WILLIAMS-SONOMA, INC. ANNOUNCES RECORD FIRST QUARTER RESULTS

·14 min read

Q1 COMPARABLE BRAND REVENUE GROWTH OF 9.5% AND 49.9% ON A 2-YEAR BASIS

GROSS MARGIN OF 43.8% EXPANDING 80BPS; DILUTED EPS OF $3.50

REITERATES FULL YEAR AND LONG-TERM OUTLOOK

RECORD STOCK REPURCHASES OF OVER $500 MILLION

SAN FRANCISCO, May 25, 2022--(BUSINESS WIRE)--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 1, 2022 ("Q1 22") versus the first fiscal quarter ended May 2, 2021 ("Q1 21").

"The first quarter of fiscal 2022 represented another quarter of outperformance with a 9.5% comp on the topline, with both demand and net sales in-line with each other; and 19.5% growth on the bottom line to $3.50 per share. These results continue to demonstrate the strength of our multi-brand portfolio and our team's ability to navigate challenges and outperform. Additionally, these results are even more impressive when considering that we were up against last year’s strong performance with a comp of more than 40%," said Laura Alber, President and Chief Executive Officer.

Alber concluded, "As we look to the balance of the year, we remain confident and committed to our guidance of mid-to-high single digit comps with operating margins relatively aligned to fiscal 2021. We have a solid line-up of growth initiatives and operational improvements planned for the balance of the year. And, as we look further, we are confident in our path to be a $10 billion company by 2024."

FIRST QUARTER 2022

  • Comparable brand revenue growth of 9.5%, including Pottery Barn at 14.6% and West Elm at 12.8%

  • Gross margin of 43.8%, expanding 80bps and driven by higher year-over-year merchandise margins as well as occupancy leverage of approximately 20bps; occupancy costs were $186 million

  • Operating margin of 17.1%; GAAP operating margin expansion of 140bps; non-GAAP operating margin expansion of 120bps

  • Diluted EPS of $3.50, increasing 20.7% on a GAAP basis and 19.5% on a non-GAAP basis over last year

  • Maintained a strong liquidity position of $325 million in cash and generated $185 million in operating cash flow, enabling the company to repurchase over $500 million in shares and to pay over $58 million in dividends in the first quarter

OUTLOOK

Given the ongoing strength of our business as we enter fiscal year 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 expecting our fiscal year 2022 financial performance to be in line with our long-term financial guidance 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, May 25, 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, such as the acquisition of Outward, Inc. 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 macro trends.

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 May 1, 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

May 1, 2022

May 2, 2021

(In thousands, except per share amounts)

$

% of
Revenues

$

% of
Revenues

Net revenues

$

1,891,227

100.0

%

$

1,749,029

100.0

%

Cost of goods sold

1,062,679

56.2

996,176

57.0

Gross profit

828,548

43.8

752,853

43.0

Selling, general and administrative expenses

505,067

26.7

477,676

27.3

Operating income

323,481

17.1

275,177

15.7

Interest (income) expense, net

(163

)

1,872

0.1

Earnings before income taxes

323,644

17.1

273,305

15.6

Income taxes

69,531

3.7

45,503

2.6

Net earnings

$

254,113

13.4

%

$

227,802

13.0

%

Earnings per share (EPS):

Basic

$

3.59

$

3.01

Diluted

$

3.50

$

2.90

Shares used in calculation of EPS:

Basic

70,851

75,800

Diluted

72,652

78,485

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

Net Revenues

Comparable Brand Revenue
Growth (Decline)

(In millions, except percentages)

Q1 22

Q1 21

Q1 22

Q1 21

Pottery Barn

$

775

$

679

14.6

%

41.3

%

West Elm

536

477

12.8

50.9

Williams Sonoma

252

266

(2.2

)

35.3

Pottery Barn Kids and Teen

227

236

(3.1

)

27.6

Other2

101

91

N/A

N/A

Total

$

1,891

$

1,749

9.5

%

40.4

%

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 Q1 2022 and Q1 2021.

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

Condensed Consolidated Balance Sheets (unaudited)

As of

(In thousands, except per share amounts)

May 1, 2022

January 30, 2022

May 2, 2021

Assets

Current assets

Cash and cash equivalents

$

324,835

$

850,338

$

639,670

Accounts receivable, net

122,946

131,683

142,459

Merchandise inventories, net

1,396,135

1,246,372

1,087,528

Prepaid expenses

60,997

69,252

58,837

Other current assets

23,939

26,249

20,502

Total current assets

1,928,852

2,323,894

1,948,996

Property and equipment, net

942,460

920,773

875,384

Operating lease right-of-use assets

1,102,056

1,132,764

1,054,746

Deferred income taxes, net

48,737

56,585

57,499

Goodwill

85,298

85,354

85,435

Other long-term assets, net

103,310

106,250

88,180

Total assets

$

4,210,713

$

4,625,620

$

4,110,240

Liabilities and stockholders' equity

Current liabilities

Accounts payable

$

642,619

$

612,512

$

574,876

Accrued expenses

183,729

319,924

174,139

Gift card and other deferred revenue

490,821

447,770

389,640

Income taxes payable

126,270

79,554

93,282

Operating lease liabilities

211,614

217,409

208,739

Other current liabilities

88,587

94,517

78,597

Total current liabilities

1,743,640

1,771,686

1,519,273

Deferred lease incentives

15,576

16,360

19,505

Long-term operating lease liabilities

1,038,249

1,066,839

999,288

Other long-term liabilities

103,504

106,528

124,878

Total liabilities

2,900,969

2,961,413

2,662,944

Stockholders' equity

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

Common stock: $0.01 par value; 253,125 shares authorized; 69,219, 71,982, and 75,235 shares issued and outstanding at May 1, 2022, January 30, 2022 and May 2, 2021, respectively

693

720

753

Additional paid-in capital

532,205

600,942

556,305

Retained earnings

789,852

1,074,084

894,878

Accumulated other comprehensive loss

(12,267

)

(10,828

)

(3,929

)

Treasury stock, at cost

(739

)

(711

)

(711

)

Total stockholders' equity

1,309,744

1,664,207

1,447,296

Total liabilities and stockholders' equity

$

4,210,713

$

4,625,620

$

4,110,240

Retail Store Data

(unaudited)

Beginning of quarter

End of quarter

As of

January 30, 2022

Openings

Closings

May 1, 2022

May 2, 20211

Pottery Barn

188

1

(1

)

188

195

Williams Sonoma

174

2

(1

)

175

195

West Elm

121

121

121

Pottery Barn Kids

52

52

57

Rejuvenation

9

9

10

Total

544

3

(2

)

545

578

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 Thirteen Weeks Ended

(In thousands)

May 1, 2022

May 2, 2021

Cash flows from operating activities:

Net earnings

$

254,113

$

227,802

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

Depreciation and amortization

50,251

47,922

Loss on disposal/impairment of assets

159

195

Amortization of deferred lease incentives

(784

)

(1,108

)

Non-cash lease expense

54,338

52,955

Deferred income taxes

(2,725

)

(3,981

)

Tax benefit related to stock-based awards

10,522

10,146

Stock-based compensation expense

28,542

26,330

Other

(17

)

(223

)

Changes in:

Accounts receivable

8,741

1,522

Merchandise inventories

(149,470

)

(79,726

)

Prepaid expenses and other assets

13,517

34,562

Accounts payable

25,559

27,910

Accrued expenses and other liabilities

(139,883

)

(90,883

)

Gift card and other deferred revenue

42,924

16,174

Operating lease liabilities

(58,025

)

(53,633

)

Income taxes payable

46,757

22,917

Net cash provided by operating activities

184,519

238,881

Cash flows from investing activities:

Purchases of property and equipment

(71,186

)

(42,360

)

Other

86

93

Net cash used in investing activities

(71,100

)

(42,267

)

Cash flows from financing activities:

Repurchases of common stock

(501,075

)

(315,529

)

Tax withholdings related to stock-based awards

(78,508

)

(98,451

)

Payment of dividends

(58,150

)

(45,576

)

Repayment of long-term debt

(300,000

)

Net cash used in financing activities

(637,733

)

(759,556

)

Effect of exchange rates on cash and cash equivalents

(1,189

)

2,275

Net decrease in cash and cash equivalents

(525,503

)

(560,667

)

Cash and cash equivalents at beginning of period

850,338

1,200,337

Cash and cash equivalents at end of period

$

324,835

$

639,670

Exhibit 1

1st Quarter GAAP to Non-GAAP Reconciliation

(unaudited)

For the Thirteen Weeks Ended

May 1, 2022

May 2, 2021

(In thousands, except per share data)

$

% of
revenues

$

% of
revenues

Selling, general and administrative expenses

$

505,067

26.7 %

$

477,676

27.3 %

Outward-related1

(2,839)

Non-GAAP selling, general and administrative expenses

$

505,067

26.7 %

$

474,837

27.1 %

Operating income

$

323,481

17.1 %

$

275,177

15.7 %

Outward-related1

2,839

Non-GAAP operating income

$

323,481

17.1 %

$

278,016

15.9 %

$

Tax rate

$

Tax rate

Income taxes

$

69,531

21.5 %

$

45,503

16.6 %

Outward-related1

511

Non-GAAP income taxes

$

69,531

21.5 %

$

46,014

16.7 %

Diluted EPS

$

3.50

$

2.90

Outward-related1

0.03

Non-GAAP diluted EPS2

$

3.50

$

2.93

1 During Q1 2021, we incurred approximately $2.8 million 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220525005917/en/

Contacts

Julie Whalen EVP, Chief Financial Officer – (415) 616 8524
-or-
Jeremy Brooks SVP, Chief Accounting Officer & Head of Investor Relations – (415) 616 8571

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