Q3 revenues grow 16.0% with comparable brand
revenue growth of 16.9%, accelerating 2YR comp of 41.3% Q3
GAAP operating margin of 16.1%; Q3 Non-GAAP operating margin
expansion of 60bps to 16.3% Q3 GAAP diluted EPS of $3.29; Q3
Non-GAAP diluted EPS of $3.32, increasing 30% 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 third fiscal quarter ended
October 31, 2021 (“Q3 21”) versus the third fiscal quarter ended
November 1, 2020 (“Q3 20”).
“We are extremely proud to deliver yet another quarter of
outperformance with comps of 16.9%, building to an accelerated
two-year stack of 41.3%, and operating margin expansion of 60 basis
points. These results are a function of both (i) the advantages of
our distinctive positioning in the market and (ii) our successful
execution against our long-term growth strategies. Furthermore, our
performance demonstrates that we can continue to take share in a
fractured market, and deliver high-quality, sustainable earnings.
As a result, we are raising our full-year outlook to reflect
revenue growth of 22% to 23% and operating margins of 16.9% to
17.1%” said Laura Alber, President and Chief Executive Officer.
Alber concluded, “As we enter the fourth quarter, we are seeing
strong sales and margins continuing. We are thrilled with our
customers' response to our holiday and gifting assortments, and we
are ready to drive an outstanding finish to the year. With our
strong results to date, our winning positioning in the industry,
and our outperforming growth strategies, we are more confident than
ever in the long-term strength of our business.”
THIRD QUARTER 2021
- Revenues grow 16.0%, with strong growth across all brands,
including ecommerce accelerating to 67% of total company
revenues
- Comparable brand revenue growth of 16.9%, including West Elm at
22.5%, Pottery Barn at 15.9%, Pottery Barn Kids and Teen at 16.9%,
and Williams Sonoma accelerating to 7.6% on top of a 30.4% last
year
- Accelerating comparable brand revenue growth on a two-year
basis at 41.3%
- GAAP and non-GAAP gross margin of 43.7%, expanding 370bps and
driven by higher year-over-year merchandise margins as well as
occupancy leverage of approximately 90bps; occupancy costs were
$183 million
- GAAP operating margin of 16.1%; non-GAAP operating margin of
16.3%, leveraging approximately 60bps over last year
- GAAP diluted EPS of $3.29; non-GAAP diluted EPS of $3.32,
increasing 30% over last year
- Maintaining strong liquidity position of $657 million in cash
and over $788 million in operating cash flow, enabling the company
to repurchase an additional $201 million in shares in the third
quarter and over $650 million year-to-date and to pay over $135
million in dividends.
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 for
the long-term, we are raising our fiscal year 2021 outlook to 22%
to 23% net revenue growth and non-GAAP operating margin between
16.9% to 17.1%.
Long-Term
For the long-term, we are planning for annual net revenue growth
of mid-to-high single digits with non-GAAP operating margin at
least at fiscal year end 2021 levels. Our continued 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 our accelerated
path to $10 billion in net revenues by 2024.
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today,
November 18, 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., asset impairment charges, and income
tax benefit associated with non-recurring tax adjustments. 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 2021 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 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 October 31, 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 be a
leader in the 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)
Thirteen Weeks Ended
Thirty-nine Weeks
Ended
October 31, 2021
November 1, 2020
October 31, 2021
November 1, 2020
In thousands, except per share amounts
$
% of
Revenues
$
% of
Revenues
$
% of
Revenues
$
% of
Revenues
Net revenues
$
2,047,539
100
%
$
1,764,536
100
%
$
5,744,907
100
%
$
4,490,516
100
%
Cost of goods sold
1,152,054
56.3
1,058,953
60.0
3,238,181
56.4
2,819,471
62.8
Gross profit
895,485
43.7
705,583
40.0
2,506,726
43.6
1,671,045
37.2
Selling, general and administrative
expenses
565,218
27.6
430,979
24.4
1,578,182
27.5
1,162,435
25.9
Operating income
330,267
16.1
274,604
15.6
928,544
16.2
508,610
11.3
Interest (income) expense, net
121
—
5,344
0.3
1,954
—
13,967
0.3
Earnings before income taxes
330,146
16.1
269,260
15.3
926,590
16.1
494,643
11.0
Income taxes
80,622
3.9
67,488
3.8
203,194
3.5
122,884
2.7
Net earnings
$
249,524
12.2
%
$
201,772
11.4
%
$
723,396
12.6
%
$
371,759
8.3
%
Earnings per share (EPS):
Basic
$
3.37
$
2.60
$
9.66
$
4.80
Diluted
$
3.29
$
2.54
$
9.40
$
4.71
Shares used in calculation of
EPS:
Basic
74,010
77,487
74,865
77,511
Diluted
75,943
79,332
76,975
79,012
3rd Quarter Net Revenues and
Comparable Brand Revenue Growth by Concept*
Net Revenues
(Millions)
Comparable Brand Revenue
Growth
Q3 21
Q3 20
Q3 21
Q3 20
Pottery Barn
$
789
$
684
15.9
%
24.1
%
West Elm
580
475
22.5
21.8
Williams Sonoma
272
260
7.6
30.4
Pottery Barn Kids and Teen
316
278
16.9
23.8
Other**
91
68
N/A
N/A
Total
$
2,048
$
1,765
16.9
%
24.4
%
* 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 Q3 2021 and Q3 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
October 31, 2021
January 31, 2021
November 1, 2020
Assets
Current assets
Cash and cash equivalents
$
656,898
$
1,200,337
$
773,170
Accounts receivable, net
139,511
143,728
129,782
Merchandise inventories, net
1,272,028
1,006,299
1,125,475
Prepaid expenses
85,433
93,822
84,974
Other current assets
22,852
22,894
23,556
Total current assets
2,176,722
2,467,080
2,136,957
Property and equipment, net
892,226
873,894
869,092
Operating lease right-of-use assets
1,159,315
1,086,009
1,091,649
Deferred income taxes, net
61,768
61,854
42,185
Goodwill
85,392
85,446
85,402
Other long-term assets, net
101,901
87,141
85,394
Total assets
$
4,477,324
$
4,661,424
$
4,310,679
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
638,371
$
542,992
$
562,294
Accrued expenses
273,722
267,592
194,985
Gift card and other deferred revenue
431,446
373,164
349,671
Income taxes payable
38,320
69,476
36,037
Current debt
—
299,350
—
Operating lease liabilities
218,348
209,754
217,448
Other current liabilities
91,418
85,672
99,691
Total current liabilities
1,691,625
1,848,000
1,460,126
Deferred lease incentives
17,268
20,612
21,858
Long-term debt
—
—
299,173
Long-term operating lease liabilities
1,095,290
1,025,057
1,027,142
Other long-term liabilities
129,771
116,570
100,478
Total liabilities
2,933,954
3,010,239
2,908,777
Stockholders' equity
Preferred stock: $0.01 par value; 7,500
shares authorized, none issued
—
—
—
Common stock: $0.01 par value; 253,125
shares authorized; 73,326, 76,340, and 76,697 shares issued and
outstanding at October 31, 2021, January 31, 2021 and November 1,
2020, respectively
734
764
768
Additional paid-in capital
585,449
638,375
623,379
Retained earnings
963,840
1,019,762
792,196
Accumulated other comprehensive loss
(5,942
)
(7,117
)
(13,843
)
Treasury stock, at cost
(711
)
(599
)
(598
)
Total stockholders' equity
1,543,370
1,651,185
1,401,902
Total liabilities and stockholders'
equity
$
4,477,324
$
4,661,424
$
4,310,679
Retail Store Data
(unaudited)
August 1, 2021
Openings
Closings
October 31, 2021
November 1, 2020
Williams Sonoma
196
—
(2
)
194
210
Pottery Barn
195
—
—
195
201
West Elm
123
1
(3
)
121
122
Pottery Barn Kids
57
—
—
57
71
Rejuvenation
10
—
—
10
10
Total
581
1
(5
)
577
614
Condensed Consolidated
Statements of Cash Flows (unaudited)
Thirty-nine Weeks
Ended
In thousands
October 31, 2021
November 1, 2020
Cash flows from operating
activities:
Net earnings
$
723,396
$
371,759
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Depreciation and amortization
145,897
140,340
Loss on disposal/impairment of assets
887
26,220
Amortization of deferred lease
incentives
(3,345
)
(4,538
)
Non-cash lease expense
159,757
162,767
Deferred income taxes
(11,440
)
(6,969
)
Tax benefit related to stock-based
awards
10,838
13,143
Stock-based compensation expense
70,566
54,671
Other
4
(9
)
Changes in:
Accounts receivable
4,941
(18,017
)
Merchandise inventories
(264,094
)
(22,990
)
Prepaid expenses and other assets
(10,078
)
(4,807
)
Accounts payable
74,181
54,279
Accrued expenses and other liabilities
24,400
58,539
Gift card and other deferred revenue
58,189
59,953
Operating lease liabilities
(164,569
)
(171,245
)
Income taxes payable
(31,191
)
13,532
Net cash provided by operating
activities
788,339
726,628
Cash flows from investing
activities:
Purchases of property and equipment
(141,010
)
(124,885
)
Other
97
506
Net cash used in investing
activities
(140,913
)
(124,379
)
Cash flows from financing
activities:
Repurchases of common stock
(652,699
)
(109,048
)
Repayment of long-term debt
(300,000
)
—
Payment of dividends
(135,201
)
(116,761
)
Tax withholdings related to stock-based
awards
(102,482
)
(30,555
)
Debt issuance costs
(777
)
(3,645
)
Borrowings under revolving line of
credit
—
487,823
Repayments under the revolving line of
credit
—
(487,823
)
Net cash used in financing
activities
(1,191,159
)
(260,009
)
Effect of exchange rates on cash and cash
equivalents
294
(1,232
)
Net (decrease) increase in cash and cash
equivalents
(543,439
)
341,008
Cash and cash equivalents at beginning of
period
1,200,337
432,162
Cash and cash equivalents at end of
period
$
656,898
$
773,170
Exhibit 1
3rd Quarter GAAP to Non-GAAP
Reconciliation (unaudited)
(Dollars in thousands, except per
share data)
Thirteen Weeks Ended
Thirty-nine Weeks
Ended
October 31, 2021
November 1, 2020
October 31, 2021
November 1, 2020
$
% of
revenues
$
% of
revenues
$
% of
revenues
$
% of
revenues
Gross profit
$
895,485
43.7
%
$
705,583
40.0
%
$
2,506,726
43.6
%
$
1,671,045
37.2
%
Inventory write-off 1
—
—
—
11,378
Non-GAAP gross profit
$
895,485
43.7
%
$
705,583
40.0
%
$
2,506,726
43.6
%
$
1,682,423
37.5
%
Selling, general and administrative
expenses
$
565,218
27.6
%
$
430,979
24.4
%
$
1,578,182
27.5
%
$
1,162,435
25.9
%
Outward-related2
(2,752
)
(2,219
)
(8,348
)
(8,918
)
Asset impairment 3
—
—
—
(21,975
)
Non-GAAP selling, general and
administrative expenses
$
562,466
27.5
%
$
428,760
24.3
%
$
1,569,834
27.3
%
$
1,131,542
25.2
%
Operating income
$
330,267
16.1
%
$
274,604
15.6
%
$
928,544
16.2
%
$
508,610
11.3
%
Outward-related2
2,752
2,219
8,348
8,918
Inventory write-off 1
—
—
—
11,378
Asset impairment 3
—
—
—
21,975
Non-GAAP operating income
$
333,019
16.3
%
$
276,823
15.7
%
$
936,892
16.3
%
$
550,881
12.3
%
$
Tax rate
$
Tax rate
$
Tax rate
$
Tax rate
Income taxes
$
80,622
24.4
%
$
67,488
25.1
%
$
203,194
21.9
%
$
122,884
24.8
%
Outward-related2
473
473
1,446
1,665
Inventory write-off 1
—
—
—
2,940
Asset impairment3
—
—
—
5,324
Deferred tax liability adjustment4
—
647
—
647
Non-GAAP income taxes
$
81,095
24.4
%
$
68,608
25.3
%
$
204,640
21.9
%
$
133,460
24.9
%
Diluted EPS
$
3.29
$
2.54
$
9.40
$
4.71
Outward-related2
0.03
0.02
0.09
0.09
Inventory write-off1
—
—
—
0.11
Asset impairment3
—
—
—
0.21
Deferred tax liability adjustment4
—
(0.01
)
—
(0.01
)
Non-GAAP diluted EPS*
$
3.32
$
2.56
$
9.49
$
5.11
∗ 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:
- During year-to-date 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.
- During Q3 2021 and year-to-date 2021, we incurred approximately
$2.8 million and $8.3 million, respectively, associated with
acquisition-related compensation expense and the amortization of
acquired intangibles for Outward, Inc. During Q3 2020 and
year-to-date 2020, we incurred approximately $2.2 million and $8.9
million, respectively, associated with acquisition-related
compensation expense and the amortization of acquired intangibles
for Outward, Inc.
- During year-to-date 2020, we incurred approximately $22.0
million of expense associated with store asset impairments due to
the impact that COVID-19 had on our retail stores.
- During Q3 2020 and year-to-date 2020, we recorded an
approximate $0.6 million tax benefit resulting from a non-recurring
adjustment to a deferred tax liability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211118006182/en/
Julie Whalen EVP, Chief Financial Officer – (415) 616 8524 -or-
Investor Relations – (415) 616 8571
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