News Release Details

Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the third fiscal quarter ended October 30, 2016 (“Q3 16”) versus the third fiscal quarter ended November 1, 2015 (“Q3 15”).

3 ^rd QUARTER 2016 RESULTS

					-			Q3 16 net revenues grew 1.1% to $1.245 billion versus $1.232 billion in Q3 15 with comparable brand revenue decreasing 0.4%.
					-			Q3 16 operating margin was 8.8% versus 9.0% in Q3 15. Excluding unusual business events due to severance-related reorganization charges (see Note 1 in Exhibit 1), non-GAAP operating margin was 8.9% in Q3 16. See Exhibit 1 for a reconciliation of GAAP to non-GAAP operating margin.
					-			Q3 16 diluted earnings per share (“EPS”) was $0.78 versus $0.77 in Q3 15. Excluding unusual business events due to severance-related reorganization charges of approximately $0.01 per diluted share, non-GAAP EPS was $0.79 in Q3 16. See Exhibit 1 for a reconciliation of GAAP to non-GAAP EPS.
					-			Cash returned to stockholders totaled $72 million, comprising $39 million in stock repurchases and $33 million in dividends.

Laura Alber, President and Chief Executive Officer, commented: “Our third quarter performance demonstrates our competitive strengths – our differentiated portfolio of brands and profitable multi-channel business model – as well as the ongoing success of our strategic initiatives that we have seen this year. We saw continued double-digit growth in West Elm, our newer businesses Rejuvenation and Mark and Graham, and our international company-owned businesses. We also made additional progress across our supply chain and continued to reduce inventory, which resulted in better gross margins, allowing us to meet our earnings commitment at the high end of our guidance range, despite a more difficult retail environment.”

Alber continued: “Although the current environment is less certain, we remain focused on what we can control, and we are confident that the ongoing progress on our strategic initiatives will improve service for our customers and will drive long-term sustainable profitable growth for our shareholders.”

Net revenues increased to $1.245 billion in Q3 16 from $1.232 billion in Q3 15.

Comparable brand revenue in Q3 16 decreased 0.4% compared to 4.5% growth in Q3 15 as shown in the table below:

3 rd Quarter Comparable Brand Revenue Growth by Concept*
						Q3 16						Q3 15
Pottery Barn						(4.6%)						2.0%
Williams-Sonoma						0.1%						1.2%
West Elm						12.0%						15.7%
Pottery Barn Kids						(1.0%)						4.7%
PBteen						(10.9%)						(0.9%)
Total						(0.4%)						4.5%
* See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue.

E-commerce net revenues in Q3 16 increased 3.3% to $649 million from $628 million in Q3 15. E-commerce net revenues generated 52.1% of total company net revenues in Q3 16 and 51.0% of total company net revenues in Q3 15.

Retail net revenues in Q3 16 decreased 1.2% to $597 million from $604 million in Q3 15.

Operating margin in Q3 16 was 8.8% compared to 9.0% in Q3 15. Excluding unusual business events, non-GAAP operating margin was 8.9% in Q3 16:

					-			Gross margin was 36.8% in Q3 16 versus 36.6% in Q3 15.
					-			Selling, general and administrative (“SG&A”) expenses were $348 million, or 28.0% of net revenues in Q3 16, versus $341 million, or 27.6% of net revenues in Q3 15. Excluding unusual business events due to severance-related reorganization charges of approximately $1.2 million, non-GAAP SG&A expenses were $347 million, or 27.9% of net revenues, in Q3 16.

EPS in Q3 16 was $0.78 versus $0.77 in Q3 15. Excluding unusual business events, non-GAAP EPS was $0.79 in Q3 16.

Merchandise inventories at the end of Q3 16 decreased 3.5% to $1.064 billion from $1.102 billion at the end of Q3 15.

STOCK REPURCHASE PROGRAM

During Q3 16, we repurchased 771,327 shares of common stock at an average cost of $50.56 per share and a total cost of approximately $39 million. As of October 30, 2016, there was approximately $447 million remaining under our current stock repurchase program.

FISCAL YEAR 2016 FINANCIAL GUIDANCE

4th Quarter 2016 Guidance Financial Highlights
Total Net Revenues (millions)						$1,570 – $1,650
Comparable Brand Revenue Growth/(Decrease)						(1%) – 4%
Diluted EPS						$1.45 – $1.55
Fiscal Year 2016 Guidance Financial Highlights
Total Net Revenues (millions)						$5,070 – $5,150
Comparable Brand Revenue Growth						1% – 2%
Non-GAAP Operating Margin*						9.4% – 9.6%
Non-GAAP Diluted EPS**						$3.35 – $3.45
Income Tax Rate						37.0% – 38.0%
Capital Spending (millions)						$200 – $220
Depreciation and Amortization (millions)						$170 – $180
* Excludes severance-related reorganization charges of approximately $14 million, or
0.3% of operating margin during Q1 2016 and Q3 2016. Including these charges,
GAAP operating margin guidance would be 9.1% to 9.3%.
** Excludes severance-related reorganization charges of approximately $14 million, or
$0.10 per diluted share during Q1 2016 and Q3 2016.

Store Opening and Closing Guidance by Retail Concept*
FY 2015 ACT														FY 2016 GUID
							Total							New							Close							End
Williams-Sonoma							239							5							(10)							234
Pottery Barn							197							5							(2)							200
Pottery Barn Kids							89							2							(4)							87
West Elm							87							13							(2)							98
Rejuvenation							6							1							-							7
Total							618							26							(18)							626
* Included in the FY 15 store count are 19 stores in Australia and one store in the UK.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, November 17, 2016, 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 SG&A, operating income, operating margin and diluted EPS. These non-GAAP financial measures exclude the impact of severance-related reorganization charges in Q1 16 and Q3 16. 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 actual results and FY 16 guidance 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 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 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: the progress on our strategic initiatives; our growth drivers; our future financial guidance, including Q4 16 and FY 2016 guidance; our stock repurchase program; 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 16; 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 January 31, 2016 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 635 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 and stores and e-commerce websites in Mexico.

Williams-Sonoma, Inc.
Condensed Consolidated Statements of Earnings (unaudited)
Thirteen weeks ended October 30, 2016 and November 1, 2015
(Dollars and shares in thousands, except per share amounts)
						3 rd Quarter
						2016														2015
						$							% of   Revenues							$							% of   Revenues
E-commerce net revenues						$	648,743						52.1	%						$	628,191						51.0	%
Retail net revenues							596,642						47.9								603,891						49.0
Net revenues							1,245,385						100.0								1,232,082						100.0
Cost of goods sold							787,162						63.2								780,894						63.4
Gross profit							458,223						36.8								451,188						36.6
Selling, general and administrative expenses							348,244						28.0								340,505						27.6
Operating income							109,979						8.8								110,683						9.0
Interest (income) expense, net							488						-								342						-
Earnings before income taxes							109,491						8.8								110,341						9.0
Income taxes							40,113						3.2								39,859						3.2
Net earnings						$	69,378						5.6	%						$	70,482						5.7	%
Earnings per share (EPS):
Basic						$0.78														$0.78
Diluted						$0.78														$0.77
Shares used in calculation of EPS:
Basic							88,382														90,437
Diluted							89,144														91,801

Williams-Sonoma, Inc.
Condensed Consolidated Statements of Earnings (unaudited)
Thirty-nine weeks ended October 30, 2016 and November 1, 2015
(Dollars and shares in thousands, except per share amounts)
						Year-to-Date
						2016														2015
						$							% of   Revenues							$							% of   Revenues
E-commerce net revenues						$	1,824,660						52.1	%						$	1,730,677						51.1	%
Retail net revenues							1,677,571						47.9								1,659,109						48.9
Net revenues							3,502,231						100.0								3,389,786						100.0
Cost of goods sold							2,240,952						64.0								2,153,132						63.5
Gross profit							1,261,279						36.0								1,236,654						36.5
Selling, general and administrative expenses							1,004,499						28.7								970,700						28.6
Operating income							256,780						7.3								265,954						7.8
Interest (income) expense, net							587						-								625						-
Earnings before income taxes							256,193						7.3								265,329						7.8
Income taxes							95,433						2.7								96,389						2.8
Net earnings						$	160,760						4.6	%						$	168,940						5.0	%
Earnings per share (EPS):
Basic						$1.81														$1.85
Diluted						$1.79														$1.82
Shares used in calculation of EPS:
Basic							88,906														91,129
Diluted							89,764														92,576

Williams-Sonoma, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(Dollars and shares in thousands, except per share amounts)
						Oct. 30, 2016								Jan. 31, 2016								Nov. 1, 2015
Assets
Current assets
Cash and cash equivalents						$	75,381							$	193,647							$	72,264
Accounts receivable, net							96,386								79,304								88,535
Merchandise inventories, net							1,063,747								978,138								1,102,349
Prepaid catalog expenses							25,329								28,919								35,762
Prepaid expenses							74,195								44,654								59,276
Deferred income taxes, net							-								-								130,684
Other assets							12,176								11,438								12,966
Total current assets							1,347,214								1,336,100								1,501,836
Property and equipment, net							918,020								886,813								883,459
Non-current deferred income taxes, net							136,558								141,784								2,560
Other assets, net							51,540								52,730								47,821
Total assets						$	2,453,332							$	2,417,427							$	2,435,676
Liabilities and stockholders' equity
Current liabilities
Accounts payable						$	450,144							$	447,412							$	395,033
Accrued salaries, benefits and other							111,445								127,122								115,720
Customer deposits							289,737								296,827								293,317
Borrowings under revolving line of credit							125,000								-								200,000
Income taxes payable							1,122								67,052								35,317
Other liabilities							53,423								58,014								55,152
Total current liabilities							1,030,871								996,427								1,094,539
Deferred rent and lease incentives							192,948								173,061								174,059
Other long-term obligations							70,031								49,713								50,545
Total liabilities							1,293,850								1,219,201								1,319,143
Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized;   none issued							-								-								-
Common stock: $.01 par value; 253,125 shares authorized;   88,014, 89,563 and 90,010 shares issued and outstanding   at October 30, 2016, January 31, 2016 and November 1,   2015, respectively							881								896								901
Additional paid-in capital							547,513								541,307								538,737
Retained earnings							623,243								668,545								585,928
Accumulated other comprehensive loss							(10,772	)							(10,616	)							(7,127	)
Treasury stock, at cost							(1,383	)							(1,906	)							(1,906	)
Total stockholders’ equity							1,159,482								1,198,226								1,116,533
Total liabilities and stockholders' equity						$	2,453,332							$	2,417,427							$	2,435,676

Williams-Sonoma, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
Thirty-nine weeks ended October 30, 2016 and November 1, 2015
(Dollars in thousands)
						Year-to-Date
							2016								2015
Cash flows from operating activities
Net earnings						$	160,760							$	168,940
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization							127,745								125,093
Loss on disposal/impairment of assets							1,852								3,558
Amortization of deferred lease incentives							(18,789	)							(18,326	)
Deferred income taxes							(14,461	)							(13,526	)
Tax benefit related to stock-based awards							23,571								29,603
Excess tax benefit related to stock-based awards							(4,817	)							(14,283	)
Stock-based compensation expense							37,975								36,182
Other							(647	)							91
Changes in:
Accounts receivable							(17,400	)							(21,875	)
Merchandise inventories							(82,410	)							(216,294	)
Prepaid catalog expenses							3,591								(1,820	)
Prepaid expenses and other assets							(29,205	)							(20,909	)
Accounts payable							(17,403	)							(10,179	)
Accrued salaries, benefits and other current and long-term liabilities							(507	)							(13,494	)
Customer deposits							(7,445	)							32,016
Deferred rent and lease incentives							25,969								25,561
Income taxes payable							(65,915	)							2,707
Net cash provided by operating activities							122,464								93,045
Cash flows from investing activities:
Purchases of property and equipment							(127,169	)							(136,069	)
Other							370								535
Net cash used in investing activities							(126,799	)							(135,534	)
Cash flows from financing activities:
Borrowings under revolving line of credit							125,000								200,000
Repurchase of common stock							(115,167	)							(196,497	)
Payment of dividends							(100,854	)							(96,020	)
Tax withholdings related to stock-based awards							(26,518	)							(31,019	)
Excess tax benefit related to stock-based awards							4,817								14,283
Net proceeds related to stock-based awards							1,532								2,647
Repayment of long-term obligations							-								(1,968	)
Other							(48	)							-
Net cash used in financing activities							(111,238	)							(108,574	)
Effect of exchange rates on cash and cash equivalents							(2,693	)							400
Net decrease in cash and cash equivalents							(118,266	)							(150,663	)
Cash and cash equivalents at beginning of period							193,647								222,927
Cash and cash equivalents at end of period						$	75,381							$	72,264

Exhibit 1
3 rd Quarter Operating Margin By Segment*
($ in thousands)
					E-commerce											Retail											Unallocated											Total
					Q3 16					Q3 15						Q3 16					Q3 15						Q3 16					Q3 15						Q3 16					Q3 15
Net Revenues					$	648,743				$	628,191					$	596,642				$	603,891					$	-				$	-					$	1,245,385				$	1,232,082
GAAP Operating Income/(Expense)						150,164					137,828						47,080					49,213						(87,265	)				(76,358	)					109,979					110,683
GAAP Operating Margin						23.1	%				21.9	%					7.9	%				8.1	%					(7.0	%)				(6.2	%)					8.8	%				9.0	%
Unusual Business Events (1)						-					-						-					-						1,185					-						1,185					-
Non-GAAP Operating Income/ (Expense) Excluding Unusual Business Events (2)					$	150,164				$	137,828					$	47,080				$	49,213					$	(86,080	)			$	(76,358	)				$	111,164				$	110,683
Non-GAAP Operating Margin (2)						23.1	%				21.9	%					7.9	%				8.1	%					(6.9	%)				(6.2	%)					8.9	%				9.0	%
* 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 GAAP to Non-GAAP
Diluted Earnings Per Share**
(Totals rounded to the nearest cent per diluted share)
							Q1 16 ACT					Q2 16 ACT					Q3 16 ACT					Q4 16 GUID					FY 16 GUID
2016 GAAP Diluted EPS							$0.44					$0.58					$0.78					$1.45 - $1.55					$3.25 - $3.35
Impact of Unusual Business Events (1)							$0.09					-					$0.01					-					$0.10
2016 Non-GAAP Diluted EPS Excluding Unusual Business Events (2)							$0.53					$0.58					$0.79					$1.45 - $1.55					$3.35 - $3.45
							Q1 15 ACT					Q2 15 ACT					Q3 15 ACT					Q4 15 ACT					FY 15 ACT
2015 GAAP Diluted EPS							$0.48					$0.58					$0.77					$1.55					$3.37
** 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
					Jul. 31, 2016			Openings			Closings				Oct. 30, 2016			Nov. 1, 2015				Oct. 30, 2016					Nov. 1, 2015
Williams-Sonoma					241			1			(1)				241			243				6,600					6,600
Pottery Barn					201			1			-				202			200				13,800					13,700
Pottery Barn Kids					89			-			-				89			90				7,500					7,500
West Elm					89			10			(2)				97			84				13,300					13,400
Rejuvenation					6			-			-				6			6				9,300					9,000
Total					626			12			(3)				635			623				10,000					9,900

									Jul. 31, 2016									Oct. 30, 2016									Nov. 1, 2015
Total store selling square footage									3,894,000									3,966,000									3,839,000
Total store leased square footage									6,262,000									6,381,000									6,188,000

Notes:
(1)	Impact of Unusual Business Events – During Q1 16 and Q3 16, we incurred severance-related reorganization charges due to headcount reduction primarily in our corporate functions totaling approximately $14 million, or $0.10 per diluted share. These charges were recorded as SG&A expense within the unallocated segment.
(2)	SEC Regulation G – Non-GAAP Information – These tables include non-GAAP operating income, operating margin 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 and FY 16 guidance 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.