Williams-Sonoma, Inc. (NYSE: WSM) today announced operating
results for the third fiscal quarter ended October 30, 2016 (“Q3
16”) versus the third fiscal quarter ended November 1, 2015 (“Q3
15”).
3rd QUARTER 2016 RESULTS
-
Q3 16 net revenues grew 1.1% to $1.245 billion versus
$1.232 billion in Q3 15 with comparable brand revenue decreasing
0.4%.
-
Q3 16 operating margin was 8.8% versus 9.0% in Q3 15. Excluding
unusual business events due to severance-related reorganization
charges (see Note 1 in Exhibit 1), non-GAAP operating margin was
8.9% in Q3 16. See Exhibit 1 for a reconciliation of GAAP to
non-GAAP operating margin.
-
Q3 16 diluted earnings per share (“EPS”) was $0.78 versus $0.77 in
Q3 15. Excluding unusual business events due to severance-related
reorganization charges of approximately $0.01 per diluted share,
non-GAAP EPS was $0.79 in Q3 16. See Exhibit 1 for a reconciliation
of GAAP to non-GAAP EPS.
-
Cash returned to stockholders totaled $72 million, comprising $39
million in stock repurchases and $33 million in dividends.
Laura Alber, President and Chief Executive Officer,
commented: “Our third quarter performance demonstrates our
competitive strengths – our differentiated portfolio of brands and
profitable multi-channel business model – as well as the ongoing
success of our strategic initiatives that we have seen this year.
We saw continued double-digit growth in West Elm, our newer
businesses Rejuvenation and Mark and Graham, and our international
company-owned businesses. We also made additional progress across
our supply chain and continued to reduce inventory, which resulted
in better gross margins, allowing us to meet our earnings
commitment at the high end of our guidance range, despite a more
difficult retail environment.”
Alber continued: “Although the current environment is less
certain, we remain focused on what we can control, and we are
confident that the ongoing progress on our strategic initiatives
will improve service for our customers and will drive long-term
sustainable profitable growth for our shareholders.”
Net revenues increased to $1.245 billion in Q3 16 from
$1.232 billion in Q3 15.
Comparable brand revenue in Q3 16 decreased 0.4% compared
to 4.5% growth in Q3 15 as shown in the table below:
3rd Quarter Comparable
Brand Revenue Growth by Concept*
Q3 16
Q3 15 Pottery Barn
(4.6%) 2.0%
Williams-Sonoma 0.1% 1.2% West Elm 12.0% 15.7% Pottery Barn Kids
(1.0%) 4.7% PBteen (10.9%)
(0.9%)
Total
(0.4%)
4.5% * See the Company’s 10-K and 10-Q filings
for the definition of comparable brand revenue.
E-commerce net revenues in Q3 16 increased 3.3% to $649
million from $628 million in Q3 15. E-commerce net revenues
generated 52.1% of total company net revenues in Q3 16 and 51.0% of
total company net revenues in Q3 15.
Retail net revenues in Q3 16 decreased 1.2% to $597
million from $604 million in Q3 15.
Operating margin in Q3 16 was 8.8% compared to 9.0% in Q3
15. Excluding unusual business events, non-GAAP operating margin
was 8.9% in Q3 16:
-
Gross margin was 36.8% in Q3 16 versus 36.6% in Q3
15.
-
Selling, general and administrative (“SG&A”) expenses were $348
million, or 28.0% of net revenues in Q3 16, versus $341 million, or
27.6% of net revenues in Q3 15. Excluding unusual business events
due to severance-related reorganization charges of approximately
$1.2 million, non-GAAP SG&A expenses were $347 million, or
27.9% of net revenues, in Q3 16.
EPS in Q3 16 was $0.78 versus $0.77 in Q3 15. Excluding
unusual business events, non-GAAP EPS was $0.79 in Q3 16.
Merchandise inventories at the end of Q3 16 decreased
3.5% to $1.064 billion from $1.102 billion at the end of
Q3 15.
STOCK REPURCHASE PROGRAM
During Q3 16, we repurchased 771,327 shares of common stock at
an average cost of $50.56 per share and a total cost of
approximately $39 million. As of October 30, 2016, there was
approximately $447 million remaining under our current stock
repurchase program.
FISCAL YEAR 2016 FINANCIAL GUIDANCE
4th Quarter 2016 Guidance Financial
Highlights
Total Net Revenues (millions)
$1,570 – $1,650 Comparable Brand Revenue Growth/(Decrease)
(1%) – 4% Diluted EPS $1.45 – $1.55
Fiscal Year 2016 Guidance Financial
Highlights
Total Net Revenues (millions) $5,070 – $5,150 Comparable
Brand Revenue Growth 1% – 2% Non-GAAP Operating Margin* 9.4% – 9.6%
Non-GAAP Diluted EPS** $3.35 – $3.45 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 $14 million, or
0.3% of operating margin during Q1 2016
and Q3 2016. Including these charges,
GAAP operating margin guidance would be
9.1% to 9.3%.
** Excludes severance-related
reorganization charges of approximately $14 million, or
$0.10 per diluted share during Q1 2016 and
Q3 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 5 (2) 200 Pottery Barn Kids 89 2
(4)
87 West Elm 87 13 (2) 98 Rejuvenation
6 1
-
7
Total
618
26
(18)
626
* 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,
November 17, 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.
SEC REGULATION G — NON-GAAP INFORMATION
This press release includes non-GAAP SG&A, operating income,
operating margin and diluted EPS. These non-GAAP financial measures
exclude the impact of severance-related reorganization charges in
Q1 16 and Q3 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: the progress on our strategic
initiatives; our growth drivers; our future financial guidance,
including Q4 16 and FY 2016 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 Q3 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 quarterly reports on
Form 10-Q and current reports on Form 8-K. All forward-looking
statements in this press release are based on information available
to us as of the date hereof, and we assume no obligation to update
these forward-looking statements.
ABOUT WILLIAMS-SONOMA, INC.
Williams-Sonoma, Inc. is a specialty retailer of high-quality
products for the home. These products, representing eight distinct
merchandise strategies – Williams-Sonoma, 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 635 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
October 30, 2016 and November 1, 2015 (Dollars and shares in
thousands, except per share amounts)
3rd Quarter
2016
2015
$
% of Revenues
$
% of Revenues
E-commerce net revenues $ 648,743
52.1 % $ 628,191 51.0 %
Retail net revenues 596,642
47.9 603,891
49.0
Net revenues
1,245,385
100.0
1,232,082
100.0 Cost of goods sold 787,162
63.2 780,894
63.4
Gross profit 458,223
36.8 451,188 36.6 Selling, general and
administrative expenses 348,244
28.0 340,505
27.6
Operating income 109,979
8.8 110,683 9.0 Interest (income)
expense, net 488 -
342 -
Earnings
before income taxes 109,491 8.8 110,341
9.0 Income taxes 40,113
3.2 39,859
3.2
Net earnings $ 69,378
5.6 % $
70,482 5.7
% Earnings per share (EPS): Basic $0.78 $0.78
Diluted $0.78 $0.77
Shares used in calculation of
EPS: Basic 88,382 90,437 Diluted 89,144 91,801
Williams-Sonoma, Inc. Condensed Consolidated Statements
of Earnings (unaudited) Thirty-nine weeks ended October 30,
2016 and November 1, 2015 (Dollars and shares in thousands,
except per share amounts)
Year-to-Date
2016 2015 $
% of Revenues
$
% of Revenues
E-commerce net revenues $ 1,824,660
52.1 % $ 1,730,677 51.1 %
Retail net revenues 1,677,571
47.9 1,659,109
48.9
Net revenues 3,502,231
100.0 3,389,786 100.0 Cost of goods
sold 2,240,952 64.0
2,153,132 63.5
Gross profit 1,261,279 36.0
1,236,654 36.5 Selling, general and
administrative expenses 1,004,499
28.7 970,700
28.6
Operating income 256,780
7.3 265,954 7.8 Interest (income)
expense, net 587 -
625 -
Earnings
before income taxes 256,193 7.3 265,329
7.8 Income taxes 95,433
2.7 96,389
2.8
Net earnings $ 160,760
4.6 % $
168,940 5.0
% Earnings per share (EPS): Basic $1.81 $1.85
Diluted $1.79 $1.82
Shares used in calculation of
EPS: Basic 88,906 91,129 Diluted 89,764 92,576
Williams-Sonoma, Inc. Condensed Consolidated Balance
Sheets (unaudited) (Dollars and shares in thousands, except
per share amounts)
Oct. 30, 2016
Jan. 31, 2016 Nov. 1,
2015 Assets Current assets Cash and cash equivalents $
75,381 $ 193,647 $ 72,264 Accounts receivable, net 96,386 79,304
88,535 Merchandise inventories, net 1,063,747 978,138 1,102,349
Prepaid catalog expenses 25,329 28,919 35,762 Prepaid expenses
74,195 44,654 59,276 Deferred income taxes, net - - 130,684 Other
assets 12,176 11,438 12,966
Total current assets 1,347,214
1,336,100 1,501,836
Property and equipment, net 918,020 886,813 883,459
Non-current deferred income taxes, net 136,558 141,784 2,560 Other
assets, net 51,540 52,730 47,821
Total assets $ 2,453,332
$ 2,417,427 $ 2,435,676
Liabilities and stockholders' equity Current
liabilities Accounts payable $ 450,144 $ 447,412 $ 395,033 Accrued
salaries, benefits and other 111,445 127,122 115,720 Customer
deposits 289,737 296,827 293,317 Borrowings under revolving line of
credit 125,000 - 200,000 Income taxes payable 1,122 67,052 35,317
Other liabilities 53,423 58,014
55,152
Total current liabilities
1,030,871 996,427
1,094,539 Deferred rent and lease incentives
192,948 173,061 174,059 Other long-term obligations 70,031
49,713 50,545
Total
liabilities 1,293,850
1,219,201 1,319,143
Stockholders’ equity
Preferred stock: $.01 par value; 7,500
shares authorized; none issued
- - -
Common stock: $.01 par value; 253,125
shares authorized; 88,014, 89,563 and 90,010 shares
issued and outstanding at October 30, 2016, January 31,
2016 and November 1, 2015, respectively
881 896 901 Additional paid-in capital 547,513 541,307 538,737
Retained earnings 623,243 668,545 585,928 Accumulated other
comprehensive loss (10,772 ) (10,616 ) (7,127 ) Treasury stock, at
cost (1,383 ) (1,906 ) (1,906 )
Total
stockholders’ equity 1,159,482
1,198,226 1,116,533
Total liabilities and stockholders' equity
$ 2,453,332 $ 2,417,427
$ 2,435,676 Williams-Sonoma,
Inc. Condensed Consolidated Statements of Cash Flows
(unaudited) Thirty-nine weeks ended October 30, 2016 and
November 1, 2015 (Dollars in thousands)
Year-to-Date
2016 2015 Cash
flows from operating activities Net earnings $ 160,760 $
168,940
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 127,745 125,093 Loss on
disposal/impairment of assets 1,852 3,558 Amortization of deferred
lease incentives (18,789 ) (18,326 ) Deferred income taxes (14,461
) (13,526 ) Tax benefit related to stock-based awards 23,571 29,603
Excess tax benefit related to stock-based awards (4,817 ) (14,283 )
Stock-based compensation expense 37,975 36,182 Other (647 ) 91
Changes in: Accounts receivable (17,400 ) (21,875 )
Merchandise inventories (82,410 ) (216,294 ) Prepaid catalog
expenses 3,591 (1,820 ) Prepaid expenses and other assets (29,205 )
(20,909 ) Accounts payable (17,403 ) (10,179 ) Accrued salaries,
benefits and other current and long-term liabilities (507 ) (13,494
) Customer deposits (7,445 ) 32,016 Deferred rent and lease
incentives 25,969 25,561 Income taxes payable (65,915 )
2,707
Net cash provided by operating
activities 122,464 93,045
Cash flows from investing activities:
Purchases of property and equipment (127,169 ) (136,069 ) Other
370 535
Net cash used in investing
activities (126,799 )
(135,534 ) Cash flows from financing
activities: Borrowings under revolving line of credit 125,000
200,000 Repurchase of common stock (115,167 ) (196,497 ) Payment of
dividends (100,854 ) (96,020 ) Tax withholdings related to
stock-based awards (26,518 ) (31,019 ) Excess tax benefit related
to stock-based awards 4,817 14,283 Net proceeds related to
stock-based awards 1,532 2,647 Repayment of long-term obligations -
(1,968 ) Other (48 ) -
Net cash used in
financing activities (111,238 )
(108,574 ) Effect of exchange rates on cash
and cash equivalents (2,693 ) 400 Net decrease in cash and cash
equivalents (118,266 ) (150,663 ) Cash and cash equivalents at
beginning of period 193,647 222,927
Cash and cash equivalents at end of period $
75,381 $ 72,264
Exhibit 1
3rd Quarter Operating
Margin By Segment*
($ in thousands)
E-commerce
Retail Unallocated
Total
Q3 16
Q3 15
Q3 16
Q3 15
Q3 16
Q3 15
Q3 16
Q3 15
Net Revenues $
648,743
$
628,191
$
596,642
$
603,891
$ - $ - $ 1,245,385
$ 1,232,082
GAAP Operating Income/(Expense)
150,164
137,828 47,080
49,213 (87,265 )
(76,358
) 109,979 110,683
GAAP Operating Margin
23.1 %
21.9 % 7.9
% 8.1 %
(7.0 %) (6.2
%) 8.8 %
9.0 % Unusual Business Events (1)
- -
- -
1,185 -
1,185 -
Non-GAAP Operating Income/(Expense)
Excluding UnusualBusiness Events (2)
$
150,164
$
137,828
$
47,080
$
49,213
$
(86,080
)
$
(76,358
)
$
111,164
$
110,683
Non-GAAP Operating Margin (2)
23.1 %
21.9 % 7.9 %
8.1 %
(6.9 %) (6.2 %)
8.9 %
9.0 %
* 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 16ACT
Q2 16ACT
Q3 16ACT
Q4 16GUID
FY 16GUID
2016 GAAP Diluted EPS
$0.44
$0.58
$0.78
$1.45 - $1.55
$3.25 - $3.35
Impact of Unusual Business Events (1)
$0.09
- $0.01
- $0.10
2016 Non-GAAP Diluted EPS Excluding Unusual Business Events
(2)
$0.53
$0.58
$0.79 $1.45 -
$1.55 $3.35 - $3.45
Q1 15ACT
Q2 15ACT
Q3 15ACT
Q4 15ACT
FY 15ACT
2015 GAAP Diluted EPS
$0.48 $0.58
$0.77
$1.55 $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 FootagePer
Store
Jul. 31, 2016
Openings
Closings
Oct. 30, 2016
Nov. 1, 2015
Oct. 30, 2016
Nov. 1, 2015
Williams-Sonoma 241 1
(1) 241 243 6,600
6,600 Pottery Barn 201 1 - 202 200 13,800
13,700 Pottery Barn Kids 89 - - 89 90 7,500 7,500 West Elm 89 10
(2) 97 84 13,300 13,400 Rejuvenation 6
- - 6 6
9,300 9,000
Total
626 12
(3) 635 623
10,000 9,900
Jul. 31, 2016
Oct. 30, 2016
Nov. 1, 2015
Total store selling square footage 3,894,000 3,966,000 3,839,000
Total store leased square footage 6,262,000 6,381,000 6,188,000
Notes:
(1) Impact of Unusual Business Events – During Q1 16 and Q3 16, we
incurred severance-related reorganization charges due to headcount
reduction primarily in our corporate functions totaling
approximately $14 million, or $0.10 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161117006319/en/
WILLIAMS-SONOMA, INC.Julie P. WhalenEVP, Chief Financial
Officer(415) 616-8524-or-Beth Potillo-MillerSVP, Finance &
Corporate TreasurerInvestor Relations(415) 616-8643
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