 30, 2017
May 1, 2016
Total store selling square footage
3,951,000
3,942,000
3,867,000
Total store leased square footage
6,359,000
6,341,000
6,218,000

Notes:

(1)
During Q1 16 and Q3 16 we incurred severance-related reorganization
charges due to headcount reduction primarily in our corporate
functions totaling approximately $13 million, or $0.09 per diluted
share, and $1 million, or $0.01 per diluted share, respectively.
These charges were recorded as SG&A expense within the unallocated
segment.
(2)
During Q1 17 we incurred severance-related charges associated with
the previously announced departure of the former President of the
Pottery Barn brands, as well as other severance-related charges, of
approximately $6 million, or $0.04 per diluted share. These charges
were recorded as SG&A expense within the unallocated segment.
(3)
During Q1 17 we incurred tax expense of approximately $1 million, or
$0.02 per diluted share, associated with the adoption of new
accounting rules related to stock-based compensation.
(4)
During Q4 16 we incurred a benefit of approximately $8 million, or
$0.08 per diluted share, related to a one-time tax adjustment
associated with intercompany transactions.
(5)
SEC Regulation G - Non-GAAP Information - These tables include
non-GAAP 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 and FY 17
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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170524006198r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170524006198/en/

SOURCE: Williams-Sonoma, Inc.

WILLIAMS-SONOMA, INC.
Julie P. Whalen, 415-616-8524
EVP, Chief Financial Officer
-or-
Beth Potillo-Miller, 415-616-8643
SVP, Finance & Corporate Treasurer
Investor Relations