Williams-Sonoma, Inc. Announces First Quarter 2013 Results GAAP EPS Increases 33% to $0.40, Non-GAAP

Williams-Sonoma, Inc. Announces First Quarter 2013 Results
GAAP EPS Increases 33% to $0.40, Non-GAAP EPS Increases 21% to $0.41
Raises Financial Guidance for Fiscal Year 2013

SAN FRANCISCO--(BUSINESS WIRE)-- Williams-Sonoma, Inc. (NYS: WSM) today announced operating results for the 13 weeks ended May 5, 2013 ("Q1 13") versus the 13 weeks ended April 29, 2012 ("Q1 12").

Q1 13 Results

  • Net revenues grew 8.6% to $888 million versus $818 million in Q1 12 with comparable brand revenue growth of 7.2%.

  • Operating margin increased to 7.2% from 6.0% in Q1 12. Excluding unusual business events, non-GAAP operating margin increased to 7.5% from 6.9% in Q1 12 (see Exhibit 1).

  • Diluted earnings per share ("EPS") grew 33% to $0.40. Excluding unusual business events, non-GAAP EPS increased 21% to $0.41 (see Exhibit 1).

  • Cash returned to stockholders totaled $63 million comprising $41 million in stock repurchases and $22 million in dividends.


Laura Alber, President and Chief Executive Officer commented, "Our first quarter 2013 financial results represent our best first quarter in the company's history, exceeding our expectations for both operating margin and diluted EPS, on revenue growth of 9%. We delivered these results while simultaneously investing in our future growth strategies."

Alber continued, "Based on our results to date and our continued confidence in the full year, we are raising our FY 2013 revenues to a range of $4.22 billion to $4.30 billion and our non-GAAP EPS to a range of $2.67 to $2.77."

Alber remarked, "In the first quarter, we reached an important new milestone with the launch of our first company-owned stores and e-commerce sites in Australia. We also announced today our further global expansion into the United Kingdom later this year, and we are excited about the opportunities we see to grow our brands globally."

Comparable brand revenue growth in Q1 13 increased 7.2% on top of 5.4% in Q1 12 as shown in the table below:

First Quarter Comparable Brand Revenue Growth by Concept*

Q1 13

Q1 12

Pottery Barn

7.6

%

9.1

%

Williams-Sonoma

1.9

%

(4.3

%)

Pottery Barn Kids

6.9

%

(0.8

%)

West Elm

11.8

%

22.1

%

PBteen

16.1

%

(6.0

%)

Total

7.2

%

5.4

%

*

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 Q1 13 increased 11.9% to $419 million from $374 million in Q1 12 with increases across all brands. This growth was primarily led by Pottery Barn, West Elm, Williams-Sonoma and Pottery Barn Kids. DTC net revenues generated 47% of total company net revenues in Q1 13 versus 46% in Q1 12.

Retail net revenues in Q1 13 increased 5.8% to $469 million from $443 million in Q1 12, driven primarily by our international franchise operations, Pottery Barn and West Elm, partially offset by a decrease in Williams-Sonoma. Including six net new stores within Q1 13, retail leased square footage increased 2.0% from the end of Q1 12.

Operating margin, including unusual business events, in Q1 13 was 7.2% versus 6.0% in Q1 12. Excluding unusual business events, non-GAAP operating margin in Q1 13 was 7.5% versus 6.9% last year:

  • Gross margin decreased 20 basis points to 37.6% from 37.8% in Q1 12.

  • Selling, general and administrative ("SG&A") expenses were $270 million or 30.5% of net revenues versus $260 million or 31.8% in Q1 12. Excluding the 40 basis point impact related to unusual business events in Q1 13 and the 90 basis point impact related to unusual business events in Q1 12, non-GAAP SG&A expenses were $267 million or 30.1% in Q1 13 versus $253 million or 30.9% in Q1 12.

EPS in Q1 13 increased 33% to $0.40 from $0.30 in Q1 12. Excluding unusual business events, non-GAAP EPS in Q1 13 increased 21% to $0.41 from $0.34 in Q1 12.

Merchandise inventories at the end of Q1 13 increased 12.8% to $662 million versus $586 million at the end of Q1 12.

STOCK REPURCHASE PROGRAM

During Q1 13, we repurchased 800,882 shares of common stock at an average cost of $51.41 per share and a total cost of approximately $41 million. As of May 5, 2013, there was $709 million remaining under the three-year $750 million stock repurchase program announced in March 2013.

FY 13 FINANCIAL GUIDANCE

  • Second Quarter 2013 Guidance (13 weeks)

  • Net revenues in the second quarter of fiscal 2013 ("Q2 13") are expected to be in the range of $920 million to $940 million.

  • Comparable brand revenue growth in Q2 13 is expected to be in the range of 4% to 6%.

  • Diluted EPS in Q2 13 is expected to be in the range of $0.43 to $0.46.

  • Fiscal Year 2013 Guidance (52 weeks)

FY 13

GUID

Total Net Revenues (millions)

$4,220 - $4,300

Comparable Brand Revenue Growth

(52-week vs. 52-week)

4 - 6 %

Operating Margin

10.0 - 10.3 %

Diluted EPS

$2.67 - $2.77

Income Tax Rate

38.2 - 38.6 %

Capital Spending (millions)

$200 - $220

Depreciation and Amortization (millions)

$150 - $160

  • Fiscal Year 2013 Store Opening and Closing Guidance by Retail Concept

FY 12

ACT

FY 13

GUID

Retail Concept

Total

New

Close

End

Williams-Sonoma

253

7

(15

)

245

Pottery Barn

192

6

(4

)

194

Pottery Barn Kids

84

4

(5

)

83

West Elm

48

11

(1

)

58

Rejuvenation

4

-

-

4

Total

581

28

(25

)

584

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, May 23, 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 SG&A, operating margin and diluted EPS. These non-GAAP financial measures exclude the impact of employee separation charges. 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 diluted EPS actual results and FY 13 guidance on a comparable basis with our quarterly and FY 12 results. 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 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 growth strategies; our global expansion; our future financial guidance, including Q2 13 and fiscal year 2013 guidance; our three year stock repurchase program; our proposed store openings and closures; and our beliefs regarding non-GAAP financial measures.

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 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 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 587 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 24 stores in the Middle East.

WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THIRTEEN WEEKS ENDED MAY 5, 2013 AND APRIL 29, 2012
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

FIRST QUARTER

2013

2012

(13 Weeks)

(13 Weeks)

$

% of
Revenues

$

% of
Revenues

Direct-to-customer net revenues

$

419,084

47.2

%

$

374,407

45.8

%

Retail net revenues

468,724

52.8

443,207

54.2

Net revenues

887,808

100.0

817,614

100.0

Cost of goods sold

553,623

62.4

508,348

62.2

Gross margin

334,185

37.6

309,266

37.8

Selling, general and administrative expenses

270,402

30.5

259,943

31.8

Operating income

63,783

7.2

49,323

6.0

Interest (income), net

(189

)

-

(191

)

-

Earnings before income taxes

63,972

7.2

49,514

6.1

Income taxes

24,506

2.8

18,798

2.3

Net earnings

$

39,466

4.4

%

$

30,716

3.8

%

Earnings per share:

Basic

$

0.40

$

0.31

Diluted

$

0.40

$

0.30

Shares used in calculation of earnings per share:

Basic

97,704

100,172

Diluted

99,515

101,956

WILLIAMS-SONOMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)

May 5,
2013

February 3,
2013

April 29,
2012

Assets

Current assets

Cash and cash equivalents

$

252,536

$

424,555

$

376,464

Restricted cash

16,061

16,055

14,737

Accounts receivable, net

60,667

62,985

47,688

Merchandise inventories, net

661,541

640,024

586,270

Prepaid catalog expenses

36,407

37,231

34,308

Prepaid expenses

52,695

26,339

32,975

Deferred income taxes, net

99,739

99,764

91,774

Other assets

9,434

9,819

8,606

Total current assets

1,189,080

1,316,772

1,192,822

Property and equipment, net

817,249

812,037

726,133

Non-current deferred income taxes, net

10,738

12,398

11,764

Other assets, net

46,152

46,472

38,847

Total assets

$

2,063,219

$

2,187,679

$

1,969,566