Williams-Sonoma, Inc. Announces Second Quarter 2013 Results Revenues Grow 12%, EPS Increases 14% to
Williams-Sonoma, Inc. Announces Second Quarter 2013 Results
Revenues Grow 12%, EPS Increases 14% to $0.49
Raises Financial Guidance for Fiscal Year 2013
Q2 13 Results
- Net revenues grew 12.3% to $982 million versus $874 million in Q2 12 with comparable brand revenue growth of 8.4%.
- Operating margin was 8.0%, equal to Q2 12.
- Diluted earnings per share ("EPS") grew 14.0% to $0.49 compared to Q2 12.
- Cash returned to stockholders totaled $120 million comprising $90 million in stock repurchases and $30 million in dividends.
Laura Alber, President and Chief Executive Officer commented, "Our second quarter results demonstrate the strong demand for our brands and the profitability of our multi-channel, multi-brand platform. We generated a 12% increase in revenue and a 14% increase in diluted EPS over last year. We achieved sales and profit levels that exceeded our expectations while making investments in our growth objectives and in the infrastructure to support them."
Alber continued, "We are on track to achieve another record year of revenue and deliver a double-digit increase in earnings per share. Due to our performance year-to-date and our confidence in the remainder of the year, we are raising our FY 2013 revenue guidance to a range of $4.26 billion to $4.34 billion and our non-GAAP diluted EPS guidance to a range of $2.69 to $2.79."
Alber concluded, "Longer term, we remain confident in our ability to continue to grow sales, maximize profitability and capture market share as we build on our successes across brands and geographies. We are looking forward to expanding our company-owned retail presence in Australia and entering a new market in the United Kingdom later this year. Additionally, in advancement of our global expansion objectives, we are excited about today's announcement of a multi-year franchise agreement with Store Specialists, Inc. as the franchisee for our brands in the Philippines."
Comparable brand revenue growth in Q2 13 increased 8.4% on top of 7.4% in Q2 12 as shown in the table below:
Second Quarter Comparable Brand Revenue Growth by Concept*
|Q2 13||Q2 12|
|Pottery Barn Kids||8.2||%||3.8||%|
|*||See the company's 10-K and 10-Q filings for the definition of comparable brand revenue growth.|
Direct-to-customer ("DTC") net revenues in Q2 13 increased 15.3% to $478 million from $414 million in Q2 12, primarily driven by Pottery Barn, West Elm, PBteen and Pottery Barn Kids. DTC net revenues generated 49% of total company net revenues in Q2 13, compared to 47% in Q2 12.
Retail net revenues in Q2 13 increased 9.7% to $505 million from $460 million in Q2 12, driven primarily by Pottery Barn, West Elm and our international franchise operations, partially offset by a decrease in Williams-Sonoma. Including three net new stores within Q2 13, retail leased square footage increased 2% from the end of Q2 12.
Operating margin in Q2 13 was 8.0%, equal to Q2 12:
- Gross margin decreased 70 basis points to 37.6% from 38.3% in Q2 12.
- Selling, general and administrative ("SG&A") expenses were $291 million or 29.6% of net revenues versus $264 million or 30.2% in Q2 12.
EPS in Q2 13 increased 14.0% to $0.49 from $0.43 in Q2 12.
Merchandise inventories increased 19.6% to $737 million versus $616 million at the end of Q2 12. Excluding the impact of additional inventory in transit due to taking ownership of our inventory earlier in the supply chain in Q2 13 versus Q2 12, merchandise inventories increased 13.4% on a comparable basis.
STOCK REPURCHASE PROGRAM
During Q2 13, we repurchased 1.6 million shares of common stock at an average cost of $55.66 per share and a total cost of approximately $90 million. As of August 4, 2013, $619 million remained under the three-year $750 million stock repurchase program announced in March 2013.
FY 13 FINANCIAL GUIDANCE
- Third Quarter 2013 Guidance (13 weeks)
- Net revenues in the third quarter of fiscal 2013 ("Q3 13") are expected to be in the range of $1,020 million to $1,040 million.
- Comparable brand revenue growth in Q3 13 is expected to be in the range of 4% to 6%.
- Diluted EPS in Q3 13 is expected to be in the range of $0.51 to $0.54.
- Fiscal Year 2013 Guidance (52 weeks)
|Total Net Revenues (millions)||$4,260 - $4,340|
|Comparable Brand Revenue Growth
(52-week vs. 52-week)
|4 - 6 %|
|10.0 - 10.3 %|
|Non-GAAP Diluted EPS||
$2.69 - $2.79
|Income Tax Rate||38.0 - 38.5 %|
|Capital Spending (millions)||$200 - $220|
|Depreciation and Amortization (millions)||$150 - $160|
- Fiscal Year 2013 Store Opening and Closing Guidance by Retail Concept
|Pottery Barn Kids||84||5||(7||)||82|
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today, August 28, 2013, 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 www.williams-sonomainc.com/webcast. A replay of the webcast will be available at www.williams-sonomainc.com/webcast.
SEC REGULATION G -- NON-GAAP INFORMATION
This press release includes non-GAAP diluted EPS. This non-GAAP financial measure excludes the impact of employee separation charges. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in Exhibit 1. We believe that this non-GAAP financial measure provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of our quarterly and FY 13 diluted EPS actual results and FY 13 guidance on a comparable basis with our quarterly and FY 12 actual results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove 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 growth potential; our ability to maximize profitability and capture market share; our global expansion; our future financial guidance, including Q3 13 and FY 13 guidance; our three-year 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 Q2 13; recent 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; 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 February 3, 2013 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 (cookware and wedding registry), Pottery Barn (furniture and wedding registry), Pottery Barn Kids (kids' furniture and baby registry), PBteen (girls' bedding and boys' bedding), West Elm (modern furniture and room decor), Williams-Sonoma Home (luxury furniture and decorative accessories), Rejuvenation (lighting and hardware) and Mark and Graham (personalized gifts and gifts for the home) - are marketed through e-commerce websites, direct mail catalogs and 590 stores. Williams-Sonoma, Inc. currently operates in the United States, Canada and Australia, offers international shipping to customers worldwide, and has an unaffiliated franchisee that operates 25 stores in the Middle East.
|(13 Weeks)||(13 Weeks)|
|Direct-to-customer net revenues||$||
|Retail net revenues||504,552||51.4||459,922||52.6|
|Cost of goods sold||613,285||62.4||539,803||61.7|
|Selling, general and administrative expenses||290,838||29.6||264,377||30.2|
|Interest (income), net||(125||)||-||(168||)||-|
|Earnings before income taxes||78,211||8.0||70,271||8.0|
|Earnings per share:|
|Shares used in calculation of earnings per share:|
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
TWENTY-SIX WEEKS ENDED AUGUST 4, 2013 AND JULY 29, 2012
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
|(26 Weeks)||(26 Weeks)|
|Direct-to-customer net revenues||$||896,741||48.0||%||$||788,768||46.6||%|
|Retail net revenues||973,276||52.0||903,129||53.4|
|Cost of goods sold||1,166,908||62.4||1,048,151||62.0|
|Selling, general and administrative expenses||561,240||30.0||524,320||31.0|
|Interest (income), net||(314||)||-||(359||)||-|
|Earnings before income taxes||142,183||7.6||119,785||7.1|
|Earnings per share:|
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