Q2 revenues grow 30.7% with comparable brand
revenue growth of 29.8%, 2YR comp of 40.3% Q2 GAAP operating margin
of 16.6%; Q2 Non-GAAP operating margin expansion of 360bps to 16.7%
Q2 GAAP diluted EPS of $3.21; Q2 Non-GAAP diluted EPS of $3.24,
increasing 80% Quarterly dividend increase of 20%; new stock
repurchase authorization of $1.25 billion Raises full-year 2021 and
long-term outlook
Williams-Sonoma, Inc. (NYSE: WSM), the world’s largest
digital-first, design-led and sustainable home retailer, today
announced operating results for the second fiscal quarter ended
August 1, 2021 (“Q2 21”) versus the second fiscal quarter ended
August 2, 2020 (“Q2 20”).
"We are proud to report another quarter of outperformance with a
30% comp, strong growth across all brands and channels, and 360
basis points of operating margin expansion. These second quarter
results demonstrate the success of our growth strategies and the
earnings power of our company. We have an advantage in the industry
due to our exclusive in-house design capability, our channel
strategy which is digital-first but not digital only, and our
values - with sustainability and equity underlying all that we do,"
said Laura Alber, President and Chief Executive Officer.
"The momentum we are seeing in our business and our winning
positioning set us up to continue to take share in a fractured
market. We do not see any evidence that growth trends are waning,
and in fact, we see favorability in the macro environment as more
people prioritize their homes and home décor. We believe we are at
the intersection of a transformative change that will accelerate
the growth of our industry, and our market share within the
industry. In addition, our growth strategies are gaining traction
faster than we predicted, and our key differentiators are further
distancing us from our competition." Alber continued.
Alber concluded, "We see a clear path to beating our previous
revenue and profitability targets and we are raising our full year
revenue outlook again, with revenue growth now expected to be in
the high teens to low twenties and operating margins now expected
to be in the range of 16% to 17%. Given our increased optimism, we
now expect to achieve our long-term goal of $10 billion in revenues
in 2024, one year faster than previously expected, and with higher
profitability, which will now be at or above our increased FY21
operating margin."
SECOND QUARTER 2021
- Revenues grow 30.7%, with strong growth across all brands and
channels, including ecommerce holding at 65% of total company
revenues
- Comparable brand revenue growth of 29.8%, including West Elm at
51.1%, Pottery Barn at 29.6%, Pottery Barn Kids and Teen at 18.0%,
and Williams Sonoma at 6.4% on top of a 29.4% last year
- Ecommerce and retail comparable brand revenue growth on a
two-year basis were 58.0% and 56.5%, respectively
- GAAP and non-GAAP gross margin of 44.1%, expanding 710bps and
driven by higher year-over-year merchandise margins as well as
occupancy leverage of approximately 210bps; occupancy costs were
$176 million
- GAAP operating margin of 16.6%; non-GAAP operating margin of
16.7%, leveraging approximately 360bps
- GAAP diluted EPS of $3.21; non-GAAP diluted EPS of $3.24,
increasing 80% over last year
- Maintaining strong liquidity position of $655 million in cash
and over $475 million in operating cash flow, enabling the company
to repurchase an additional $135 million in shares in the second
quarter and over $450 million year-to-date. We also announced in a
separate release today, an additional 20% quarterly dividend
increase to $0.71, and a new stock repurchase authorization raising
our existing authorization from the approximate $500 million
remaining to $1.25 billion.
OUTLOOK
Fiscal Year 2021
Given the strength of our business year-to-date and the macro
trends that we believe will continue to benefit our business, we
are raising our fiscal year 2021 outlook to high-teens to
low-twenties net revenue growth and non-GAAP operating margin
between 16% to 17%.
Long-Term
For the long-term, we are planning for net revenue growth of
mid-to-high single digits with an accelerated path to $10 billion
in net revenues now over the next four years. Our continued 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 by 2024 while maintaining at
least fiscal year end 2021 non-GAAP operating margins. This
reflects reaching our long-term revenue outlook one year faster,
and with higher profitability.
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today,
August 25, 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.
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 impact of inventory write-offs, the
acquisition of Outward, Inc., and asset impairment 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; macro trends; our ability to continue to improve
performance; our focus on operational excellence; our ability to
improve customers’ experience; our growth strategies; our optimism
about the future; our ability to maximize growth and maintain high
profitability; our fiscal year 2021 outlook 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 continuing 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; the
impact of inflation on consumer spending; the potential for
increased corporate income taxes; 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, 2021 and all subsequent quarterly reports on Form
10-Q and current reports on Form 8-K. We have not filed our Form
10-Q for the quarter ended August 1, 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-Q. 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 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
Condensed Consolidated
Statements of Earnings (unaudited)
Thirteen Weeks Ended
Twenty-six Weeks Ended
August 1, 2021
August 2, 2020
August 1, 2021
August 2, 2020
% of
% of
% of
% of
In thousands, except per share amounts
$
Revenues
$
Revenues
$
Revenues
$
Revenues
Net revenues
$
1,948,339
100
%
$
1,490,777
100
%
$
3,697,368
100
%
$
2,725,980
100
%
Cost of goods sold
1,089,951
55.9
939,575
63.0
2,086,127
56.4
1,760,518
64.6
Gross profit
858,388
44.1
551,202
37.0
1,611,241
43.6
965,462
35.4
Selling, general and administrative
expenses
535,288
27.5
365,841
24.5
1,012,964
27.4
731,456
26.8
Operating income
323,100
16.6
185,361
12.4
598,277
16.2
234,006
8.6
Interest (income) expense, net
(39
)
—
6,464
0.4
1,833
—
8,623
0.3
Earnings before income taxes
323,139
16.6
178,897
12.0
596,444
16.1
225,383
8.3
Income taxes
77,069
4.0
44,333
3.0
122,572
3.3
55,396
2.0
Net earnings
$
246,070
12.6
%
$
134,564
9.0
%
$
473,872
12.8
%
$
169,987
6.2
%
Earnings per share (EPS):
Basic
$
3.29
$
1.73
$
6.29
$
2.19
Diluted
$
3.21
$
1.70
$
6.11
$
2.16
Shares used in calculation of
EPS:
Basic
74,786
77,783
75,293
77,522
Diluted
76,584
79,264
77,516
78,841
2nd Quarter Net Revenues and
Comparable Brand Revenue Growth by Concept*
Net Revenues
Comparable Brand
Revenue
(Millions)
Growth
Q2 21
Q2 20
Q2 21
Q2 20
Pottery Barn
$
732
$
563
29.6
%
8.1
%
West Elm
580
381
51.1
7.0
Williams Sonoma
255
243
6.4
29.4
Pottery Barn Kids and Teen
274
236
18.0
4.8
Other**
107
68
N/A
N/A
Total
$
1,948
$
1,491
29.8
%
10.5
%
* 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 Q2 2021 and Q2 2020. Comparable
stores that were temporarily closed due to COVID-19 were not
excluded from the comparable stores calculation.
** Primarily consists of net revenues from
our international franchise operations, Rejuvenation and Mark and
Graham.
Condensed Consolidated Balance
Sheets (unaudited)
In thousands, except per share amounts
August 1, 2021
January 31, 2021
August 2, 2020
Assets
Current assets
Cash and cash equivalents
$
655,211
$
1,200,337
$
947,760
Accounts receivable, net
141,814
143,728
128,737
Merchandise inventories, net
1,170,561
1,006,299
1,042,340
Prepaid expenses
85,587
93,822
109,495
Other current assets
20,537
22,894
27,098
Total current assets
2,073,710
2,467,080
2,255,430
Property and equipment, net
875,295
873,894
887,401
Operating lease right-of-use assets
1,052,617
1,086,009
1,146,229
Deferred income taxes, net
58,848
61,854
37,789
Goodwill
85,421
85,446
85,419
Other long-term assets, net
99,146
87,141
75,028
Total assets
$
4,245,037
$
4,661,424
$
4,487,296
Liabilities and Stockholders'
equity
Current liabilities
Accounts payable
$
601,879
$
542,992
$
373,086
Accrued expenses
224,089
267,592
158,407
Gift card and other deferred revenue
403,409
373,164
292,684
Income taxes payable
61,335
69,476
28,502
Current debt
—
299,350
—
Borrowings under revolving line of
credit
—
—
487,823
Operating lease liabilities
213,784
209,754
221,575
Other current liabilities
74,331
85,672
102,086
Total current liabilities
1,578,827
1,848,000
1,664,163
Deferred lease incentives
18,359
20,612
24,684
Long-term debt
—
—
298,995
Long-term operating lease liabilities
994,165
1,025,057
1,080,622
Other long-term liabilities
126,967
116,570
85,910
Total liabilities
2,718,318
3,010,239
3,154,374
Stockholders' equity
Preferred stock: $0.01 par value; 7,500
shares authorized, none issued
—
—
—
Common stock: $0.01 par value; 253,125
shares authorized; 74,426, 76,340, and 77,796 shares issued and
outstanding at August 1, 2021, January 31, 2021 and August 2, 2020,
respectively
745
764
778
Additional paid-in capital
569,734
638,375
608,892
Retained earnings
964,000
1,019,762
736,772
Accumulated other comprehensive loss
(7,049
)
(7,117
)
(12,921
)
Treasury stock, at cost
(711
)
(599
)
(599
)
Total stockholders' equity
1,526,719
1,651,185
1,332,922
Total liabilities and stockholders'
equity
$
4,245,037
$
4,661,424
$
4,487,296
Retail Store Data
(unaudited)
May 2, 2021
Openings
Closings
August 1, 2021
August 2, 2020
Williams Sonoma
195
3
(2
)
196
210
Pottery Barn
195
1
(1
)
195
201
West Elm
121
2
—
123
121
Pottery Barn Kids
57
—
—
57
72
Rejuvenation
10
—
—
10
10
Total
578
6
(3
)
581
614
Condensed Consolidated
Statements of Cash Flows (unaudited)
Twenty-six Weeks Ended
In thousands
August 1, 2021
August 2, 2020
Cash flows from operating
activities:
Net earnings
$
473,872
$
169,987
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization
96,687
93,120
Loss on disposal/impairment of assets
455
25,408
Amortization of deferred lease
incentives
(2,254
)
(2,975
)
Non-cash lease expense
105,739
108,448
Deferred income taxes
(7,037
)
(2,229
)
Tax benefit related to stock-based
awards
10,302
12,694
Stock-based compensation expense
46,260
33,395
Other
(274
)
255
Changes in:
Accounts receivable
2,002
(16,740
)
Merchandise inventories
(163,621
)
60,055
Prepaid expenses and other assets
(4,622
)
(30,968
)
Accounts payable
48,457
(141,602
)
Accrued expenses and other liabilities
(43,653
)
12,117
Gift card and other deferred revenue
30,308
2,936
Operating lease liabilities
(108,791
)
(113,489
)
Income taxes payable
(8,162
)
5,988
Net cash provided by operating
activities
475,668
216,400
Cash flows from investing
activities:
Purchases of property and equipment
(78,281
)
(76,123
)
Other
97
241
Net cash used in investing
activities
(78,184
)
(75,882
)
Cash flows from financing
activities:
Repurchases of common stock
(451,388
)
—
Repayment of long-term debt
(300,000
)
—
Tax withholdings related to stock-based
awards
(100,160
)
(29,589
)
Payment of dividends
(91,069
)
(79,274
)
Borrowings under revolving line of
credit
—
487,823
Debt issuance costs
—
(1,050
)
Net cash (used in) provided by
financing activities
(942,617
)
377,910
Effect of exchange rates on cash and cash
equivalents
7
(2,830
)
Net (decrease) increase in cash and cash
equivalents
(545,126
)
515,598
Cash and cash equivalents at beginning of
period
1,200,337
432,162
Cash and cash equivalents at end of
period
$
655,211
$
947,760
Exhibit 1
2nd Quarter GAAP to Non-GAAP
Reconciliation
(unaudited)
(Dollars in thousands, except per
share data)
Thirteen Weeks Ended
Twenty-six Weeks Ended
August 1, 2021
August 2, 2020
August 1, 2021
August 2, 2020
$
% of
$
% of
$
% of
$
% of
revenues
revenues
revenues
revenues
Gross profit
$
858,388
44.1
%
$
551,202
37.0
%
$
1,611,241
43.6
%
$
965,462
35.4
%
Inventory write-off 1
—
—
—
11,378
Non-GAAP gross profit
$
858,388
44.1
%
$
551,202
37.0
%
$
1,611,241
43.6
%
$
976,840
35.8
%
Selling, general and administrative
expenses
$
535,288
27.5
%
$
365,841
24.5
%
$
1,012,964
27.4
%
$
731,456
26.8
%
Outward-related 2
(2,757
)
(3,341
)
(5,596
)
(6,699
)
Asset impairment 3
—
(6,355
)
—
(21,975
)
Non-GAAP selling, general and
administrative expenses
$
532,531
27.3
%
$
356,145
23.9
%
$
1,007,368
27.2
%
$
702,782
25.8
%
Operating income
$
323,100
16.6
%
$
185,361
12.4
%
$
598,277
16.2
%
$
234,006
8.6
%
Outward-related 2
2,757
3,341
5,596
6,699
Inventory write-off 1
—
—
—
11,378
Asset impairment 3
—
6,355
—
21,975
Non-GAAP operating income
$
325,857
16.7
%
$
195,057
13.1
%
$
603,873
16.3
%
$
274,058
10.1
%
$
Tax rate
$
Tax rate
$
Tax rate
$
Tax rate
Income taxes
$
77,069
23.9
%
$
44,333
24.8
%
$
122,572
20.6
%
$
55,396
24.6
%
Outward-related 2
462
451
973
1,192
Inventory write-off 1
—
—
—
2,940
Asset impairment 3
—
1,287
—
5,324
Non-GAAP income taxes
$
77,531
23.8
%
$
46,071
24.4
%
$
123,545
20.5
%
$
64,852
24.4
%
Diluted EPS
$
3.21
$
1.70
$
6.11
$
2.16
Outward-related 2
0.03
0.04
0.06
0.07
Inventory write-off 1
—
—
—
0.11
Asset impairment 3
—
0.06
—
0.21
Non-GAAP diluted EPS*
$
3.24
$
1.80
$
6.17
$
2.54
∗ Per share amounts may not sum due to
rounding to the nearest cent per diluted share
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:
- During year-to-date 2020, 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.
- During Q2 2021 and year-to-date 2021, we incurred approximately
$2.8 million and $5.6 million, respectively, associated with
acquisition-related compensation expense and the amortization of
acquired intangibles for Outward, Inc. During Q2 2020 and
year-to-date 2020, we incurred approximately $3.3 million and $6.7
million, respectively, associated with acquisition-related
compensation expense and the amortization of acquired intangibles
for Outward, Inc.
- During Q2 2020 and year-to-date 2020, we incurred approximately
$6.4 million and $22.0 million, respectively, of expense associated
with store asset impairments due to the impact that COVID-19 had on
our retail stores.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210825005697/en/
Julie Whalen EVP, Chief Financial Officer – (415) 616 8524 -or-
Investor Relations – (415) 616 8571
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