Q1 comparable brand revenue -4.9% Q1
operating margin of 19.5%; diluted EPS of $4.07 Without the
benefit of an out-of-period adjustment, Q1 operating margin of
16.6%; diluted EPS of $3.48 Raises full-year operating
margin outlook
Williams-Sonoma, Inc. (NYSE: WSM) today announced operating
results for the first quarter ended April 28, 2024 versus the first
quarter ended April 30, 2023.
“We are pleased to deliver strong results in the first quarter
of 2024, driven by an improving top-line trend and continued
strength in our profitability. We remain committed to executing on
our three key priorities in 2024 – returning to growth, elevating
our world-class customer service, and driving margin,” said Laura
Alber, President and Chief Executive Officer.
FIRST QUARTER 2024 HIGHLIGHTS
- Comparable brand revenue -4.9% with a 2-year comp -10.9% and a
3-year comp -1.4%.
- Gross margin of 48.3%, including a benefit of +290bps from an
out-of-period adjustment. Without this adjustment, gross margin of
45.4%, which increased +690bps compared to LY GAAP basis, driven by
(i) higher merchandise margins of +480bps, (ii) supply chain
efficiencies of +240bps, partially offset by (iii) occupancy
deleverage of -30bps. Occupancy costs of $196 million, -3.2% to LY
GAAP basis.
- Gross margin of 48.3%, including a benefit of +290bps from an
out-of-period adjustment. Without this adjustment, gross margin of
45.4%, which increased +680bps compared to LY non-GAAP basis,
driven by (i) higher merchandise margins of +470bps, (ii) supply
chain efficiencies of +240bps, partially offset by (iii) occupancy
deleverage of -30bps. Occupancy costs of $196 million, -3.1% to LY
non-GAAP basis.
- SG&A rate of 28.8% +170bps to LY GAAP basis driven by
higher advertising spend and incentive compensation. SG&A of
$479 million, +0.7% to LY GAAP basis.
- SG&A rate of 28.8% +310bps to LY non-GAAP basis driven by
higher advertising spend and incentive compensation. SG&A of
$479 million, +6.0% to LY non-GAAP basis.
- Operating income of $324 million with an operating margin of
19.5%, including a benefit of +290bps from an out-of-period
adjustment. Without this adjustment, operating margin of
16.6%.
- Diluted EPS of $4.07 per share, including a benefit of $0.59
per share from an out-of-period adjustment. Without this
adjustment, diluted EPS of $3.48 per share.
- Merchandise inventories -13.1% to the first quarter LY to $1.2
billion.
- Maintained strong liquidity position of $1.3 billion in cash
and operating cash flow of $227 million, enabling the company to
deliver returns to stockholders of $107 million through $63 million
in dividends and $44 million in stock repurchases.
OUT-OF-PERIOD ADJUSTMENT
Subsequent to the filing of our Form 10-K, in April 2024, the
Company determined that it over-recognized freight expense in
fiscal years 2021, 2022 and 2023 for a cumulative amount of $49
million. The Company evaluated the error, both qualitatively and
quantitatively, and determined that no prior interim or annual
periods were materially misstated. The Company then evaluated
whether the cumulative amount of the over-accrual was material to
its projected fiscal 2024 results, and determined the cumulative
amount was not material. Therefore, the Condensed Consolidated
Financial Statements for the thirteen weeks ended April 28, 2024
include an out-of-period adjustment of $49 million to reduce cost
of goods sold and accounts payable, which corrected the cumulative
error on the balance sheet as of January 28, 2024.
OUTLOOK
- We are reiterating our guidance of annual net revenue growth in
the range of -3% to +3% with comps in the range of -4.5% to +1.5%
in fiscal 2024.
- We are raising our guidance on our operating margin for fiscal
2024. We now expect an operating margin between 17.6% to 18.0%,
including the impact of the out-of-period adjustment of 60bps.
Without this adjustment, we expect an operating margin between
17.0% to 17.4% in fiscal 2024.
- For fiscal 2024, we expect annual interest income to be
approximately $40 million and our annual effective tax rate to be
approximately 25.5%.
- Fiscal 2024 is a 53-week year. Our financial statements will be
prepared on a 53-week basis in fiscal 2024 and a 52-week basis in
fiscal 2023. However, we will report comps on a 53-week versus
53-week comparable basis. All other year-over-year comparisons will
be 53-weeks in fiscal 2024 versus 52-weeks in fiscal 2023. We
expect the additional week in fiscal 2024 to contribute 150bps to
net revenue growth and 10bps to operating margin, both of which are
reflected in our guidance.
- Over the long-term, we continue to expect mid-to-high
single-digit annual net revenue growth with an operating margin in
the mid-to-high teens.
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today,
May 22, 2024, at 7:00 A.M. (PT). The call 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 as we cannot do so without unreasonable
efforts due to the potential variability and limited visibility of
excluded items, and for the same reasons, we are unable to address
the probable significance of the unavailable information. These
excluded items include exit costs associated with the closure of
our West Coast manufacturing facility and the exiting of Aperture,
a division of our Outward, Inc. subsidiary, as well as costs
related to reduction-in-force initiatives. 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, among other things, statements in the quotes of our
President and Chief Executive Officer, our updated fiscal year 2024
outlook and long-term financial targets, and statements regarding
our industry trends and business strategies.
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 inflation and measures
to control inflation, including changing interest rates, on
consumer spending; the continuing impact of global conflicts, such
as the conflicts in Ukraine and the Middle East, and shortages of
various raw materials on our global supply chain, retail store
operations and customer demand; labor and material shortages; the
outcome of our growth initiatives; 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; 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, supply chain, product,
transportation 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 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 28, 2024 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
April 28, 2024. 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, Mark and Graham, and GreenRow —
are marketed through e-commerce websites, direct-mail catalogs and
retail stores. These brands are also part of The Key Rewards, our
loyalty and credit card 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 be a
leader in our industry with our values-based culture and commitment
to achieving our sustainability goals. Our company is Good By
Design — we’ve deeply ingrained 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 sustainability efforts, please
visit: https://sustainability.williams-sonomainc.com/
WSM-IR
Condensed Consolidated
Statements of Earnings (unaudited)
For the Thirteen Weeks
Ended
April 28, 2024
April 30, 2023
(In thousands, except per share
amounts)
$
% of Revenues
$
% of Revenues
Net revenues
$
1,660,348
100.0
%
$
1,755,451
100.0
%
Cost of goods sold
857,833
51.7
1,080,392
61.5
Gross profit
802,515
48.3
675,059
38.5
Selling, general and administrative
expenses
478,687
28.8
475,582
27.1
Operating income
323,828
19.5
199,477
11.4
Interest income, net
16,053
1.0
5,498
0.3
Earnings before income taxes
339,881
20.5
204,975
11.7
Income taxes
74,215
4.5
48,444
2.8
Net earnings
$
265,666
16.0
%
$
156,531
8.9
%
Earnings per share (EPS):
Basic
$
4.14
$
2.38
Diluted
$
4.07
$
2.35
Shares used in calculation of
EPS:
Basic
64,206
65,849
Diluted
65,315
66,696
1st Quarter Net Revenues and
Comparable Brand Revenue Growth (Decline)1
Net Revenues
Comparable Brand Revenue
Growth (Decline)
(In millions, except percentages)
Q1 24
Q1 23
Q1 24
Q1 23
Pottery Barn
$
677
$
768
(10.8
)%
(0.4
)%
West Elm
430
452
(4.1
)
(15.8
)
Williams Sonoma
238
239
0.9
(4.4
)
Pottery Barn Kids and Teen
222
216
2.8
(3.3
)
Other2
93
80
N/A
N/A
Total
$
1,660
$
1,755
(4.9
)%
(6.0
)%
1 See the Company’s 10-K and 10-Q for the definition of comparable
brand revenue, which is calculated on a 13-week basis, and includes
business-to-business revenues. 2 Primarily consists of net revenues
from Rejuvenation, our international franchise operations, Mark and
Graham and GreenRow.
Condensed Consolidated Balance
Sheets (unaudited)
As of
(In thousands, except per share
amounts)
April 28, 2024
January 28, 2024
April 30, 2023
Assets
Current assets
Cash and cash equivalents
$
1,254,786
$
1,262,007
$
297,291
Accounts receivable, net
115,215
122,914
109,203
Merchandise inventories, net
1,218,438
1,246,369
1,401,616
Prepaid expenses
62,752
59,466
62,723
Other current assets
22,787
29,041
27,993
Total current assets
2,673,978
2,719,797
1,898,826
Property and equipment, net
990,166
1,013,189
1,050,026
Operating lease right-of-use assets
1,187,777
1,229,650
1,258,599
Deferred income taxes, net
102,203
110,656
70,758
Goodwill
77,292
77,306
77,330
Other long-term assets, net
128,563
122,950
115,498
Total assets
$
5,159,979
$
5,273,548
$
4,471,037
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
502,136
$
607,877
$
629,561
Accrued expenses
154,093
264,306
205,175
Gift card and other deferred revenue
596,340
573,904
452,505
Income taxes payable
148,826
96,554
87,680
Operating lease liabilities
229,555
234,517
229,751
Other current liabilities
90,007
103,157
97,144
Total current liabilities
1,720,957
1,880,315
1,701,816
Long-term operating lease liabilities
1,112,329
1,156,104
1,186,231
Other long-term liabilities
117,135
109,268
116,165
Total liabilities
2,950,421
3,145,687
3,004,212
Stockholders' equity
Preferred stock: $0.01 par value; 7,500
shares authorized, none issued
—
—
—
Common stock: $0.01 par value; 253,125
shares authorized; 64,337, 64,151, and 64,222 shares issued and
outstanding at April 28, 2024, January 28, 2024 and April 30, 2023,
respectively
644
642
643
Additional paid-in capital
521,833
588,602
531,940
Retained earnings
1,704,409
1,555,595
951,926
Accumulated other comprehensive loss
(16,893
)
(15,552
)
(16,258
)
Treasury stock, at cost
(435
)
(1,426
)
(1,426
)
Total stockholders' equity
2,209,558
2,127,861
1,466,825
Total liabilities and stockholders'
equity
$
5,159,979
$
5,273,548
$
4,471,037
Retail Store Data
(unaudited)
Beginning of quarter
End of quarter
As of
January 28, 2024
Openings
Closings
April 28, 2024
April 30, 2023
Pottery Barn
184
1
(1
)
184
188
Williams Sonoma
156
—
—
156
165
West Elm
121
1
(1
)
121
123
Pottery Barn Kids
46
—
(1
)
45
46
Rejuvenation
11
—
—
11
9
Total
518
2
(3
)
517
531
Condensed Consolidated
Statements of Cash Flows (unaudited)
For the Thirteen Weeks
Ended
(In thousands)
April 28, 2024
April 30, 2023
Cash flows from operating
activities:
Net earnings
$
265,666
$
156,531
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Depreciation and amortization
56,996
55,602
Loss on disposal/impairment of assets
1,264
10,374
Non-cash lease expense
66,821
64,173
Deferred income taxes
(538
)
(1,656
)
Tax benefit related to stock-based
awards
9,347
11,802
Stock-based compensation expense
22,975
23,446
Other
(1,252
)
(822
)
Changes in:
Accounts receivable
7,666
6,256
Merchandise inventories
27,621
52,819
Prepaid expenses and other assets
(2,816
)
6,668
Accounts payable
(116,731
)
118,525
Accrued expenses and other liabilities
(114,258
)
(92,858
)
Gift card and other deferred revenue
22,592
(26,315
)
Operating lease liabilities
(70,838
)
(68,497
)
Income taxes payable
52,273
26,478
Net cash provided by operating
activities
226,788
342,526
Cash flows from investing
activities:
Purchases of property and equipment
(39,513
)
(50,029
)
Other
31
148
Net cash used in investing
activities
(39,482
)
(49,881
)
Cash flows from financing
activities:
Tax withholdings related to stock-based
awards
(87,008
)
(4,348
)
Payment of dividends
(62,862
)
(58,079
)
Repurchases of common stock
(43,781
)
(300,000
)
Net cash used in financing
activities
(193,651
)
(362,427
)
Effect of exchange rates on cash and cash
equivalents
(876
)
(271
)
Net decrease in cash and cash
equivalents
(7,221
)
(70,053
)
Cash and cash equivalents at beginning of
period
1,262,007
367,344
Cash and cash equivalents at end of
period
$
1,254,786
$
297,291
Exhibit 1
1st Quarter GAAP to Non-GAAP
Reconciliation (unaudited)
For the Thirteen Weeks
Ended
April 28, 2024
April 30, 2023
(In thousands, except per share data)
$
% of revenues
$
% of revenues
Occupancy costs
$
196,155
11.8
%
$
202,612
11.5
%
Exit Costs1
—
(239
)
Non-GAAP occupancy costs
$
196,155
11.8
%
$
202,373
11.5
%
Gross profit
$
802,515
48.3
%
$
675,059
38.5
%
Exit Costs1
—
2,141
Non-GAAP gross profit
$
802,515
48.3
%
$
677,200
38.6
%
Selling, general and administrative
expenses
$
478,687
28.8
%
$
475,582
27.1
%
Exit Costs1
—
(15,790
)
Reduction-in-force Initiatives2
—
(8,316
)
Non-GAAP selling, general and
administrative expenses
$
478,687
28.8
%
$
451,476
25.7
%
Operating income
$
323,828
19.5
%
$
199,477
11.4
%
Exit Costs1
—
17,931
Reduction-in-force Initiatives2
—
8,316
Non-GAAP operating income
$
323,828
19.5
%
$
225,724
12.9
%
$
Tax rate
$
Tax rate
Income taxes
$
74,215
21.8
%
$
48,444
23.6
%
Exit Costs1
—
4,690
Reduction-in-force Initiatives2
—
2,174
Non-GAAP income taxes
$
74,215
21.8
%
$
55,308
23.9
%
Diluted EPS
$
4.07
$
2.35
Exit Costs1
—
0.20
Reduction-in-force Initiatives2
—
0.09
Non-GAAP diluted EPS3
$
4.07
$
2.64
1 During Q1 2023, we incurred exit costs of $17.9 million,
including $9.3 million associated with the closure of our West
Coast manufacturing facility and $8.6 million associated with the
exiting of Aperture, a division of our Outward, Inc. subsidiary. 2
During Q1 2023, we incurred costs related to reduction-in-force
initiatives of $8.3 million primarily in our corporate functions. 3
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 occupancy costs, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240522221735/en/
Jeff Howie EVP, Chief Financial Officer – (415) 402 4324 Jeremy
Brooks SVP, Chief Accounting Officer & Head of Investor
Relations – (415) 733 2371
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