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WILLIAMS-SONOMA, INC. ANNOUNCES RECORD SECOND QUARTER RESULTS

Q2 COMPARABLE BRAND REVENUE GROWTH OF 11.3% AND 41.1% ON A 2YR BASIS

OPERATING MARGIN OF 17.1% WITH OPERATING MARGIN EXPANSION OF 50BPS;

DILUTED EPS OF $3.87; DILUTED EPS GROWTH OF 20.6%

STOCK REPURCHASES OF OVER $765 MILLION YTD

REITERATES FULL YEAR AND LONG-TERM OUTLOOK

Williams-Sonoma, Inc. (NYSE: WSM), the world’s largest digital-first, design-led and sustainable home retailer, today announced operating results for the second fiscal quarter ended July 31, 2022 (“Q2 22”) versus the second fiscal quarter ended August 1, 2021 (“Q2 21”).

“The second quarter marks another quarter of strong performance, delivering an 11.3% comp on the top line and earnings growth of over 19% to $3.87 per share. These impressive results reflect the strength of our multi-brand portfolio, the success of our growth initiatives, and the ongoing execution of the team. We continue to demonstrate our ability to perform by offering high-quality, differentiated, and sustainable products that our customers know and love. Our performance was driven by strong order fulfillment, positive demand comps, and our successful continued elimination of site-wide promotions,” said Laura Alber, President and Chief Executive Officer.

Alber concluded, “I am very proud of this performance especially given the macroeconomic backdrop and the strong compares we were up against, all while delivering an impressive 41.1% comp on a two-year basis. And it is this continued outperformance that gives us the confidence to reiterate our 2022 guidance and longer-term outlook today.”

SECOND QUARTER 2022

  • Comparable brand revenue growth of 11.3%, including double-digit growth in both ecommerce and retail, Pottery Barn accelerating from the first quarter to 21.5%, West Elm growing 6.1% on top of last year's 51.1%, Pottery Barn Kids and Teen accelerating from the first quarter to 5.3%, and Williams Sonoma accelerating from negative 2.2% in the first quarter to 0.5%
  • Gross margin of 43.5%, 60bps below last year driven by higher shipping and freight costs, partially offset by merchandise margin expansion; occupancy rate was flat to last year
  • SG&A rate of 26.4%, leverage of 110bps on a GAAP basis and 90bps on a non-GAAP basis versus last year, reflecting advertising and employment leverage from the strength of our topline outperformance and overall cost discipline
  • Operating income of $366 million, increasing 13.1% on a GAAP basis and 12.2% on a non-GAAP basis over last year
  • Operating margin of 17.1%; GAAP operating margin expansion of 50bps; non-GAAP operating margin expansion of 40bps
  • Diluted EPS of $3.87, increasing 20.6% on a GAAP basis and 19.4% on a non-GAAP basis over last year
  • Maintained a strong liquidity position of $125 million in cash and generated $199 million in operating cash flow, enabling the company to repurchase over $265 million in shares and to pay over $54 million in dividends in the second quarter

OUTLOOK

Given our strong performance through the first half of fiscal 2022, the continued success of our new initiatives, and our competitive advantages that are rooted in our key differentiators (our in-house design, our digital-first channel strategy, and our values), we are reiterating our fiscal year 2022 and long-term financial outlook of mid-to-high single digit annual net revenue growth, increasing revenues to $10 billion by fiscal year 2024, and operating margins relatively in-line with our fiscal year 2021 operating margin.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, August 24, 2022, 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

This press release includes non-GAAP financial measures. Exhibit 1 provides reconciliations of these non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We have not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential variability and limited visibility of excluded items. We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. 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. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to the GAAP financial measures presented in this press release and our financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

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, among other things, statements in the quotes of our President and Chief Executive Officer, our fiscal year 2022 outlook and long-term financial targets, and statements regarding our growth strategies and initiatives.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include: continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; the impact of inflation and measures to control inflation on consumer spending; the continuing impact of the coronavirus, war in Ukraine, and shortages of various raw materials on our global supply chain, retail store operations and customer demand; the outcome of our growth initiatives; 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 and manufacturing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management; inventory constraints; our ability to manage customer returns; 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, supply chain, product, and other operating costs; our ability to improve our systems, operations and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; the impact of current and potential future tariffs and our ability to mitigate impacts; the potential for increased corporate income taxes; 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 January 30, 2022 and all subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. We have not filed our Form 10-Q for the quarter ended July 31, 2022. As a result, all financial results described here should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates that are identified prior to the time we file the Form 10-Q. 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 the world’s largest digital-first, design-led and sustainable home retailer. The company’s products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, and Mark and Graham — are marketed through e-commerce websites, direct-mail catalogs and retail stores. These brands are also part of The Key Rewards, our loyalty and credit card program that offers members exclusive benefits across the Williams-Sonoma family of brands. We operate in the U.S., Puerto Rico, Canada, Australia and the United Kingdom, offer international shipping to customers worldwide, and have unaffiliated franchisees that operate stores in the Middle East, the Philippines, Mexico, South Korea and India, as well as e-commerce websites in certain locations. We are also proud to be a leader in our industry with our Environmental, Social and Governance (“ESG”) efforts. Our company is Good By Design — we’ve deeply ingrained sustainability into our business. From our factories to your home, we’re united in a shared purpose to care for our people and our planet.

For more information on our ESG efforts, please visit: https://sustainability.williams-sonomainc.com/

WSM-IR

Condensed Consolidated Statements of Earnings (unaudited)

 

 

For the Thirteen Weeks Ended

 

For the Twenty-six Weeks Ended

 

July 31, 2022

 

August 1, 2021

 

July 31, 2022

 

August 1, 2021

(In thousands, except per share amounts)

$

 

% of

Revenues

 

$

 

% of

Revenues

 

$

 

% of

Revenues

 

$

 

% of

Revenues

Net revenues

$

2,137,537

 

 

100.0

%

 

$

1,948,339

 

 

100.0

%

 

$

4,028,764

 

 

100

%

 

$

3,697,368

 

100

%

Cost of goods sold

 

1,208,728

 

 

56.5

 

 

 

1,089,951

 

 

55.9

 

 

 

2,271,407

 

 

56.4

 

 

 

2,086,127

 

 

56.4

 

Gross profit

 

928,809

 

 

43.5

 

 

 

858,388

 

 

44.1

 

 

 

1,757,357

 

 

43.6

 

 

 

1,611,241

 

 

43.6

 

Selling, general and administrative expenses

 

563,288

 

 

26.4

 

 

 

535,288

 

 

27.5

 

 

 

1,068,355

 

 

26.5

 

 

 

1,012,964

 

 

27.4

 

Operating income

 

365,521

 

 

17.1

 

 

 

323,100

 

 

16.6

 

 

 

689,002

 

 

17.1

 

 

 

598,277

 

 

16.2

 

Interest (income) expense, net

 

(344

)

 

 

 

 

(39

)

 

 

 

 

(507

)

 

 

 

 

1,833

 

 

 

Earnings before income taxes

 

365,865

 

 

17.1

 

 

 

323,139

 

 

16.6

 

 

 

689,509

 

 

17.1

 

 

 

596,444

 

 

16.1

 

Income taxes

 

98,790

 

 

4.6

 

 

 

77,069

 

 

4.0

 

 

 

168,321

 

 

4.2

 

 

 

122,572

 

 

3.3

 

Net earnings

$

267,075

 

 

12.5

%

 

$

246,070

 

 

12.6

%

 

$

521,188

 

 

12.9

%

 

$

473,872

 

 

12.8

%

Earnings per share (EPS):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

3.92

 

 

 

 

$

3.29

 

 

 

 

$

7.50

 

 

 

 

$

6.29

 

 

 

Diluted

$

3.87

 

 

 

 

$

3.21

 

 

 

 

$

7.36

 

 

 

 

$

6.11

 

 

 

Shares used in calculation of EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

68,180

 

 

 

 

 

74,786

 

 

 

 

 

69,516

 

 

 

 

 

75,293

 

 

 

Diluted

 

69,081

 

 

 

 

 

76,584

 

 

 

 

 

70,844

 

 

 

 

 

77,516

 

 

 

 

 

2nd Quarter Net Revenues and Comparable Brand Revenue Growth1

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenues

 

Comparable Brand Revenue Growth

 

 

(In millions, except percentages)

Q2 22

 

Q2 21

 

Q2 22

 

Q2 21

 

 

Pottery Barn

$

879

 

$

732

 

21.5

%

 

29.6

%

 

 

West Elm

 

608

 

 

 

580

 

 

6.1

 

 

51.1

 

 

 

Williams Sonoma

 

249

 

 

 

255

 

 

0.5

 

 

6.4

 

 

 

Pottery Barn Kids and Teen

 

284

 

 

 

274

 

 

5.3

 

 

18.0

 

 

 

Other2

 

118

 

 

 

107

 

 

N/A

 

 

N/A

 

 

 

Total

$

2,138

 

 

$

1,948

 

 

11.3

%

 

29.8

%

 

 

  1. See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue, which is calculated on a 13-week basis for Q2 2022 and Q2 2021.
  2. Primarily consists of net revenues from our international franchise operations, Rejuvenation, and Mark and Graham.

 

 

Condensed Consolidated Balance Sheets (unaudited)

 

 

As of

(In thousands, except per share amounts)

July 31,

2022

 

January 30,

2022

 

August 1,

2021

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

$

124,944

 

 

$

850,338

 

 

$

655,211

 

Accounts receivable, net

 

133,500

 

 

 

131,683

 

 

 

141,814

 

Merchandise inventories, net

 

1,542,428

 

 

 

1,246,372

 

 

 

1,170,561

 

Prepaid expenses

 

102,312

 

 

 

69,252

 

 

 

85,587

 

Other current assets

 

25,537

 

 

 

26,249

 

 

 

20,537

 

Total current assets

 

1,928,721

 

 

 

2,323,894

 

 

 

2,073,710

 

Property and equipment, net

 

973,676

 

 

 

920,773

 

 

 

875,295

 

Operating lease right-of-use assets

 

1,174,354

 

 

 

1,132,764

 

 

 

1,052,617

 

Deferred income taxes, net

 

52,897

 

 

 

56,585

 

 

 

58,848

 

Goodwill

 

85,269

 

 

 

85,354

 

 

 

85,421

 

Other long-term assets, net

 

104,257

 

 

 

106,250

 

 

 

99,146

 

Total assets

$

4,319,174

 

 

$

4,625,620

 

 

$

4,245,037

 

Liabilities and stockholders' equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

680,097

 

 

$

612,512

 

 

$

601,879

 

Accrued expenses

 

244,559

 

 

 

319,924

 

 

 

224,089

 

Gift card and other deferred revenue

 

498,354

 

 

 

447,770

 

 

 

403,409

 

Income taxes payable

 

87,159

 

 

 

79,554

 

 

 

61,335

 

Operating lease liabilities

 

206,931

 

 

 

217,409

 

 

 

213,784

 

Other current liabilities

 

93,945

 

 

 

94,517

 

 

 

74,331

 

Total current liabilities

 

1,811,045

 

 

 

1,771,686

 

 

 

1,578,827

 

Deferred lease incentives

 

14,725

 

 

 

16,360

 

 

 

18,359

 

Long-term operating lease liabilities

 

1,115,501

 

 

 

1,066,839

 

 

 

994,165

 

Other long-term liabilities

 

99,624

 

 

 

106,528

 

 

 

126,967

 

Total liabilities

 

3,040,895

 

 

 

2,961,413

 

 

 

2,718,318

 

Stockholders' equity

 

 

 

 

 

Preferred stock: $0.01 par value; 7,500 shares authorized, none issued

 

 

 

 

 

 

 

 

Common stock: $0.01 par value; 253,125 shares authorized; 67,057, 71,982, and 74,426 shares issued and outstanding at July 31, 2022, January 30, 2022 and August 1, 2021, respectively

 

671

 

 

 

720

 

 

 

745

 

Additional paid-in capital

 

541,895

 

 

 

600,942

 

 

 

569,734

 

Retained earnings

 

750,083

 

 

 

1,074,084

 

 

 

964,000

 

Accumulated other comprehensive loss

 

(13,631

)

 

 

(10,828

)

 

 

(7,049

)

Treasury stock, at cost

 

(739

)

 

 

(711

)

 

 

(711

)

Total stockholders' equity

 

1,278,279

 

 

 

1,664,207

 

 

 

1,526,719

 

Total liabilities and stockholders' equity

$

4,319,174

 

 

$

4,625,620

 

 

$

4,245,037

 

 

 

 

 

 

 

 

Retail Store Data

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of quarter

 

 

End of quarter

 

As of

 

 

 

May 1, 2022

Openings

Closings

July 31, 2022

 

August 1, 20211

 

 

Pottery Barn

188

2

(1

)

189

 

195

 

 

Williams Sonoma

175

 

1

 

(1

)

175

 

 

196

 

 

 

West Elm

121

 

1

 

(1

)

121

 

 

123

 

 

 

Pottery Barn Kids

52

 

 

 

52

 

 

57

 

 

 

Rejuvenation

9

 

 

 

9

 

 

10

 

 

 

Total

545

 

4

 

(3

)

546

 

 

581

 

 

 

  1. Retail store data for fiscal 2021 includes stores temporarily closed due to COVID-19. All stores were reopened as of the end of fiscal 2021.

 

 

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

For the Twenty-six Weeks Ended

(In thousands)

July 31, 2022

 

August 1, 2021

Cash flows from operating activities:

 

 

 

Net earnings

$

521,188

 

 

$

473,872

 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

102,455

 

 

 

96,687

 

Loss on disposal/impairment of assets

 

5,413

 

 

 

455

 

Amortization of deferred lease incentives

 

(1,635

)

 

 

(2,254

)

Non-cash lease expense

 

110,511

 

 

 

105,739

 

Deferred income taxes

 

(7,636

)

 

 

(7,037

)

Tax benefit related to stock-based awards

 

10,828

 

 

 

10,302

 

Stock-based compensation expense

 

51,743

 

 

 

46,260

 

Other

 

154

 

 

 

(274

)

Changes in:

 

 

 

Accounts receivable

 

(1,985

)

 

 

2,002

 

Merchandise inventories

 

(295,458

)

 

 

(163,621

)

Prepaid expenses and other assets

 

(30,585

)

 

 

(4,622

)

Accounts payable

 

59,404

 

 

 

48,457

 

Accrued expenses and other liabilities

 

(78,895

)

 

 

(43,653

)

Gift card and other deferred revenue

 

50,503

 

 

 

30,308

 

Operating lease liabilities

 

(120,036

)

 

 

(108,791

)

Income taxes payable

 

7,623

 

 

 

(8,162

)

Net cash provided by operating activities

 

383,592

 

 

 

475,668

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(148,548

)

 

 

(78,281

)

Other

 

86

 

 

 

97

 

Net cash used in investing activities

 

(148,462

)

 

 

(78,184

)

Cash flows from financing activities:

 

 

 

Repurchases of common stock

 

(766,424

)

 

 

(451,388

)

Payment of dividends

 

(112,674

)

 

 

(91,069

)

Tax withholdings related to stock-based awards

 

(79,275

)

 

 

(100,160

)

Repayment of long-term debt

 

 

 

 

(300,000

)

Net cash used in financing activities

 

(958,373

)

 

 

(942,617

)

Effect of exchange rates on cash and cash equivalents

 

(2,151

)

 

 

7

 

Net decrease in cash and cash equivalents

 

(725,394

)

 

 

(545,126

)

Cash and cash equivalents at beginning of period

 

850,338

 

 

 

1,200,337

 

Cash and cash equivalents at end of period

$

124,944

 

 

$

655,211

 

 

Exhibit 1

 

 

2nd Quarter GAAP to Non-GAAP Reconciliation

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Thirteen Weeks Ended

 

For the Twenty-six Weeks Ended

 

 

 

July 31, 2022

 

August 1, 2021

 

July 31, 2022

 

August 1, 2021

 

 

(In thousands, except per share data)

$

% of

revenues

 

$

% of

revenues

 

$

% of

revenues

 

$

% of

revenues

 

 

Selling, general and administrative expenses

$

563,288

26.4

%

 

$

535,288

27.5

%

 

$

1,068,355

26.5

%

 

$

1,012,964

27.4

%

 

 

Outward-related1

 

 

 

 

 

(2,757

)

 

 

 

 

 

 

 

(5,596

)

 

 

 

Non-GAAP selling, general and administrative expenses

$

563,288

 

26.4

%

 

$

532,531

 

27.3

%

 

$

1,068,355

 

26.5

%

 

$

1,007,368

 

27.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

365,521

 

17.1

%

 

$

323,100

 

16.6

%

 

$

689,002

 

17.1

%

 

$

598,277

 

16.2

%

 

 

Outward-related1

 

 

 

 

 

2,757

 

 

 

 

 

 

 

 

5,596

 

 

 

 

Non-GAAP operating income

$

365,521

 

17.1

%

 

$

325,857

 

16.7

%

 

$

689,002

 

17.1

%

 

$

603,873

 

16.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

Tax rate

 

$

Tax rate

 

$

Tax rate

 

$

Tax rate

 

 

Income taxes

$

98,790

 

27.0

%

 

$

77,069

 

23.9

%

 

$

168,321

 

24.4

%

 

$

122,572

 

20.6

%

 

 

Outward-related1

 

 

 

 

 

462

 

 

 

 

 

 

 

 

973

 

 

 

 

Non-GAAP income taxes

$

98,790

 

27.0

%

 

$

77,531

 

23.8

%

 

$

168,321

 

24.4

%

 

$

123,545

 

20.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

$

3.87

 

 

 

$

3.21

 

 

 

$

7.36

 

 

 

$

6.11

 

 

 

 

Outward-related1

 

 

 

 

 

0.03

 

 

 

 

 

 

 

 

0.06

 

 

 

 

Non-GAAP diluted EPS2

$

3.87

 

 

 

$

3.24

 

 

 

$

7.36

 

 

 

$

6.17

 

 

 

 

  1. During Q2 2021 and year-to-date 2021, we incurred approximately $2.8 million and $5.6 million, respectively, associated with acquisition-related compensation expense and the amortization of acquired intangibles for Outward, Inc.
  2. Per share amounts may not sum due to rounding to the nearest cent per diluted share.

 

SEC Regulation G – Non-GAAP Information

These tables include non-GAAP selling, general and administrative expense, operating income, operating margin, income taxes, effective tax rate and diluted EPS. 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 actual results on a comparable basis with prior periods. 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 financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Contacts

Julie Whalen EVP, Chief Financial Officer – (415) 616 8524

-or-

Jeremy Brooks SVP, Chief Accounting Officer & Head of Investor Relations – (415) 733 2371

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