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

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8-K - 8-K - WILLIAMS SONOMA INC	d60587d8k.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 third quarter 2015 results

Net revenues grow 7.8% with operating margin of 9.0%

Diluted EPS increases 13.2% to $0.77

Reiterates full year guidance

San Francisco, CA, November 19, 2015 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the third fiscal quarter ended November 1, 2015 (“Q3 15”) versus the third fiscal quarter ended November 2, 2014 (“Q3 14”).

3^rd QUARTER 2015 RESULTS

•

Q3 15 net revenues grew 7.8% to $1.232 billion versus $1.143 billion in Q3 14 with comparable brand revenue growth of 4.5%.

•

Q3 15 operating margin was 9.0% versus 9.2% in Q3 14.

•

Q3 15 diluted earnings per share (“EPS”) was $0.77 versus $0.68 in Q3 14.

•

Cash returned to stockholders totaled $103 million, comprising $71 million in stock repurchases and $32 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, “We are pleased with our solid third quarter results, which speak to the power of our brands and our ability to execute our customer-focused strategy. We achieved total net revenue growth of 8%, EPS growth of 13%, and we are reiterating our full year guidance. Looking ahead, while the retail landscape and consumer demand has been more volatile, we believe our balanced portfolio of differentiated brands and strong multi-channel platform positions us for ongoing market share gains. Our focus remains on executing our strategic initiatives to drive long-term sustainable growth for our shareholders.”

Net revenues increased to $1.232 billion in Q3 15 from $1.143 billion in Q3 14.

Comparable brand revenue growth in Q3 15 increased 4.5% on top of 8.7% in Q3 14 as shown in the table below:



3^rd Quarter Comparable Brand Revenue Growth by Concept*

	Q3 15			Q3 14

Pottery Barn		2.0%		7.0%
Williams-Sonoma		1.2%		4.3%
West Elm		15.7%		17.4%
Pottery Barn Kids		4.7%		8.6%
PBteen		(0.9%	)	11.7%

Total		4.5%		8.7%

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

E-commerce net revenues in Q3 15 increased 7.0% to $628 million from $587 million in Q3 14. E-commerce net revenues generated 51% of total company net revenues in both Q3 15 and Q3 14.

Retail net revenues in Q3 15 increased 8.6% (4.3% excluding international growth) to $604 million from $556 million in Q3 14.

Operating margin in Q3 15 was 9.0% compared to 9.2% in Q3 14:

•

Gross margin was 36.6% in Q3 15 versus 37.7% in Q3 14.

•

Selling, general and administrative (“SG&A”) expenses were $341 million, or 27.6% of net revenues in Q3 15, versus $327 million, or 28.6% of net revenues, in Q3 14.

EPS in Q3 15 was $0.77 versus $0.68 in Q3 14.

Merchandise inventories at the end of Q3 15 increased 12.5% to $1.102 billion from $980 million at the end of Q3 14.

STOCK REPURCHASE PROGRAM

During Q3 15, we repurchased 922,127 shares of common stock at an average cost of $77.54 per share and a total cost of approximately $71 million. As of November 1, 2015, there was approximately $90 million remaining under our $750 million stock repurchase program announced in March 2013.

FISCAL YEAR 2015 FINANCIAL GUIDANCE



		4^th Quarter 2015 Guidance Financial Highlights
		Total Net Revenues (millions)		$1,575 – $1,630
		Comparable Brand Revenue Growth		2% – 5%
		Diluted EPS		$1.53 – $1.62

		Fiscal Year 2015 Guidance Financial Highlights
		(Includes impact of the west coast port slowdown)*
		Total Net Revenues (millions)		$4,965 – $5,020
		Comparable Brand Revenue Growth		4% – 6%
		Operating Margin		10.2% – 10.5%
		Diluted EPS		$3.36 – $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		(3	)	88
West Elm		69			18		-		87
Rejuvenation		5			1		-		6
Total		601			34		(19	)	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, November 19, 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 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

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 market share; our strategic initiatives; our future financial guidance, including Q4 15 and FY 2015 guidance; our 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 Q3 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 623 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, the Philippines and Mexico.

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirteen weeks ended November 1, 2015 and November 2, 2014

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


	3^rd Quarter
	2015					2014
			% of					% of
	$		Revenues			$		Revenues
E-commerce net revenues	$	628,191		51.0	%	$	586,976		51.3	%
Retail net revenues		603,891		49.0			556,186		48.7

Net revenues		1,232,082		100.0			1,143,162		100.0
Cost of goods sold		780,894		63.4			711,755		62.3

Gross profit		451,188		36.6			431,407		37.7
Selling, general and administrative expenses		340,505		27.6			326,687		28.6

Operating income		110,683		9.0			104,720		9.2
Interest (income) expense, net		342		—			117		—

Earnings before income taxes		110,341		9.0			104,603		9.2
Income taxes		39,859		3.2			39,695		3.5

Net earnings	$	70,482		5.7	%	$	64,908		5.7	%


Earnings per share (EPS):
Basic	$	0.78				$	0.70
Diluted	$	0.77				$	0.68
Shares used in calculation of EPS:
Basic		90,437					93,067
Diluted		91,801					94,920

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirty-nine weeks ended November 1, 2015 and November 2, 2014

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


	Year-to-Date
	2015					2014
	$		% of Revenues			$		% of Revenues
E-commerce net revenues	$	1,730,677		51.1	%	$	1,600,854		50.7	%
Retail net revenues		1,659,109		48.9			1,555,740		49.3

Net revenues		3,389,786		100.0			3,156,594		100.0
Cost of goods sold		2,153,132		63.5			1,974,681		62.6

Gross profit		1,236,654		36.5			1,181,913		37.4
Selling, general and administrative expenses		970,700		28.6			917,531		29.1

Operating income		265,954		7.8			264,382		8.4
Interest (income) expense, net		625		—			88		—

Earnings before income taxes		265,329		7.8			264,294		8.4
Income taxes		96,389		2.8			102,477		3.2

Net earnings	$	168,940		5.0	%	$	161,817		5.1	%


Earnings per share (EPS):
Basic	$	1.85				$	1.72
Diluted	$	1.82				$	1.69
Shares used in calculation of EPS:
Basic		91,129					93,862
Diluted		92,576					95,603

Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

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


	Nov. 1, 2015			Feb. 1, 2015			Nov. 2, 2014
Assets
Current assets
Cash and cash equivalents	$	72,264		$	222,927		$	107,703
Accounts receivable, net		88,535			67,465			63,664
Merchandise inventories, net		1,102,349			887,701			979,719
Prepaid catalog expenses		35,762			33,942			39,116
Prepaid expenses		59,276			36,265			56,517
Deferred income taxes, net		130,684			130,618			121,380
Other assets		12,966			13,005			14,816

Total current assets		1,501,836			1,391,923			1,382,915

Property and equipment, net		883,459			883,012			866,670
Non-current deferred income taxes, net		2,560			4,265			4,142
Other assets, net		47,821			51,077			50,220

Total assets	$	2,435,676		$	2,330,277		$	2,303,947


Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	395,033		$	397,037		$	411,232
Accrued salaries, benefits and other		115,720			136,012			117,410
Customer deposits		293,317			261,679			265,058
Borrowings under revolving line of credit		200,000			-			90,000
Income taxes payable		35,317			32,488			4,750
Current portion of long-term debt		-			1,968			1,968
Other liabilities		55,152			46,764			46,134

Total current liabilities		1,094,539			875,948			936,552

Deferred rent and lease incentives		174,059			166,925			168,078
Other long-term obligations		50,545			62,698			62,942

Total liabilities		1,319,143			1,105,571			1,167,572


Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized; none issued		-			-			-
Common stock: $.01 par value; 253,125 shares authorized; 90,010, 91,891 and 92,219 shares issued and outstanding at November 1, 2015, February 1, 2015 and November 2, 2014, respectively		901			919			923
Additional paid-in capital		538,737			527,261			519,783
Retained earnings		585,928			701,214			612,611
Accumulated other comprehensive income (loss)		(7,127	)		(2,548	)		5,203
Treasury stock, at cost		(1,906	)		(2,140	)		(2,145	)

Total stockholders’ equity		1,116,533			1,224,706			1,136,375

Total liabilities and stockholders’ equity	$	2,435,676		$	2,330,277		$	2,303,947

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Thirty-nine weeks ended November 1, 2015 and November 2, 2014

(Dollars in thousands)


	Year-to-Date
	2015			2014
Cash flows from operating activities
Net earnings	$	168,940		$	161,817
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		125,093			121,135
Loss on disposal/impairment of assets		3,558			1,581
Amortization of deferred lease incentives		(18,326	)		(18,577	)
Deferred income taxes		(13,526	)		(13,031	)
Tax benefit related to stock-based awards		29,603			49,451
Excess tax benefit related to stock-based awards		(14,283	)		(24,408	)
Stock-based compensation expense		36,182			34,729
Other		91			352
Changes in:
Accounts receivable		(21,875	)		(4,455	)
Merchandise inventories		(216,294	)		(165,839	)
Prepaid catalog expenses		(1,820	)		(5,560	)
Prepaid expenses and other assets		(20,909	)		(22,000	)
Accounts payable		(10,179	)		8,193
Accrued salaries, benefits and other current and long-term liabilities		(13,494	)		(12,242	)
Customer deposits		32,016			36,897
Deferred rent and lease incentives		25,561			18,392
Income taxes payable		2,707			(44,634	)

Net cash provided by operating activities		93,045			121,801


Cash flows from investing activities:
Purchases of property and equipment		(136,069	)		(131,670	)
Restricted cash receipts		-			14,289
Other		535			1,205

Net cash used in investing activities		(135,534	)		(116,176	)


Cash flows from financing activities:
Borrowings under revolving line of credit		200,000			90,000
Repurchase of common stock		(196,497	)		(195,235	)
Payment of dividends		(96,020	)		(95,267	)
Tax withholdings related to stock-based awards		(31,019	)		(53,440	)
Excess tax benefit related to stock-based awards		14,283			24,408
Net proceeds related to stock-based awards		2,647			3,511
Repayments of long-term obligations		(1,968	)		(1,785	)
Other		-			(4	)

Net cash used in financing activities		(108,574	)		(227,812	)


Effect of exchange rates on cash and cash equivalents		400			(231	)
Net decrease in cash and cash equivalents		(150,663	)		(222,418	)
Cash and cash equivalents at beginning of period		222,927			330,121

Cash and cash equivalents at end of period	$	72,264		$	107,703

Exhibit 1

3^rd Quarter Operating Margin By Segment*

($ in thousands)


	E-commerce				Retail				Unallocated						Total
	Q3 15		Q3 14		Q3 15		Q3 14		Q3 15			Q3 14			Q3 15		Q3 14
Net Revenues	$	628,191	$	586,976	$	603,891	$	556,186	$	-		$	-		$	1,232,082	$	1,143,162
Operating Income/(Expense)		137,828		136,617		49,213		49,973		(76,358	)		(81,870	)		110,683		104,720
Operating Margin		21.9%		23.3%		8.1%		9.0%		(6.2%	)		(7.2%	)		9.0%		9.2%

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

ACT

Q4 15

GUID

FY 15

GUID

2015 GAAP Diluted EPS

$0.48

$0.58

$0.77

$1.53 - $1.62

$3.36 - $3.45

Q1 14

ACT

Q2 14

ACT

Q3 14

ACT

Q4 14

ACT

FY 14

ACT

2014 GAAP Diluted EPS

$0.48

$0.53

$0.68

$1.57

$3.24

Impact of Unusual Business Events ⁽¹⁾

(0.05)

(0.04)

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

$0.48

$0.53

$0.68

$1.52

$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
	Aug. 2, 2015		Openings		Closings			Nov. 1, 2015		Nov. 2, 2014		Nov. 1, 2015		Nov. 2, 2014
Williams-Sonoma		241		4		(2	)		243		248		6,600		6,600
Pottery Barn		199		2		(1	)		200		198		13,700		13,700
Pottery Barn Kids		89		1		-			90		85		7,500		7,700
West Elm		78		6		-			84		68		13,400		13,800
Rejuvenation		5		1		-			6		4		9,000		13,200
Total		612		14		(3	)		623		603		9,900		9,900



	Aug. 2, 2015		Nov. 1, 2015		Nov. 2, 2014
Total store selling square footage		3,771,000		3,839,000		3,688,000
Total store leased square footage		6,088,000		6,188,000		5,988,000

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 - November 19, 2015

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