View all news

Williams-Sonoma, Inc. announces strong first quarter results

05/26/2021

Q1 comparable brand revenue growth accelerates to 40.4%
Q1 GAAP operating margin of 15.7%; Q1 non-GAAP operating margin expansion of 950bps to 15.9%
Q1 GAAP diluted EPS of $2.90; Q1 Non-GAAP diluted EPS of $2.93
Raises full-year 2021 outlook

Williams-Sonoma, Inc. (NYSE: WSM), the world’s largest digital-first, design-led and sustainable home retailer, today announced operating results for the first fiscal quarter ended May 2, 2021 (“Q1 21”) versus the first fiscal quarter ended May 3, 2020 (“Q1 20”).

“We are proud to report another record quarter of accelerating revenue and profitability with over 40% comp growth and a 950bps expansion in our non-GAAP operating margin. These results were driven by strength across all of our brands. We are seeing strength in our core businesses and our new growth initiatives have outperformed. As re-openings accelerate across the country, a record number of customers continue to shop with us as they invest in their homes. We are honored to be our customers' destination for their entertaining and home furnishings needs as they welcome friends and family back,” said Laura Alber, President and Chief Executive Officer.

“As a result, we are raising our full year outlook from mid-to-high single digit revenue growth to low-double digit to mid-teen revenue growth and year-over-year operating margin expansion. We believe our business is uniquely positioned to gain market share given our growth strategies and our three key differentiators:

  1. Our in‐house design;
  2. Our digital-first channel strategy; and
  3. Our values.

These differentiators are more relevant than ever with our customers and set us apart from our competition,” Alber continued.

Alber concluded, “As we look ahead, we are confident in our runway for growth and profitability. The goals we have set are driving incremental growth faster than anticipated, our brand differentiators continue to accelerate, and favorable macro trends should continue to benefit our business for the long-term. We are the only home furnishings retailer that’s able to serve customers at scale online and provide the experience and convenience of physical retail with exclusive sustainable products – giving us the unique advantage to gain share for many years to come.”

FIRST QUARTER 2021

  • Comparable brand revenue growth accelerates to 40.4%, with all brands accelerating sequentially including West Elm at 50.9%, Pottery Barn at 41.3%, Williams Sonoma at 35.3% and Pottery Barn Kids and Teen at 27.6%
  • GAAP gross margin of 43.0%; non-GAAP gross margin of 43.0%, expanding 850bps and driven by higher year-over-year merchandise margins and occupancy leverage of approximately 410bps; occupancy costs were approximately $176 million, relatively flat to last year
  • GAAP SG&A rate of 27.3%; non-GAAP SG&A rate of 27.1%, leveraging approximately 100bps and reflecting the strength of our topline performance and ongoing financial discipline
  • GAAP operating margin of 15.7%; non-GAAP operating margin of 15.9%, leveraging approximately 950bps
  • GAAP diluted EPS of $2.90; non-GAAP diluted EPS of $2.93, or 296% higher than last year
  • Maintaining strong liquidity position of $640 million in cash and over $238 million in operating cash flow, enabling the company to repay its $300 million term loan in full, let its 364-day $200 million line of credit facility expire, and repurchase approximately $315 million in shares

OUTLOOK

Fiscal Year 2021

Given the strength of our business year-to-date and the macro trends that we believe will continue to benefit our business, we are raising our fiscal year 2021 outlook to low double-digit to mid-teen net revenue growth and year-over-year non-GAAP operating margin expansion.

Long-Term Financial Guidance

For the long-term, we are planning for net revenue growth of mid-to-high single digits and non-GAAP operating margin expansion. Our strong results, combined with our three key differentiators of in-house design, digital-first channel strategy and values, and the macro trends that should benefit our business over the long-term, give us confidence in these future growth projections and an accelerated path to $10 billion in net revenues and maintaining at least 15% non-GAAP operating margins in the next five years.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, May 26, 2021, 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; these excluded items may include expenses related to the impact of inventory write-offs, the acquisition of Outward, Inc., and asset impairment charges. 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 statements relating to: our ability to capture significant opportunities in the home furnishings industry; increase our market share; our ability to continue to improve performance; our focus on operational excellence; our ability to improve customers’ experience; our optimism about the future; our ability to maximize growth and maintain high profitability; our fiscal year 2021 outlook and long-term financial targets, including projected net revenue growth and operating margin expansion; our stock repurchase program and dividend expectations; our planned capital investments; 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: continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; the continuing impact of the coronavirus on our global supply chain, retail store operations and customer demand; 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; the impact of current and potential future tariffs and our ability to mitigate impacts; the impact of inflation on consumer spending; 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 31, 2021 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 May 2, 2021. 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 free-to-join loyalty 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 lead the industry with our Environmental, Social and Governance (“ESG”) efforts. Our company is Good By Design — we’ve deeply engrained 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)

   

 

 

Thirteen Weeks Ended

 

Thirteen Weeks Ended

 

 

May 2, 2021

 

May 3, 2020

 

 

 

% of

 

 

% of

In thousands, except per share amounts

$

Revenues

$

Revenues

Net revenues

 

$

1,749,029

 

 

100

%

 

$

1,235,203

 

 

100

%

Cost of goods sold

 

996,176

 

 

57.0

 

 

820,943

 

 

66.5

 

Gross profit

 

752,853

 

 

43.0

 

 

414,260

 

 

33.5

 

Selling, general and administrative expenses

 

477,676

 

 

27.3

 

 

365,615

 

 

29.6

 

Operating income

 

275,177

 

 

15.7

 

 

48,645

 

 

3.9

 

Interest expense, net

 

1,872

 

 

0.1

 

 

2,159

 

 

0.2

 

Earnings before income taxes

 

273,305

 

 

15.6

 

 

46,486

 

 

3.8

 

Income taxes

 

45,503

 

 

2.6

 

 

11,063

 

 

0.9

 

Net earnings

 

$

227,802

 

 

13.0

%

 

$

35,423

 

 

2.9

%

Earnings per share (EPS):

 

 

 

 

 

 

 

 

Basic

 

$

3.01

 

 

 

 

$

0.46

 

 

 

Diluted

 

$

2.90

 

 

 

 

$

0.45

 

 

 

Shares used in calculation of EPS:

 

 

 

 

 

 

 

 

Basic

 

75,800

 

 

 

 

77,262

 

 

 

Diluted

 

78,485

 

 

 

 

78,399

 

 

 

 

1st Quarter Net Revenues and Comparable Brand Revenue Growth (Decline) by Concept*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenues

 

Comparable Brand Revenue

 

(Millions)

Growth (Decline)

 

 

 

Q1 21

 

Q1 20

 

Q1 21

 

Q1 20

 

 

Pottery Barn

 

$

679

 

$

480

41.3

%

 

(1.1

%)

 

 

West Elm

 

 

477

 

 

315

 

50.9

 

 

3.3

 

 

 

Williams Sonoma

 

 

266

 

 

199

 

35.3

 

 

5.4

 

 

 

Pottery Barn Kids and Teen

 

 

236

 

 

189

 

27.6

 

 

8.5

 

 

 

Other**

 

 

91

 

 

52

 

N/A

 

 

N/A

 

 

 

Total

 

$

1,749

 

$

1,235

 

40.4

%

 

2.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

* See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue, which is calculated on a 13-week to 13-week basis for Q1 2021 and Q1 2020. Comparable stores that were temporarily closed due to COVID-19 were not excluded from the comparable stores calculation.

** Primarily consists of net revenues from our international franchise operations, Rejuvenation and Mark and Graham.

 

Condensed Consolidated Balance Sheets (unaudited)

 

In thousands, except per share amounts

 

May 2, 2021

 

January 31, 2021

 

May 3, 2020

Assets

 

 

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

$

639,670

 

 

$

1,200,337

 

 

$

861,002

 

Accounts receivable, net

 

 

142,459

 

 

 

143,728

 

 

 

104,829

 

Merchandise inventories, net

 

 

1,087,528

 

 

 

1,006,299

 

 

 

1,070,681

 

Prepaid expenses

 

 

58,837

 

 

 

93,822

 

 

 

90,433

 

Other current assets

 

 

20,502

 

 

 

22,894

 

 

 

22,099

 

Total current assets

 

 

1,948,996

 

 

 

2,467,080

 

 

 

2,149,044

 

Property and equipment, net

 

 

875,384

 

 

 

873,894

 

 

 

907,219

 

Operating lease right-of-use assets

 

 

1,054,746

 

 

 

1,086,009

 

 

 

1,175,402

 

Deferred income taxes, net

 

 

57,499

 

 

 

61,854

 

 

 

33,320

 

Goodwill

 

 

85,435

 

 

 

85,446

 

 

 

85,335

 

Other long-term assets, net

 

 

88,180

 

 

 

87,141

 

 

 

67,795

 

Total assets

 

$

4,110,240

 

 

$

4,661,424

 

 

$

4,418,115

 

Liabilities and Stockholders' equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

574,876

 

 

$

542,992

 

 

$

423,375

 

Accrued expenses

 

 

174,139

 

 

 

267,592

 

 

 

137,495

 

Gift card and other deferred revenue

 

 

389,640

 

 

 

373,164

 

 

 

299,353

 

Income taxes payable

 

 

93,282

 

 

 

69,476

 

 

 

24,049

 

Current debt

 

 

 

 

 

299,350

 

 

 

 

Borrowings under revolving line of credit

 

 

 

 

 

 

 

 

487,823

 

Operating lease liabilities

 

 

208,739

 

 

 

209,754

 

 

 

224,541

 

Other current liabilities

 

 

78,597

 

 

 

85,672

 

 

 

85,458

 

Total current liabilities

 

 

1,519,273

 

 

 

1,848,000

 

 

 

1,682,094

 

Deferred lease incentives

 

 

19,505

 

 

 

20,612

 

 

 

26,254

 

Long-term debt

 

 

 

 

 

 

 

 

299,868

 

Long-term operating lease liabilities

 

 

999,288

 

 

 

1,025,057

 

 

 

1,109,473

 

Other long-term liabilities

 

 

124,878

 

 

 

116,570

 

 

 

81,497

 

Total liabilities

 

 

2,662,944

 

 

 

3,010,239

 

 

 

3,199,186

 

Stockholders' equity

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Common stock: $0.01 par value; 253,125 shares authorized; 75,235, 76,340, and 77,759 shares issued and outstanding at May 2, 2021, January 31, 2021 and May 3, 2020, respectively

 

 

753

 

 

 

764

 

 

 

778

 

Additional paid-in capital

 

 

556,305

 

 

 

638,375

 

 

 

596,184

 

Retained earnings

 

 

894,878

 

 

 

1,019,762

 

 

 

641,917

 

Accumulated other comprehensive loss

 

 

(3,929

)

 

 

(7,117

)

 

 

(19,351

)

Treasury stock, at cost

 

 

(711

)

 

 

(599

)

 

 

(599

)

Total stockholders' equity

 

 

1,447,296

 

 

 

1,651,185

 

 

 

1,218,929

 

Total liabilities and stockholders' equity

 

$

4,110,240

 

 

$

4,661,424

 

 

$

4,418,115

 

 

 

 

 

 

 

 

 

Retail Store Data

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 31, 2021

 

Openings

 

Closings

 

May 2, 2021

 

May 3, 2020

 

 

Williams Sonoma

 

198

 

 

 

 

(3

 

195

 

 

212

 

 

 

Pottery Barn

 

195

 

 

2

 

 

(2

 

195

 

 

201

 

 

 

West Elm

 

121

 

 

 

 

 

 

121

 

 

119

 

 

 

Pottery Barn Kids

 

57

 

 

 

 

 

 

57

 

 

74

 

 

 

Rejuvenation

 

10

 

 

 

 

 

 

10

 

 

10

 

 

 

Total

 

581

 

 

2

 

 

(5

) 

 

578

 

 

616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

 

Thirteen Weeks Ended

In thousands

 

May 2, 2021

 

May 3, 2020

Cash flows from operating activities:

 

 

 

 

Net earnings

 

$

227,802

 

 

$

35,423

 

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

operating activities:

 

 

 

 

Depreciation and amortization

 

$

47,922

 

 

$

46,224

 

Loss on disposal/impairment of assets

 

 

195

 

 

 

16,185

 

Amortization of deferred lease incentives

 

 

(1,108

)

 

 

(1,405

)

Non-cash lease expense

 

 

52,955

 

 

 

54,262

 

Deferred income taxes

 

 

(3,981

)

 

 

(2,585

)

Tax benefit related to stock-based awards

 

 

10,146

 

 

 

12,039

 

Stock-based compensation expense

 

 

26,330

 

 

 

19,703

 

Other

 

 

(223

)

 

 

129

 

Changes in:

 

 

 

 

Accounts receivable

 

 

1,522

 

 

 

8,950

 

Merchandise inventories

 

 

(79,726

)

 

 

28,513

 

Prepaid expenses and other assets

 

 

34,562

 

 

 

(215

)

Accounts payable

 

 

27,910

 

 

 

(92,871

)

Accrued expenses and other liabilities

 

 

(90,883

)

 

 

(29,050

)

Gift card and other deferred revenue

 

 

16,174

 

 

 

9,960

 

Operating lease liabilities

 

 

(53,633

)

 

 

(57,629

)

Income taxes payable

 

 

22,917

 

 

 

6,240

 

Net cash provided by operating activities

 

 

238,881

 

 

 

53,873

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(42,360

)

 

 

(42,321

)

Other

 

 

93

 

 

 

242

 

Net cash used in investing activities

 

 

(42,267

)

 

 

(42,079

)

Cash flows from financing activities:

 

 

 

 

Repurchases of common stock

 

 

(315,529

)

 

 

 

Repayment of long-term debt

 

 

(300,000

)

 

 

 

Tax withholdings related to stock-based awards

 

 

(98,451

)

 

 

(28,912

)

Payment of dividends

 

 

(45,576

)

 

 

(39,391

)

Borrowings under revolving line of credit

 

 

 

 

 

487,823

 

Net cash (used in) provided by financing activities

 

 

(759,556

)

 

 

419,520

 

Effect of exchange rates on cash and cash equivalents

 

 

2,275

 

 

 

(2,474

)

Net (decrease) increase in cash and cash equivalents

 

 

(560,667

)

 

 

428,840

 

Cash and cash equivalents at beginning of period

 

 

1,200,337

 

 

 

432,162

 

Cash and cash equivalents at end of period

 

$

639,670

 

 

$

861,002

 

Exhibit 1

 

 

1st Quarter GAAP to Non-GAAP Reconciliation

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

May 2, 2021

 

May 3, 2020

 

 

 

 

$

% of
revenues

 

$

% of
revenues

 

 

Gross profit

 

$

752,853

 

43.0

%

 

$

414,260

 

33.5

%

 

 

Inventory write-off 1

 

 

 

 

11,378

 

 

 

 

Non-GAAP gross profit

 

$

752,853

 

43.0

%

 

$

425,638

 

34.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

477,676

 

27.3

%

 

$

365,615

 

29.6

%

 

 

Outward-related 2

 

(2,839)

 

 

 

(3,358)

 

 

 

 

Asset impairment3

 

 

 

 

(15,620)

 

 

 

 

Non-GAAP selling, general and administrative expenses

 

$

474,837

 

27.1

%

 

$

346,637

 

28.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

275,177

 

15.7

%

 

$

48,645

 

3.9

%

 

 

Outward-related 2

 

2,839

 

 

 

3,358

 

 

 

 

Inventory write-off1

 

 

 

 

11,378

 

 

 

 

Asset impairment3

 

 

 

 

15,620

 

 

 

 

Non-GAAP operating income

 

$

278,016

 

15.9

%

 

$

79,001

 

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

$

Tax rate

 

$

Tax rate

 

 

Income taxes

 

$

45,503

 

16.6

%

 

$

11,063

 

23.8

%

 

 

Outward-related 2

 

511

 

 

 

741

 

 

 

 

Inventory write-off 1

 

 

 

 

2,940

 

 

 

 

Asset impairment 3

 

 

 

 

4,037

 

 

 

 

Non-GAAP income taxes

 

$

46,014

 

16.7

%

 

$

18,781

 

24.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$

2.90

 

 

 

$

0.45

 

 

 

 

Outward-related 2

 

0.03

 

 

 

0.03

 

 

 

 

Inventory write-off 1

 

 

 

 

0.11

 

 

 

 

Asset impairment 3

 

 

 

 

0.15

 

 

 

 

Non-GAAP diluted EPS*

 

$

2.93

 

 

 

$

0.74

 

 

 

 

  • 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 gross profit, gross margin, 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.

Notes to Exhibit 1:

  1. During Q1 2020, we incurred approximately $11.4 million of inventory write-offs for inventory with minor damage that we could not liquidate through our outlets due to store closures resulting from COVID-19.
  2. During Q1 2021 and Q1 2020, we incurred approximately $2.8 million and $3.4 million, respectively, associated with acquisition-related compensation expense and the amortization of acquired intangibles for Outward, Inc.
  3. During Q1 2020, we incurred approximately $15.6 million of expense associated with store asset impairments due to the impact that COVID-19 had on our retail stores.

 

Julie Whalen EVP, Chief Financial Officer – (415) 616 8524
-or-
Elise Wang VP, Investor Relations – (415) 616 8571

Source: Williams-Sonoma, Inc.

Multimedia Files:

View all news

Stock Information

Investor Relations Contact