WILLIAMS SONOMA INC - FORM 8-K - EX-99.1

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8-K - 8-K - WILLIAMS SONOMA INC	d930051d8k.htm

Exhibit 99.1

WILLIAMS-SONOMA, INC.

3250 Van Ness Avenue

San Francisco, CA 94109


						CONTACT:
						Julie P. Whalen
						EVP, Chief Financial Officer
						(415) 616-8524

						Gabrielle L. Rabinovitch
						Vice President, Investor Relations
						(415) 616-7727

PRESS RELEASE

Williams-Sonoma, Inc. announces first quarter 2015 results

Net revenues grow 5.8% with comparable brand revenue growth of 4.6%,

operating margin of 7.0%, and diluted EPS of $0.48

San Francisco, CA, May 20, 2015 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the first fiscal quarter ended May 3, 2015 (“Q1 15”) versus the first fiscal quarter ended May 4, 2014 (“Q1 14”).

1^st QUARTER 2015 RESULTS

•

Q1 15 net revenues grew 5.8% to $1.031 billion versus $974 million in Q1 14 with comparable brand revenue growth of 4.6%.

•

Q1 15 operating margin was 7.0% versus 7.6% in Q1 14.

•

Q1 15 diluted earnings per share (“EPS”) was $0.48 versus $0.48 in Q1 14.

•

Cash returned to stockholders totaled $85 million, comprising $53 million in stock repurchases and $32 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, “Our first quarter results were better than we expected, driven by West Elm and our new businesses, as well as strong operational and financial execution across all of our brands. Based on the results we see across our portfolio, we are confident in the fundamentals of our business and the year ahead. We believe that our growth strategies, consistent execution and operational discipline, put us on track to deliver another record year for our shareholders.”

Ms. Alber concluded, “We believe our strong brands and profitable multi-channel strategy create a sustainable competitive advantage. We are focused on executing our long-term growth initiatives and we believe we are well-positioned for consistent market share gains.”

Net revenues increased to $1.031 billion in Q1 15 from $974 million in Q1 14.

Comparable brand revenue growth in Q1 15 increased 4.6% on top of 10.0% in Q1 14 as shown in the table below:



1^st Quarter Comparable Brand Revenue Growth by Concept*

	Q1 15		Q1 14

Pottery Barn		2.4%	9.7%
Williams-Sonoma		2.7%	6.0%
West Elm		15.3%	18.8%
Pottery Barn Kids		0.8%	8.1%
PBteen		3.0%	12.0%

Total		4.6%	10.0%

* See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue growth.

E-commerce net revenues in Q1 15 increased 8.4% to $533 million from $491 million in Q1 14. E-commerce net revenues generated 52% of total company net revenues in Q1 15, compared to 50% in Q1 14.

Retail net revenues in Q1 15 increased 3.1% to $498 million from $483 million in Q1 14.

Operating margin in Q1 15 was 7.0% compared to 7.6% in Q1 14:

•

Gross margin was 36.8% in Q1 15 versus 37.8% in Q1 14.

•

Selling, general and administrative (“SG&A”) expenses were $307 million, or 29.8% of net revenues in Q1 15, versus $294 million, or 30.2% of net revenues, in Q1 14.

EPS in Q1 15 was $0.48 versus $0.48 in Q1 14.

Merchandise inventories at the end of Q1 15 increased 10.9% to $943 million from $850 million at the end of Q1 14. Inventory on-hand and available-for-sale grew 5.1% year-over-year. Inventory on-hand and available-for-sale for the Pottery Barn portfolio of brands declined by 2.0% year-over-year versus the end of Q1 14, with a 3.2% decrease in Pottery Barn, our largest brand.

STOCK REPURCHASE PROGRAM

During Q1 15, we repurchased 664,402 shares of common stock at an average cost of $79.11 per share and a total cost of approximately $53 million. As of May 3, 2015, there was approximately $234 million remaining under the three-year, $750 million stock repurchase program announced in March 2013.

FISCAL YEAR 2015 FINANCIAL GUIDANCE



		2^nd Quarter 2015 Guidance Financial Highlights (Includes impact of the west coast port slowdown)*
		Total Net Revenues (millions)		$1,085 – $1,105
		Comparable Brand Revenue Growth		4% – 6%
		Diluted EPS		$0.53 – $0.57


		Fiscal Year 2015 Guidance Financial Highlights (Includes impact of the west coast port slowdown)*
		Total Net Revenues (millions)		$4,950 – $5,020
		Comparable Brand Revenue Growth		4% – 6%
		Operating Margin		10.2% – 10.5%
		Diluted EPS		$3.35 – $3.45
		Income Tax Rate		38.3% – 38.8%
		Capital Spending (millions)		$200 – $220
		Depreciation and Amortization (millions)		$170 – $180
		* We have estimated the impact of the west coast port slowdown to be an approximate $30 to $40 million reduction in net revenues and a $0.10 to $0.12 reduction in EPS in fiscal year 2015. The second quarter 2015 impact is estimated to be a $5 to $10 million reduction in net revenues and a $0.02 to $0.04 reduction in EPS.



Store Opening and Closing Guidance by Retail Concept*
	FY 2014 ACT		FY 2015 GUID

	Total			New		Close			End

Williams-Sonoma		243			5		(10	)	238
Pottery Barn		199			4		(6	)	197
Pottery Barn Kids		85			6		(4	)	87
West Elm		69			19		-		88
Rejuvenation		5			1		-		6

Total		601			35		(20	)	616

* Included in the FY 14 store count are 13 stores in Australia and one store in the UK. FY 15 guidance includes six additional Australian stores.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, May 20, 2015, 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

We have reconciled non-GAAP diluted EPS with the most directly comparable GAAP financial measure in Exhibit 1. This non-GAAP financial measure excludes the impact of unusual business events which occurred in FY 14. 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 FY 15 guidance on a comparable basis with prior periods. 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 measure 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: our confidence in the fundamentals of our business; our growth strategies; our competitive advantage; our execution of long-term growth initiatives and our market share positioning; our future financial guidance, including Q2 15 and FY 2015 guidance; our three-year stock repurchase program; the impact of the west coast port slowdown; 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 Q1 15; 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 February 1, 2015 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, 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 603 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.

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirteen weeks ended May 3, 2015 and May 4, 2014

(Dollars and shares in thousands, except per share amounts)


	1^st Quarter
	2015					2014
	$		% of Revenues			$			% of Revenues
E-commerce net revenues	$	532,573		51.7	%	$	491,289			50.4	%
Retail net revenues		498,103		48.3			483,041			49.6

Net revenues		1,030,676		100.0			974,330			100.0
Cost of goods sold		651,835		63.2			605,922			62.2

Gross profit		378,841		36.8			368,408			37.8
Selling, general and administrative expenses		306,913		29.8			294,082			30.2

Operating income		71,928		7.0			74,326			7.6
Interest (income) expense, net		8		—			(69	)		—

Earnings before income taxes		71,920		7.0			74,395			7.6
Income taxes		27,130		2.6			28,233			2.9

Net earnings	$	44,790		4.3	%	$	46,162			4.7	%

Earnings per share (EPS):
Basic	$	0.49				$	0.49
Diluted	$	0.48				$	0.48
Shares used in calculation of EPS:
Basic		91,707					93,993
Diluted		93,300					95,618

Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(Dollars and shares in thousands, except per share amounts)


	May 3, 2015			Feb. 1, 2015			May 4, 2014
Assets
Current assets
Cash and cash equivalents	$	78,851		$	222,927		$	112,870
Restricted cash		-			-			14,295
Accounts receivable, net		64,720			67,465			54,725
Merchandise inventories, net		942,800			887,701			850,416
Prepaid catalog expenses		35,648			33,942			34,986
Prepaid expenses		59,684			36,265			79,491
Deferred income taxes, net		130,889			130,618			121,443
Other assets		11,627			13,005			9,261

Total current assets		1,324,219			1,391,923			1,277,487

Property and equipment, net		876,785			883,012			837,012
Non-current deferred income taxes, net		-			4,265			-
Other assets, net		50,085			51,077			53,601

Total assets	$	2,251,089		$	2,330,277		$	2,168,100

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	367,525		$	397,037		$	369,279
Accrued salaries, benefits and other		87,067			136,012			88,796
Customer deposits		258,854			261,679			233,563
Borrowings under revolving line of credit		60,000			-			-
Income taxes payable		8,322			32,488			2,571
Current portion of long-term debt		1,968			1,968			1,785
Other liabilities		45,092			46,764			40,232

Total current liabilities		828,828			875,948			736,226

Deferred rent and lease incentives		170,528			166,925			158,339
Long-term debt		-			-			1,968
Non-current deferred income taxes		1,958			-			2,850
Other long-term obligations		63,143			62,698			60,425

Total liabilities		1,064,457			1,105,571			959,808

Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized; none issued		-			-			-
Common stock: $.01 par value; 253,125 shares authorized; 91,644, 91,891 and 94,184 shares issued and outstanding at May 3, 2015, February 1, 2015 and May 4, 2014, respectively		917			919			942
Additional paid-in capital		527,257			527,261			509,178
Retained earnings		662,671			701,214			693,670
Accumulated other comprehensive income		(2,257	)		(2,548	)		7,391
Treasury stock, at cost		(1,956	)		(2,140	)		(2,889	)

Total stockholders’ equity		1,186,632			1,224,706			1,208,292



Total liabilities and stockholders’ equity	$	2,251,089		$	2,330,277		$	2,168,100

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Thirteen weeks ended May 3, 2015 and May 4, 2014

(Dollars in thousands)


	Year-to-Date
	2015			2014
Cash flows from operating activities
Net earnings	$	44,790		$	46,162
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		41,478			38,630
Loss on disposal/impairment of assets		1,694			644
Amortization of deferred lease incentives		(5,999	)		(5,782	)
Deferred income taxes		(5,498	)		(4,649	)
Tax benefit related to stock-based awards		20,572			43,223
Excess tax benefit related to stock-based awards		(8,724	)		(21,371	)
Stock-based compensation expense		14,010			12,368
Other		51			173
Changes in:
Accounts receivable		2,864			5,692
Merchandise inventories		(53,746	)		(36,108	)
Prepaid catalog expenses		(1,706	)		(1,430	)
Prepaid expenses and other assets		(21,439	)		(41,951	)
Accounts payable		(25,030	)		(19,276	)
Accrued salaries, benefits and other current and long-term liabilities		(51,387	)		(48,164	)
Customer deposits		(3,106	)		5,216
Deferred rent and lease incentives		8,260			3,092
Income taxes payable		(24,155	)		(46,798	)

Net cash used in operating activities		(67,071	)		(70,329	)


Cash flows from investing activities:
Purchases of property and equipment		(40,384	)		(38,119	)
Other		5			133

Net cash used in investing activities		(40,379	)		(37,986	)


Cash flows from financing activities:
Borrowings under revolving line of credit		60,000			-
Repurchase of common stock		(52,562	)		(53,309	)
Payment of dividends		(31,934	)		(32,891	)
Tax withholdings related to stock-based awards		(21,734	)		(46,730	)
Excess tax benefit related to stock-based awards		8,724			21,371
Net proceeds related to stock-based awards		1,836			2,997
Other		-			(6	)

Net cash used in financing activities		(35,670	)		(108,568	)


Effect of exchange rates on cash and cash equivalents		(956	)		(368	)
Net decrease in cash and cash equivalents		(144,076	)		(217,251	)
Cash and cash equivalents at beginning of period		222,927			330,121

Cash and cash equivalents at end of period	$	78,851		$	112,870

Exhibit 1

1^st Quarter Operating Margin By Segment*

($ in thousands)


	E-commerce				Retail				Unallocated						Total
	Q1 15		Q1 14		Q1 15		Q1 14		Q1 15			Q1 14			Q1 15		Q1 14
Net Revenues	$	532,573	$	491,289	$	498,103	$	483,041	$	-		$	-		$	1,030,676	$974,330
Operating Income/(Expense)		127,574		121,136		28,126		30,196		(83,772	)		(77,006	)		71,928	74,326
Operating Margin		24.0%		24.7%		5.6%		6.3%		(8.1%	)		(7.9%	)		7.0%	7.6%

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 Actual GAAP to Non-GAAP

Diluted Earnings Per Share**

(Totals rounded to the nearest cent per diluted share)

Q1 15

ACT

Q2 15

GUID

FY 15

GUID

2015 GAAP Diluted EPS

$0.48

$0.53 - $0.57

$3.35 - $3.45

Q1 14

ACT

Q2 14

ACT

FY 14

ACT

2014 GAAP Diluted EPS

$0.48

$0.53

$3.24

Impact of Unusual Business Events ⁽¹⁾

(0.04)

2014 Non-GAAP Diluted EPS Excluding Unusual Business Events ⁽²⁾

$0.48

$0.53

$3.20

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 Footage Per Store
	Feb. 1, 2015		Openings		Closings			May 3, 2015		May 4, 2014		May 3, 2015		May 4, 2014
Williams-Sonoma		243		-		(2	)		241		248		6,600		6,600
Pottery Barn		199		-		(1	)		198		195		13,700		13,800
Pottery Barn Kids		85		2		-			87		84		7,500		7,700
West Elm		69		3		-			72		58		13,600		14,100
Rejuvenation		5		-		-			5		4		10,000		13,200
Total		601		5		(3	)		603		589		9,900		9,900


	Feb. 1, 2015		May 3, 2015		May 4, 2014
Total store selling square footage		3,684,000		3,709,000		3,600,000
Total store leased square footage		5,965,000		5,998,000		5,850,000

Notes:

(1)

Impact of Unusual Business Events – During FY 14, we received our share of the VISA/MasterCard antitrust litigation settlement. This settlement (a benefit) totaled approximately $0.04 per diluted share in FY 14, and is recorded in SG&A expenses within the unallocated segment.

(2)

SEC Regulation G – Non-GAAP Information – This table includes non-GAAP diluted EPS. 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 FY 15 guidance on a comparable basis with prior periods. 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.

WILLIAMS SONOMA INC - FORM 8-K - EX-99.1 - May 20, 2015

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