Williams-Sonoma, Inc. announces second quarter 2023 results
- Operating margin of 14.6% and diluted EPS of $3.12 exceeded estimates.
- 2-year comp was essentially flat and 4-year comp to 2019 was +39.7%.
- Raised outlook on operating margin to a range of 15% to 16%.
- Q2 comparable brand revenue down 11.9%.
- Annual revenues expected to be down 5% to 10%.
Q2 comparable brand revenue -
Operating margin of
Revises 2023 outlook with lower revenues offset by higher operating margin
“We are pleased to deliver another quarter of strong earnings. We significantly exceeded profitability estimates with an operating margin of
Alber concluded, “Connecting these results to our expectation for the balance of the year, we are updating our guidance to reflect both the ongoing topline uncertainty and the proven strength in our operating model. We now expect annual revenues to come in at a range of down
SECOND QUARTER 2023 HIGHLIGHTS
-
Comparable brand revenue -
11.9% with a 2-year comp -0.6% and a 4-year comp +39.7% .
-
Gross margin of
40.7% -280bps to LY with selling margin -90bps due to higher shipping and freight costs, and occupancy deleverage of 190bps. Occupancy costs +5.3% to .$203 million
-
SG&A rate of
26.1% -30bps to LY driven by employment and advertising leverage. SG&A -13.7% to .$486 million
-
Operating income of
with an operating margin of$272 million 14.6% .
-
Diluted EPS of
per share.$3.12
-
Merchandise inventories -
16% to .$1.3 billion
-
Cash at quarter-end of
with no borrowings outstanding.$514 million
-
Operating cash flow of
funding dividends and stock repurchases.$372 million
OUTLOOK
- We are revising our fiscal 2023 guidance to reflect lower net revenue trends and higher operating margin expectations. The net effect of these changes holds earnings materially in line with our prior implied EPS guidance.
-
In fiscal 2023, we now expect net revenue growth in the range of -
5% to -10% with an operating margin between15% to16% .
-
Over the long-term, we continue to expect mid-to-high single-digit annual net revenue growth with operating margin above
15% .
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today, August 23, 2023, at 7:00 A.M. (PT). The call 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
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 updated fiscal year 2023 outlook and long-term financial targets, and statements regarding our industry trends and business strategies.
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 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, Mark and Graham and GreenRow — 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-
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 30, 2023 |
|
July 31, 2022 |
|
July 30, 2023 |
|
July 31, 2022 |
||||||||||||||||||||
(In thousands, except per share amounts) |
$ |
|
% of
|
|
$ |
|
% of
|
|
$ |
|
% of
|
|
$ |
|
% of
|
|||||||||||||
Net revenues |
$ |
1,862,614 |
|
100.0 |
% |
$ |
2,137,537 |
|
100.0 |
% |
$ |
3,618,065 |
|
100.0 |
% |
$ |
4,028,764 |
|
100.0 |
% |
||||||||
Cost of goods sold |
|
1,105,047 |
|
59.3 |
|
|
1,208,728 |
|
56.5 |
|
|
2,185,439 |
|
60.4 |
|
|
2,271,407 |
|
56.4 |
|
||||||||
Gross profit |
|
757,567 |
|
40.7 |
|
|
928,809 |
|
43.5 |
|
|
1,432,626 |
|
39.6 |
|
|
1,757,357 |
|
43.6 |
|
||||||||
Selling, general and administrative expenses |
|
486,019 |
|
26.1 |
|
|
563,288 |
|
26.4 |
|
|
961,601 |
|
26.6 |
|
|
1,068,355 |
|
26.5 |
|
||||||||
Operating income |
|
271,548 |
|
14.6 |
|
|
365,521 |
|
17.1 |
|
|
471,025 |
|
13.0 |
|
|
689,002 |
|
17.1 |
|
||||||||
Interest expense (income), net |
|
(3,335 |
) |
(0.2 |
) |
|
(344 |
) |
— |
|
|
(8,833 |
) |
(0.3 |
) |
|
(507 |
) |
— |
|
||||||||
Earnings before income taxes |
|
274,883 |
|
14.8 |
|
|
365,865 |
|
17.1 |
|
|
479,858 |
|
13.3 |
|
|
689,509 |
|
17.1 |
|
||||||||
Income taxes |
|
73,376 |
|
3.9 |
|
|
98,790 |
|
4.6 |
|
|
121,820 |
|
3.4 |
|
|
168,321 |
|
4.2 |
|
||||||||
Net earnings |
$ |
201,507 |
|
10.8 |
% |
$ |
267,075 |
|
12.5 |
% |
$ |
358,038 |
|
9.9 |
% |
$ |
521,188 |
|
12.9 |
% |
||||||||
Earnings per share (EPS): |
|
|
|
|
|
|
|
|
||||||||||||||||||||
Basic |
$ |
3.14 |
|
|
$ |
3.92 |
|
|
$ |
5.51 |
|
|
$ |
7.50 |
|
|
||||||||||||
Diluted |
$ |
3.12 |
|
|
$ |
3.87 |
|
|
$ |
5.46 |
|
|
$ |
7.36 |
|
|
||||||||||||
Shares used in calculation of EPS: |
|
|
|
|
|
|
|
|
||||||||||||||||||||
Basic |
|
64,163 |
|
|
|
68,180 |
|
|
|
65,006 |
|
|
|
69,516 |
|
|
||||||||||||
Diluted |
|
64,526 |
|
|
|
69,081 |
|
|
|
65,586 |
|
|
|
70,844 |
|
|
||||||||||||
2nd Quarter Net Revenues and Comparable Brand Revenue Growth (Decline)1 |
|||||||||||||||
|
|
|
|
||||||||||||
Net Revenues |
Comparable Brand Revenue
|
||||||||||||||
(In millions, except percentages) | Q2 23 |
Q2 22 |
Q2 23 |
Q2 22 |
|||||||||||
Pottery Barn | $ |
786 |
$ |
879 |
(10.6 |
)% |
21.5 |
% |
|||||||
West Elm |
|
484 |
|
608 |
(20.8 |
) |
6.1 |
|
|||||||
Williams |
|
245 |
|
249 |
(0.7 |
) |
0.5 |
|
|||||||
Pottery Barn Kids and Teen |
|
256 |
|
284 |
(9.0 |
) |
5.3 |
|
|||||||
Other2 |
|
92 |
|
118 |
N/A |
|
N/A |
|
|||||||
Total | $ |
1,863 |
$ |
2,138 |
(11.9 |
)% |
11.3 |
% |
|||||||
1 |
See the Company’s 10-K and 10-Q for the definition of comparable brand revenue, which is calculated on a 13-week basis, and includes business-to-business revenues. |
||||||||||||||
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) |
July 30,
|
January 29,
|
July 31,
|
|||||||||
Assets |
|
|
|
|||||||||
Current assets |
|
|
|
|||||||||
Cash and cash equivalents |
$ |
514,435 |
|
$ |
367,344 |
|
$ |
124,944 |
|
|||
Accounts receivable, net |
|
117,045 |
|
|
115,685 |
|
|
133,500 |
|
|||
Merchandise inventories, net |
|
1,300,838 |
|
|
1,456,123 |
|
|
1,542,428 |
|
|||
Prepaid expenses |
|
73,521 |
|
|
64,961 |
|
|
102,312 |
|
|||
Other current assets |
|
26,293 |
|
|
31,967 |
|
|
25,537 |
|
|||
Total current assets |
|
2,032,132 |
|
|
2,036,080 |
|
|
1,928,721 |
|
|||
Property and equipment, net |
|
1,036,407 |
|
|
1,065,381 |
|
|
973,676 |
|
|||
Operating lease right-of-use assets |
|
1,232,925 |
|
|
1,286,452 |
|
|
1,174,354 |
|
|||
Deferred income taxes, net |
|
73,610 |
|
|
81,389 |
|
|
52,897 |
|
|||
Goodwill |
|
77,322 |
|
|
77,307 |
|
|
85,269 |
|
|||
Other long-term assets, net |
|
119,415 |
|
|
116,407 |
|
|
104,257 |
|
|||
Total assets |
$ |
4,571,811 |
|
$ |
4,663,016 |
|
$ |
4,319,174 |
|
|||
Liabilities and stockholders' equity |
|
|
|
|||||||||
Current liabilities |
|
|
|
|||||||||
Accounts payable |
$ |
597,104 |
|
$ |
508,321 |
|
$ |
680,097 |
|
|||
Accrued expenses |
|
184,996 |
|
|
247,594 |
|
|
244,559 |
|
|||
Gift card and other deferred revenue |
|
435,369 |
|
|
479,229 |
|
|
498,354 |
|
|||
Income taxes payable |
|
127,581 |
|
|
61,204 |
|
|
87,159 |
|
|||
Operating lease liabilities |
|
222,155 |
|
|
231,965 |
|
|
206,931 |
|
|||
Other current liabilities |
|
96,645 |
|
|
108,138 |
|
|
93,945 |
|
|||
Total current liabilities |
|
1,663,850 |
|
|
1,636,451 |
|
|
1,811,045 |
|
|||
Long-term operating lease liabilities |
|
1,168,221 |
|
|
1,211,693 |
|
|
1,115,501 |
|
|||
Other long-term liabilities |
|
118,785 |
|
|
113,821 |
|
|
114,349 |
|
|||
Total liabilities |
|
2,950,856 |
|
|
2,961,965 |
|
|
3,040,895 |
|
|||
Stockholders' equity |
|
|
|
|||||||||
Preferred stock: |
|
— |
|
|
— |
|
|
— |
|
|||
Common stock: |
|
642 |
|
|
663 |
|
|
671 |
|
|||
Additional paid-in capital |
|
551,507 |
|
|
573,117 |
|
|
541,895 |
|
|||
Retained earnings |
|
1,084,772 |
|
|
1,141,819 |
|
|
750,083 |
|
|||
Accumulated other comprehensive loss |
|
(14,540 |
) |
|
(13,809 |
) |
|
(13,631 |
) |
|||
Treasury stock, at cost |
|
(1,426 |
) |
|
(739 |
) |
|
(739 |
) |
|||
Total stockholders' equity |
|
1,620,955 |
|
|
1,701,051 |
|
|
1,278,279 |
|
|||
Total liabilities and stockholders' equity |
$ |
4,571,811 |
|
$ |
4,663,016 |
|
$ |
4,319,174 |
|
|||
|
|
|
|
Retail Store Data
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||
|
|
Beginning of quarter |
|
|
End of quarter |
|
As of |
|
|||||
|
|
April 30, 2023 |
Openings |
Closings |
July 30, 2023 |
|
July 31, 2022 |
|
|||||
|
Pottery Barn |
188 |
3 |
(1 |
) |
190 |
|
189 |
|
||||
|
Williams |
165 |
— |
(1 |
) |
164 |
|
175 |
|
||||
|
West Elm |
123 |
1 |
(1 |
) |
123 |
|
121 |
|
||||
|
Pottery Barn Kids |
46 |
— |
— |
|
46 |
|
52 |
|
||||
|
Rejuvenation |
9 |
— |
— |
|
9 |
|
9 |
|
||||
|
Total |
531 |
4 |
(3 |
) |
532 |
|
546 |
|
||||
|
|
|
|||||||||||
Condensed Consolidated Statements of Cash Flows (unaudited) |
||||||||
|
For the Twenty-six Weeks Ended |
|||||||
(In thousands) |
July 30, 2023 |
July 31, 2022 |
||||||
Cash flows from operating activities: |
|
|
||||||
Net earnings |
$ |
358,038 |
|
$ |
521,188 |
|
||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
|
|
||||||
Depreciation and amortization |
|
110,843 |
|
|
102,455 |
|
||
Loss on disposal/impairment of assets |
|
14,185 |
|
|
5,413 |
|
||
Non-cash lease expense |
|
126,981 |
|
|
110,511 |
|
||
Deferred income taxes |
|
(3,841 |
) |
|
(7,636 |
) |
||
Tax benefit related to stock-based awards |
|
12,334 |
|
|
10,828 |
|
||
Stock-based compensation expense |
|
44,159 |
|
|
51,743 |
|
||
Other |
|
(1,647 |
) |
|
(1,481 |
) |
||
Changes in: |
|
|
||||||
Accounts receivable |
|
(1,502 |
) |
|
(1,985 |
) |
||
Merchandise inventories |
|
154,712 |
|
|
(295,458 |
) |
||
Prepaid expenses and other assets |
|
(6,615 |
) |
|
(30,585 |
) |
||
Accounts payable |
|
87,840 |
|
|
59,404 |
|
||
Accrued expenses and other liabilities |
|
(67,955 |
) |
|
(78,895 |
) |
||
Gift card and other deferred revenue |
|
(43,699 |
) |
|
50,503 |
|
||
Operating lease liabilities |
|
(135,206 |
) |
|
(120,036 |
) |
||
Income taxes payable |
|
66,358 |
|
|
7,623 |
|
||
Net cash provided by operating activities |
|
714,985 |
|
|
383,592 |
|
||
Cash flows from investing activities: |
|
|
||||||
Purchases of property and equipment |
|
(92,880 |
) |
|
(148,548 |
) |
||
Other |
|
211 |
|
|
86 |
|
||
Net cash used in investing activities |
|
(92,669 |
) |
|
(148,462 |
) |
||
Cash flows from financing activities: |
|
|
||||||
Repurchases of common stock |
|
(310,000 |
) |
|
(766,424 |
) |
||
Payment of dividends |
|
(116,643 |
) |
|
(112,674 |
) |
||
Tax withholdings related to stock-based awards |
|
(49,950 |
) |
|
(79,275 |
) |
||
Net cash used in financing activities |
|
(476,593 |
) |
|
(958,373 |
) |
||
Effect of exchange rates on cash and cash equivalents |
|
1,368 |
|
|
(2,151 |
) |
||
Net increase (decrease) in cash and cash equivalents |
|
147,091 |
|
|
(725,394 |
) |
||
Cash and cash equivalents at beginning of period |
|
367,344 |
|
|
850,338 |
|
||
Cash and cash equivalents at end of period |
$ |
514,435 |
|
$ |
124,944 |
|
||
Exhibit 1 |
||||||||||||||||||||||||||||
2nd Quarter GAAP to Non-GAAP Reconciliation
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
For the Thirteen Weeks Ended |
|
For the Twenty-six Weeks Ended |
|
|||||||||||||||||||||
|
|
|
|
July 30, 2023 |
|
July 31, 2022 |
|
July 30, 2023 |
|
July 31, 2022 |
|
|||||||||||||||||
(In thousands, except per share data) |
$ |
|
% of
|
|
$ |
|
% of
|
|
$ |
|
% of
|
|
$ |
|
% of
|
|||||||||||||
Occupancy costs | $ |
203,259 |
10.9 |
% |
$ |
192,964 |
9.0 |
% |
$ |
405,871 |
|
11.2 |
% |
$ |
379,370 |
9.4 |
% |
|||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
|
(239 |
) |
|
|
— |
|
|||||||||||||||
Non-GAAP occupancy costs | $ |
203,259 |
10.9 |
% |
$ |
192,964 |
9.0 |
% |
$ |
405,632 |
|
11.2 |
% |
$ |
379,370 |
9.4 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Gross profit | $ |
757,567 |
40.7 |
% |
$ |
928,809 |
43.5 |
% |
$ |
1,432,626 |
|
39.6 |
% |
$ |
1,757,357 |
43.6 |
% |
|||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
$ |
2,141 |
|
|
|
— |
|
|||||||||||||||
Non-GAAP gross profit | $ |
757,567 |
40.7 |
% |
$ |
928,809 |
43.5 |
% |
$ |
1,434,767 |
|
39.7 |
% |
$ |
1,757,357 |
43.6 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Selling, general and administrative expenses | $ |
486,019 |
26.1 |
% |
$ |
563,288 |
26.4 |
% |
$ |
961,601 |
|
26.6 |
% |
$ |
1,068,355 |
26.5 |
% |
|||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
|
(15,790 |
) |
|
|
— |
|
|||||||||||||||
Reduction-in-force Initiatives2 |
|
— |
|
|
— |
|
|
(8,316 |
) |
|
|
— |
|
|||||||||||||||
Non-GAAP selling, general and administrative expenses | $ |
486,019 |
26.1 |
% |
$ |
563,288 |
26.4 |
% |
$ |
937,495 |
|
25.9 |
% |
$ |
1,068,355 |
26.5 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Operating income | $ |
271,548 |
14.6 |
% |
$ |
365,521 |
17.1 |
% |
$ |
471,025 |
|
13.0 |
% |
$ |
689,002 |
17.1 |
% |
|||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
|
17,931 |
|
|
|
— |
|
|||||||||||||||
Reduction-in-force Initiatives2 |
|
— |
|
|
— |
|
|
8,316 |
|
|
|
— |
|
|||||||||||||||
Non-GAAP operating income | $ |
271,548 |
14.6 |
% |
$ |
365,521 |
17.1 |
% |
$ |
497,272 |
|
13.7 |
% |
$ |
689,002 |
17.1 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
$ |
Tax rate |
$ |
Tax rate |
$ |
Tax rate |
$ |
Tax rate |
|||||||||||||||||||||
Income taxes | $ |
73,376 |
26.7 |
% |
$ |
98,790 |
27.0 |
% |
$ |
121,820 |
|
25.4 |
% |
$ |
168,321 |
24.4 |
% |
|||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
|
4,690 |
|
|
|
— |
|
|||||||||||||||
Reduction-in-force Initiatives2 |
|
— |
|
|
— |
|
|
2,174 |
|
|
|
— |
|
|||||||||||||||
Non-GAAP income taxes | $ |
73,376 |
26.7 |
% |
$ |
98,790 |
27.0 |
% |
$ |
128,684 |
|
25.4 |
% |
$ |
168,321 |
24.4 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Diluted EPS | $ |
3.12 |
|
$ |
3.87 |
|
$ |
5.46 |
|
|
$ |
7.36 |
|
|||||||||||||||
Exit Costs1 |
|
— |
|
|
— |
|
|
0.20 |
|
|
|
— |
|
|||||||||||||||
Reduction-in-force Initiatives2 |
|
— |
|
|
— |
|
|
0.09 |
|
|
|
— |
|
|||||||||||||||
Non-GAAP diluted EPS3 | $ |
3.12 |
|
$ |
3.87 |
|
$ |
5.75 |
|
|
$ |
7.36 |
|
|||||||||||||||
1 | During Q1 2023, we incurred exit costs of |
|||||||||||||||||||||||||||
2 | During Q1 2023, we incurred costs related to reduction-in-force initiatives of |
|||||||||||||||||||||||||||
3 | 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 occupancy costs, 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230823775068/en/
Jeff Howie EVP, Chief Financial Officer – (415) 402 4324
Jeremy Brooks SVP, Chief Accounting Officer & Head of Investor Relations – (415) 733 2371
Source: Williams-Sonoma, Inc.