WILLIAMS SONOMA INC - FORM 8-K - EX-99.1 - EX-.991

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8-K - 8-K - WILLIAMS SONOMA INC	d22056d8k.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 second quarter 2015 results

Net revenues grow 8.5%, with comparable brand revenue growth of 6.3%

and diluted EPS of $0.58

San Francisco, CA, August 26, 2015 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the second fiscal quarter ended August 2, 2015 (“Q2 15”) versus the second fiscal quarter ended August 3, 2014 (“Q2 14”).

2^nd QUARTER 2015 RESULTS

•

Q2 15 net revenues grew 8.5% to $1.127 billion versus $1.039 billion in Q2 14, with comparable brand revenue growth of 6.3%.

•

Q2 15 operating margin was 7.4% versus 8.2% in Q2 14.

•

Q2 15 diluted earnings per share (“EPS”) was $0.58 versus $0.53 in Q2 14.

•

Cash returned to stockholders totaled $104.5 million, comprising $72.4 million in stock repurchases and $32.1 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, “We are pleased to have delivered another quarter of solid performance, once again demonstrating the competitive advantage from our multi-brand, multi-channel, business model. As anticipated, during the quarter, we incurred incremental supply chain costs primarily associated with the west coast port disruption to restore our in-stock inventory levels, allowing us to provide superior long-term customer service. We are focused on disciplined execution against our strategic growth initiatives.”

Net revenues increased to $1.127 billion in Q2 15 from $1.039 billion in Q2 14.

Comparable brand revenue growth in Q2 15 increased 6.3% on top of 5.7% in Q2 14 as shown in the table below:



2^nd Quarter Comparable Brand Revenue Growth by Concept*

	Q2 15			Q2 14

Pottery Barn		6.4%		4.4%
Williams-Sonoma		(0.3%	)	3.4%
West Elm		15.7%		16.7%
Pottery Barn Kids		3.3%		5.6%
PBteen		3.9%		(1.0%)

Total		6.3%		5.7%

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

E-commerce net revenues in Q2 15 increased 9.1% to $570 million from $523 million in Q2 14. E-commerce net revenues generated 51% of total company net revenues in Q2 15, compared to 50% in Q2 14.

Retail net revenues in Q2 15 increased 7.9% to $557 million from $517 million in Q2 14.

Operating margin in Q2 15 was 7.4% compared to 8.2% in Q2 14:

•

Gross margin was 36.1% in Q2 15 versus 36.8% in Q2 14.

•

Selling, general and administrative (“SG&A”) expenses were $323 million, or 28.7% of net revenues in Q2 15, versus $297 million, or 28.6% of net revenues, in Q2 14.

EPS in Q2 15 was $0.58 versus $0.53 in Q2 14.

Merchandise inventories at the end of Q2 15 increased 15.3% to $1.031 billion from $895 million at the end of Q2 14.

The effective income tax rate in Q2 15 was 35.4% versus 40.5% in Q2 14, reflecting the favorable resolution of certain income tax matters.

STOCK REPURCHASE PROGRAM

During Q2 15, we repurchased 899,301 shares of common stock at an average cost of $80.55 per share and a total cost of approximately $72 million. As of August 2, 2015, there was approximately $162 million remaining under the three-year, $750 million stock repurchase program announced in March 2013.

FISCAL YEAR 2015 FINANCIAL GUIDANCE



		3^rd Quarter 2015 Guidance Financial Highlights
		Total Net Revenues (millions)		$1,190 – $1,220
		Comparable Brand Revenue Growth		4% – 6%
		Diluted EPS		$0.68 – $0.73

		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 million to $40 million reduction in net revenues and a $0.10 to $0.12 reduction in EPS in fiscal year 2015.



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			18		-		87
Rejuvenation		5			1		-		6
Total		601			34		(20	)	615

* 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, August 26, 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 growth initiatives; our future financial guidance, including Q3 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 Q2 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 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, 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 612 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 August 2, 2015 and August 3, 2014

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


	2^nd Quarter
	2015					2014
			% of					% of
	$		Revenues			$		Revenues
E-commerce net revenues	$	569,913		50.6	%	$	522,589		50.3	%
Retail net revenues		557,115		49.4			516,513		49.7

Net revenues		1,127,028		100.0			1,039,102		100.0
Cost of goods sold		720,403		63.9			657,004		63.2

Gross profit		406,625		36.1			382,098		36.8
Selling, general and administrative expenses		323,282		28.7			296,762		28.6

Operating income		83,343		7.4			85,336		8.2
Interest (income) expense, net		275		—			40		—

Earnings before income taxes		83,068		7.4			85,296		8.2
Income taxes		29,400		2.6			34,549		3.3

Net earnings	$	53,668		4.8	%	$	50,747		4.9	%


Earnings per share (EPS):
Basic	$	0.59				$	0.54
Diluted	$	0.58				$	0.53
Shares used in calculation of EPS:
Basic		91,243					93,979
Diluted		92,564					95,839

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Twenty-six weeks ended August 2, 2015 and August 3, 2014

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


	Year-to-Date
	2015					2014
	$		% of Revenues			$			% of Revenues
E-commerce net revenues	$	1,102,486		51.1	%	$	1,013,878			50.4	%
Retail net revenues		1,055,218		48.9			999,554			49.6

Net revenues		2,157,704		100.0			2,013,432			100.0
Cost of goods sold		1,372,238		63.6			1,262,926			62.7

Gross profit		785,466		36.4			750,506			37.3
Selling, general and administrative expenses		630,195		29.2			590,844			29.3

Operating income		155,271		7.2			159,662			7.9
Interest (income) expense, net		283		—			(29	)		—

Earnings before income taxes		154,988		7.2			159,691			7.9
Income taxes		56,530		2.6			62,782			3.1

Net earnings	$	98,458		4.6	%	$	96,909			4.8	%


Earnings per share (EPS):
Basic	$	1.08				$	1.03
Diluted	$	1.06				$	1.01
Shares used in calculation of EPS:
Basic		91,475					94,010
Diluted		92,969					95,714

Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

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


	Aug. 2, 2015			Feb. 1, 2015			Aug. 3, 2014
Assets
Current assets
Cash and cash equivalents	$	119,776		$	222,927		$	70,574
Accounts receivable, net		81,753			67,465			69,653
Merchandise inventories, net		1,031,472			887,701			894,860
Prepaid catalog expenses		38,088			33,942			39,072
Prepaid expenses		56,119			36,265			55,892
Deferred income taxes, net		130,687			130,618			121,527
Other assets		12,808			13,005			9,772

Total current assets		1,470,703			1,391,923			1,261,350

Property and equipment, net		875,002			883,012			849,255
Non-current deferred income taxes, net		-			4,265			856
Other assets, net		50,266			51,077			52,087

Total assets	$	2,395,971		$	2,330,277		$	2,163,548

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	416,276		$	397,037		$	336,470
Accrued salaries, benefits and other		103,695			136,012			101,818
Customer deposits		288,654			261,679			251,146
Borrowings under revolving line of credit		150,000			-			-
Income taxes payable		14,678			32,488			14,604
Current portion of long-term debt		-			1,968			1,968
Other liabilities		50,237			46,764			44,713

Total current liabilities		1,023,540			875,948			750,719

Deferred rent and lease incentives		179,103			166,925			171,193
Non-current deferred income taxes, net		1,213			-			-
Other long-term obligations		50,739			62,698			63,227

Total liabilities		1,254,595			1,105,571			985,139

Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized; none issued		-			-			-
Common stock: $.01 par value; 253,125 shares authorized; 90,860, 91,891 and 93,414 shares issued and outstanding at August 2, 2015, February 1, 2015 and August 3, 2014, respectively		909			919			934
Additional paid-in capital		532,835			527,261			514,464
Retained earnings		615,193			701,214			657,721
Accumulated other comprehensive income (loss)		(5,625	)		(2,548	)		7,741
Treasury stock, at cost		(1,936	)		(2,140	)		(2,451	)

Total stockholders’ equity		1,141,376			1,224,706			1,178,409

Total liabilities and stockholders’ equity	$	2,395,971		$	2,330,277		$	2,163,548

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Twenty-six weeks ended August 2, 2015 and August 3, 2014

(Dollars in thousands)


	Year-to-Date
	2015			2014
Cash flows from operating activities
Net earnings	$	98,458		$	96,909
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		83,233			79,332
Loss on disposal/impairment of assets		2,074			952
Amortization of deferred lease incentives		(12,075	)		(12,483	)
Deferred income taxes		(8,533	)		(8,326	)
Tax benefit related to stock-based awards		25,917			46,174
Excess tax benefit related to stock-based awards		(11,807	)		(22,911	)
Stock-based compensation expense		24,913			22,191
Other		69			305
Changes in:
Accounts receivable		(14,854	)		(4,227	)
Merchandise inventories		(144,934	)		(80,158	)
Prepaid catalog expenses		(4,146	)		(5,516	)
Prepaid expenses and other assets		(19,708	)		(18,043	)
Accounts payable		15,625			(60,527	)
Accrued salaries, benefits and other current and long-term liabilities		(30,835	)		(28,981	)
Customer deposits		27,243			22,767
Deferred rent and lease incentives		24,034			17,516
Income taxes payable		(17,869	)		(34,757	)

Net cash provided by operating activities		36,805			10,217


Cash flows from investing activities:
Purchases of property and equipment		(86,849	)		(83,519	)
Restricted cash receipts		-			14,289
Other		278			282

Net cash used in investing activities		(86,571	)		(68,948	)


Cash flows from financing activities:
Borrowings under revolving line of credit		150,000			-
Repurchase of common stock		(125,000	)		(112,054	)
Payment of dividends		(64,044	)		(63,996	)
Tax withholdings related to stock-based awards		(27,175	)		(49,434	)
Excess tax benefit related to stock-based awards		11,807			22,911
Net proceeds related to stock-based awards		2,647			3,471
Repayments of long-term obligations		(1,968	)		(1,785	)
Other		-			(6	)

Net cash used in financing activities		(53,733	)		(200,893	)


Effect of exchange rates on cash and cash equivalents		348			77
Net decrease in cash and cash equivalents		(103,151	)		(259,547	)
Cash and cash equivalents at beginning of period		222,927			330,121

Cash and cash equivalents at end of period	$	119,776		$	70,574

Exhibit 1

2^nd Quarter Operating Margin By Segment*

($ in thousands)


	E-commerce				Retail				Unallocated						Total
	Q2 15		Q2 14		Q2 15		Q2 14		Q2 15			Q2 14			Q2 15		Q2 14
Net Revenues	$	569,913	$	522,589	$	557,115	$	516,513	$	-		$	-		$	1,127,028	$	1,039,102
Operating Income/(Expense)		122,461		120,612		40,503		37,058		(79,621	)		(72,334	)		83,343		85,336
Operating Margin		21.5%		23.1%		7.3%		7.2%		(7.1%	)		(7.0%	)		7.4%		8.2%

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

ACT

Q3 15

GUID

FY 15

GUID

2015 GAAP Diluted EPS

$0.48

$0.58

$0.68 - $0.73

$3.35 - $3.45

Q1 14

ACT

Q2 14

ACT

Q3 14

ACT

FY 14

ACT

2014 GAAP Diluted EPS

$0.48

$0.53

$0.68

$3.24

Impact of Unusual Business Events ⁽¹⁾

(0.04)

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

$0.48

$0.53

$0.68

$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
	May 3, 2015		Openings		Closings			Aug. 2, 2015		Aug. 3, 2014		Aug. 2, 2015		Aug. 3, 2014
Williams-Sonoma		241		-		-			241		247		6,600		6,600
Pottery Barn		198		2		(1	)		199		195		13,700		13,700
Pottery Barn Kids		87		3		(1	)		89		84		7,500		7,700
West Elm		72		6		-			78		59		13,400		14,000
Rejuvenation		5		-		-			5		4		10,000		13,200
Total		603		11		(2	)		612		589		9,900		9,900


	May 3, 2015		Aug. 2, 2015		Aug. 3, 2014
Total store selling square footage		3,709,000		3,771,000		3,598,000
Total store leased square footage		5,998,000		6,088,000		5,843,000

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 - EX-.991 - August 26, 2015

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