Williams-Sonoma, Inc. Announces Record Third Quarter Results
Williams-Sonoma reported a strong Q3 2022 with an 8.1% revenue growth and a 25% growth on a two-year basis. The operating margin improved to 15.5%, alongside a 13.1% increase in diluted EPS to $3.72.
The company maintained its fiscal year 2022 guidance of mid-to-high single-digit annual net revenue growth, despite macroeconomic uncertainties. Cash reserves stood at $113 million, with operating cash flow of $205 million.
- 8.1% comparable brand revenue growth.
- Diluted EPS rose by 13.1% to $3.72.
- Operating margin increased to 15.5%.
- Cash flow generated was $205 million.
- Gross margin declined by 220bps to 41.5% due to higher shipping costs.
- Occupancy costs increased by 10.5% to $202 million.
Q3 Comparable Brand Revenue Growth of
Operating Margin of
Reiterates Full Year Outlook
“We are proud of another strong quarter generating an
“We delivered another quarter of record revenues and earnings in a challenging environment. Our topline results illustrate our ability to gain market share. Our bottom-line results demonstrate the power of our operating model to sustain merchandise margin and control SG&A expenses,” added
Alber concluded, “Although the macro backdrop has become more uncertain, we believe our strong positioning, growth initiatives, and culture of financial discipline will allow us to outperform in any environment.”
THIRD QUARTER 2022 HIGHLIGHTS
-
Comparable brand revenue. Increased
8.1% with a 2-year comp of25.0% and a 3-year comp of almost50% . -
Gross margin. Rate of
41.5% which was 220bps below last year, driven by higher shipping and freight costs with merchandise margin flat to last year with occupancy deleverage of 30bps. Occupancy costs increased10.5% to .$202 million -
SG&A. Rate of
26.0% leveraging 160bps on a GAAP basis and 150bps on a non-GAAP basis, reflecting employment and advertising leverage. -
Operating income.
, increasing$340 million 2.8% on a GAAP basis and2.0% on a non-GAAP basis, with operating margin of15.5% . -
Diluted EPS.
per share, increasing$3.72 13.1% on a GAAP basis and12.0% on a non-GAAP basis. -
Cash and cash flow. Ended the quarter with
in cash and generated$113 million in operating cash flow.$205 million
OUTLOOK
- We are reiterating our fiscal year 2022 guidance of mid-to-high single digit annual net revenue growth and operating margins relatively in-line with our fiscal year 2021 operating margin.
- Given the macro uncertainty, we will not reiterate or update our guidance through fiscal year 2024.
- We will provide guidance for fiscal 2023 and beyond in our press release announcing our fourth quarter fiscal 2022 results.
CONFERENCE CALL AND WEBCAST INFORMATION
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
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 and our Chief Financial 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 continuing impact of inflation and measures to control inflation, including raising interest rates, on consumer spending; the continuing impact of the coronavirus, war in
ABOUT
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 Thirty-nine Weeks Ended |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||
(In thousands, except per share amounts) |
$ |
|
% of Revenues |
|
$ |
|
% of Revenues |
|
$ |
|
% of Revenues |
|
$ |
|
% of Revenues |
|||||||||||
Net revenues |
$ |
2,192,574 |
|
|
100.0 |
% |
|
$ |
2,047,539 |
|
100.0 |
% |
|
$ |
6,221,338 |
|
|
100.0 |
% |
|
$ |
5,744,907 |
|
100.0 |
% |
|
Cost of goods sold |
|
1,282,048 |
|
|
58.5 |
|
|
|
1,152,054 |
|
56.3 |
|
|
|
3,553,455 |
|
|
57.1 |
|
|
|
3,238,181 |
|
56.4 |
|
|
Gross profit |
|
910,526 |
|
|
41.5 |
|
|
|
895,485 |
|
43.7 |
|
|
|
2,667,883 |
|
|
42.9 |
|
|
|
2,506,726 |
|
43.6 |
|
|
Selling, general and administrative expenses |
|
570,893 |
|
|
26.0 |
|
|
|
565,218 |
|
27.6 |
|
|
|
1,639,248 |
|
|
26.3 |
|
|
|
1,578,182 |
|
27.5 |
|
|
Operating income |
|
339,633 |
|
|
15.5 |
|
|
|
330,267 |
|
16.1 |
|
|
|
1,028,635 |
|
|
16.5 |
|
|
|
928,544 |
|
16.2 |
|
|
Interest (income) expense, net |
|
(370 |
) |
|
— |
|
|
|
121 |
|
— |
|
|
|
(877 |
) |
|
— |
|
|
|
1,954 |
|
— |
|
|
Earnings before income taxes |
|
340,003 |
|
|
15.5 |
|
|
|
330,146 |
|
16.1 |
|
|
|
1,029,512 |
|
|
16.5 |
|
|
|
926,590 |
|
16.1 |
|
|
Income taxes |
|
88,280 |
|
|
4.0 |
|
|
|
80,622 |
|
3.9 |
|
|
|
256,601 |
|
|
4.1 |
|
|
|
203,194 |
|
3.5 |
|
|
Net earnings |
$ |
251,723 |
|
|
11.5 |
% |
|
$ |
249,524 |
|
12.2 |
% |
|
$ |
772,911 |
|
|
12.4 |
% |
|
$ |
723,396 |
|
12.6 |
% |
|
Earnings per share (EPS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic |
$ |
3.77 |
|
|
|
|
$ |
3.37 |
|
|
|
$ |
11.27 |
|
|
|
|
$ |
9.66 |
|
|
|||||
Diluted |
$ |
3.72 |
|
|
|
|
$ |
3.29 |
|
|
|
$ |
11.08 |
|
|
|
|
$ |
9.40 |
|
|
|||||
Shares used in calculation of EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic |
|
66,704 |
|
|
|
|
|
74,010 |
|
|
|
|
68,578 |
|
|
|
|
|
74,865 |
|
|
|||||
Diluted |
|
67,617 |
|
|
|
|
|
75,943 |
|
|
|
|
69,782 |
|
|
|
|
|
76,975 |
|
|
3rd Quarter Net Revenues and Comparable Brand Revenue Growth (Decline)1 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Net Revenues |
|
Comparable Brand Revenue Growth (Decline) |
|
|||||||||
|
(In millions, except percentages) |
Q3 22 |
|
Q3 21 |
|
Q3 22 |
|
Q3 21 |
|
|||||
|
|
$ |
935 |
|
$ |
789 |
|
19.6 |
% |
|
15.9 |
% |
|
|
|
West Elm |
|
600 |
|
|
580 |
|
4.2 |
|
|
22.5 |
|
|
|
|
|
|
262 |
|
|
272 |
|
(1.5 |
) |
|
7.6 |
|
|
|
|
|
|
299 |
|
|
316 |
|
(4.8 |
) |
|
16.9 |
|
|
|
|
Other2 |
|
97 |
|
|
91 |
|
N/A |
|
|
N/A |
|
|
|
|
Total |
$ |
2,193 |
|
$ |
2,048 |
|
8.1 |
% |
|
16.9 |
% |
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets (unaudited) |
||||||||||||
|
As of |
|||||||||||
(In thousands, except per share amounts) |
|
|
|
|
|
|||||||
Assets |
|
|
|
|
|
|||||||
Current assets |
|
|
|
|
|
|||||||
Cash and cash equivalents |
$ |
113,058 |
|
|
$ |
850,338 |
|
|
$ |
656,898 |
|
|
Accounts receivable, net |
|
125,842 |
|
|
|
131,683 |
|
|
|
139,511 |
|
|
Merchandise inventories, net |
|
1,687,895 |
|
|
|
1,246,372 |
|
|
|
1,272,028 |
|
|
Prepaid expenses |
|
104,208 |
|
|
|
69,252 |
|
|
|
85,433 |
|
|
Other current assets |
|
29,729 |
|
|
|
26,249 |
|
|
|
22,852 |
|
|
Total current assets |
|
2,060,732 |
|
|
|
2,323,894 |
|
|
|
2,176,722 |
|
|
Property and equipment, net |
|
1,009,088 |
|
|
|
920,773 |
|
|
|
892,226 |
|
|
Operating lease right-of-use assets |
|
1,277,064 |
|
|
|
1,132,764 |
|
|
|
1,159,315 |
|
|
Deferred income taxes, net |
|
54,247 |
|
|
|
56,585 |
|
|
|
61,768 |
|
|
|
|
85,245 |
|
|
|
85,354 |
|
|
|
85,392 |
|
|
Other long-term assets, net |
|
107,631 |
|
|
|
106,250 |
|
|
|
101,901 |
|
|
Total assets |
$ |
4,594,007 |
|
|
$ |
4,625,620 |
|
|
$ |
4,477,324 |
|
|
Liabilities and stockholders' equity |
|
|
|
|
|
|||||||
Current liabilities |
|
|
|
|
|
|||||||
Accounts payable |
$ |
720,856 |
|
|
$ |
612,512 |
|
|
$ |
638,371 |
|
|
Accrued expenses |
|
275,381 |
|
|
|
319,924 |
|
|
|
273,722 |
|
|
Gift card and other deferred revenue |
|
488,771 |
|
|
|
447,770 |
|
|
|
431,446 |
|
|
Income taxes payable |
|
45,879 |
|
|
|
79,554 |
|
|
|
38,320 |
|
|
Operating lease liabilities |
|
220,012 |
|
|
|
217,409 |
|
|
|
218,348 |
|
|
Other current liabilities |
|
103,821 |
|
|
|
94,517 |
|
|
|
91,418 |
|
|
Total current liabilities |
|
1,854,720 |
|
|
|
1,771,686 |
|
|
|
1,691,625 |
|
|
Deferred lease incentives |
|
13,918 |
|
|
|
16,360 |
|
|
|
17,268 |
|
|
Long-term operating lease liabilities |
|
1,208,074 |
|
|
|
1,066,839 |
|
|
|
1,095,290 |
|
|
Other long-term liabilities |
|
104,361 |
|
|
|
106,528 |
|
|
|
129,771 |
|
|
Total liabilities |
|
3,181,073 |
|
|
|
2,961,413 |
|
|
|
2,933,954 |
|
|
Stockholders' equity |
|
|
|
|
|
|||||||
Preferred stock: |
|
— |
|
|
|
— |
|
|
|
— |
|
|
Common stock: |
|
666 |
|
|
|
720 |
|
|
|
734 |
|
|
Additional paid-in capital |
|
553,698 |
|
|
|
600,942 |
|
|
|
585,449 |
|
|
Retained earnings |
|
877,157 |
|
|
|
1,074,084 |
|
|
|
963,840 |
|
|
Accumulated other comprehensive loss |
|
(17,848 |
) |
|
|
(10,828 |
) |
|
|
(5,942 |
) |
|
|
|
(739 |
) |
|
|
(711 |
) |
|
|
(711 |
) |
|
Total stockholders' equity |
|
1,412,934 |
|
|
|
1,664,207 |
|
|
|
1,543,370 |
|
|
Total liabilities and stockholders' equity |
$ |
4,594,007 |
|
|
$ |
4,625,620 |
|
|
$ |
4,477,324 |
|
|
|
|
|
|
|
|
|
Retail Store Data (unaudited) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of quarter |
|
|
End of quarter |
|
As of |
|
|
|
|
|
Openings |
Closings |
|
|
|
|
|
|
|
189 |
2 |
(2) |
189 |
|
195 |
|
|
|
|
175 |
— |
— |
175 |
|
194 |
|
|
|
West Elm |
121 |
2 |
(1) |
122 |
|
121 |
|
|
|
|
52 |
— |
— |
52 |
|
57 |
|
|
|
Rejuvenation |
9 |
— |
— |
9 |
|
10 |
|
|
|
Total |
546 |
4 |
(3) |
547 |
|
577 |
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows (unaudited) |
||||||||
|
For the Thirty-nine Weeks Ended |
|||||||
(In thousands) |
|
|
|
|||||
Cash flows from operating activities: |
|
|
|
|||||
Net earnings |
$ |
772,911 |
|
|
$ |
723,396 |
|
|
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
|
|
|
|||||
Depreciation and amortization |
|
157,410 |
|
|
|
145,897 |
|
|
Loss on disposal/impairment of assets |
|
5,738 |
|
|
|
887 |
|
|
Amortization of deferred lease incentives |
|
(2,442 |
) |
|
|
(3,345 |
) |
|
Non-cash lease expense |
|
169,602 |
|
|
|
159,757 |
|
|
Deferred income taxes |
|
(10,494 |
) |
|
|
(11,440 |
) |
|
Tax benefit related to stock-based awards |
|
11,172 |
|
|
|
10,838 |
|
|
Stock-based compensation expense |
|
67,797 |
|
|
|
70,566 |
|
|
Other |
|
272 |
|
|
|
4 |
|
|
Changes in: |
|
|
|
|||||
Accounts receivable |
|
5,288 |
|
|
|
4,941 |
|
|
Merchandise inventories |
|
(443,812 |
) |
|
|
(264,094 |
) |
|
Prepaid expenses and other assets |
|
(39,737 |
) |
|
|
(10,078 |
) |
|
Accounts payable |
|
98,103 |
|
|
|
74,181 |
|
|
Accrued expenses and other liabilities |
|
(34,157 |
) |
|
|
24,400 |
|
|
Gift card and other deferred revenue |
|
42,005 |
|
|
|
58,189 |
|
|
Operating lease liabilities |
|
(177,855 |
) |
|
|
(164,569 |
) |
|
Income taxes payable |
|
(33,276 |
) |
|
|
(31,191 |
) |
|
Net cash provided by operating activities |
|
588,525 |
|
|
|
788,339 |
|
|
Cash flows from investing activities: |
|
|
|
|||||
Purchases of property and equipment |
|
(234,378 |
) |
|
|
(141,010 |
) |
|
Other |
|
100 |
|
|
|
97 |
|
|
Net cash used in investing activities |
|
(234,278 |
) |
|
|
(140,913 |
) |
|
Cash flows from financing activities: |
|
|
|
|||||
Repurchases of common stock |
|
(840,955 |
) |
|
|
(652,699 |
) |
|
Payment of dividends |
|
(165,254 |
) |
|
|
(135,201 |
) |
|
Tax withholdings related to stock-based awards |
|
(80,431 |
) |
|
|
(102,482 |
) |
|
Repayment of long-term debt |
|
— |
|
|
|
(300,000 |
) |
|
Debt issuance costs |
|
— |
|
|
|
(777 |
) |
|
Net cash used in financing activities |
|
(1,086,640 |
) |
|
|
(1,191,159 |
) |
|
Effect of exchange rates on cash and cash equivalents |
|
(4,887 |
) |
|
|
294 |
|
|
Net decrease in cash and cash equivalents |
|
(737,280 |
) |
|
|
(543,439 |
) |
|
Cash and cash equivalents at beginning of period |
|
850,338 |
|
|
|
1,200,337 |
|
|
Cash and cash equivalents at end of period |
$ |
113,058 |
|
|
$ |
656,898 |
|
Exhibit 1 |
||||||||||||||||||||||||
|
3rd Quarter GAAP to Non-GAAP Reconciliation (unaudited) |
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
For the Thirteen Weeks Ended |
|
For the Thirty-nine Weeks Ended |
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
(In thousands, except per share data) |
$ |
% of revenues |
|
$ |
% of revenues |
|
$ |
% of revenues |
|
$ |
% of revenues |
|
|||||||||||
|
Selling, general and administrative expenses |
$ |
570,893 |
26.0 |
% |
|
$ |
565,218 |
|
27.6 |
% |
|
$ |
1,639,248 |
26.3 |
% |
|
$ |
1,578,182 |
|
27.5 |
% |
|
|
|
Outward-related1 |
|
— |
|
|
|
(2,752 |
) |
|
|
|
— |
|
|
|
(8,348 |
) |
|
|
|||||
|
Non-GAAP selling, general and administrative expenses |
$ |
570,893 |
26.0 |
% |
|
$ |
562,466 |
|
27.5 |
% |
|
$ |
1,639,248 |
26.3 |
% |
|
$ |
1,569,834 |
|
27.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Operating income |
$ |
339,633 |
15.5 |
% |
|
$ |
330,267 |
|
16.1 |
% |
|
$ |
1,028,635 |
16.5 |
% |
|
$ |
928,544 |
|
16.2 |
% |
|
|
|
Outward-related1 |
|
— |
|
|
|
2,752 |
|
|
|
|
— |
|
|
|
8,348 |
|
|
|
|||||
|
Non-GAAP operating income |
$ |
339,633 |
15.5 |
% |
|
$ |
333,019 |
|
16.3 |
% |
|
$ |
1,028,635 |
16.5 |
% |
|
$ |
936,892 |
|
16.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
$ |
Tax rate |
|
$ |
Tax rate |
|
$ |
Tax rate |
|
$ |
Tax rate |
|
|||||||||||
|
Income taxes |
$ |
88,280 |
26.0 |
% |
|
$ |
80,622 |
|
24.4 |
% |
|
$ |
256,601 |
24.9 |
% |
|
$ |
203,194 |
|
21.9 |
% |
|
|
|
Outward-related1 |
|
— |
|
|
|
473 |
|
|
|
|
— |
|
|
|
1,446 |
|
|
|
|||||
|
Non-GAAP income taxes |
$ |
88,280 |
26.0 |
% |
|
$ |
81,095 |
|
24.4 |
% |
|
$ |
256,601 |
24.9 |
% |
|
$ |
204,640 |
|
21.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Diluted EPS |
$ |
3.72 |
|
|
$ |
3.29 |
|
|
|
$ |
11.08 |
|
|
$ |
9.40 |
|
|
|
|||||
|
Outward-related1 |
|
— |
|
|
|
0.03 |
|
|
|
|
— |
|
|
|
0.09 |
|
|
|
|||||
|
Non-GAAP diluted EPS2 |
$ |
3.72 |
|
|
$ |
3.32 |
|
|
|
$ |
11.08 |
|
|
$ |
9.49 |
|
|
|
|||||
|
|
|
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/20221117005463/en/
Jeff Howie EVP, Chief Financial Officer – (415) 402 4324
-or-
Source:
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