Q4 comparable brand revenue -6.8%
Q4 operating margin of 20.1%; Q4 diluted EPS
of $5.44
Quarterly dividend increase of 26%; new
stock repurchase authorization of $1 billion
Williams-Sonoma, Inc. (NYSE: WSM) today announced operating
results for the fourth quarter and fiscal year ended January 28,
2024 (Fiscal 2023).
“We are pleased with our strong finish to 2023. We delivered an
annual operating margin of 16.4% with full-year earnings per share
of $14.85, beating our 2023 comp guidance of -10% to -12% and
hitting our operating margin range of 16% to 16.5%,” said Laura
Alber, President and Chief Executive Officer.
Alber concluded, “We outperformed in 2023 despite the slowest
housing market in several decades and geopolitical unrest. Although
this pressured our top-line trend, we stayed focused on full-price
selling, supply chain efficiencies, and best-in-class customer
service. We have transformed our business model and as a result, we
delivered an operating margin well ahead of our pre-pandemic
profitability.”
FOURTH QUARTER 2023 HIGHLIGHTS
- Comparable brand revenue -6.8% with a 2-year comp -7.4% and a
4-year comp +29.1%.
- Gross margin of 46.0% +480bps to LY with selling margin +560bps
due to higher merchandise margins and lower costs from supply chain
efficiencies, offset by occupancy deleverage of 80bps. Occupancy
costs of $208 million, +2.1% to LY.
- SG&A rate of 25.9% +390bps to LY on a GAAP basis and
+460bps to LY on a non-GAAP basis driven by employment and general
expense deleverage. SG&A of $591 million, +9.3% to LY on a GAAP
basis and +13.0% to LY on a non-GAAP basis.
- Operating income of $458 million with an operating margin of
20.1%.
- Diluted EPS of $5.44 per share.
FISCAL YEAR 2023 HIGHLIGHTS
- Comparable brand revenue -9.9% with a 2-year comp -3.4% and a
4-year comp +35.6%.
- Gross margin of 42.6%, +20bps to LY on a GAAP basis with
selling margin +170bps due to higher merchandise margins and supply
chain efficiencies, offset by occupancy deleverage of 150bps. Gross
margin of 42.7%, +30bps to LY on a non-GAAP basis with selling
margin +170bps due to higher merchandise margins and supply chain
efficiencies, and occupancy deleverage of 140bps. Occupancy costs
of $814 million, +3.7% to LY on a GAAP basis and +3.6% on a
non-GAAP basis.
- SG&A rate of 26.6%, +150bps to LY on a GAAP basis and
26.3%, +140bps to LY on a non-GAAP basis, driven by employment and
general expense deleverage. GAAP SG&A of $2.1 billion, -5.5% to
LY, and non-GAAP SG&A of $2.0 billion, -5.8% to LY.
- GAAP operating income of $1.24 billion with an operating margin
of 16.1%; non-GAAP operating income of $1.27 billion with an
operating margin of 16.4%.
- GAAP diluted EPS of $14.55 and non-GAAP diluted EPS of
$14.85.
- Merchandise inventories -14.4% to LY to $1.2 billion.
- ROIC of 45.0% driven by net earnings.
- Maintained strong liquidity position of $1.3 billion in cash
and $1.7 billion in operating cash flow enabling the company to
deliver returns to stockholders of $545 million through $313
million in stock repurchases and $232 million in dividends.
DIVIDENDS AND STOCK REPURCHASE AUTHORIZATIONS
- Increased our quarterly dividend 26%, or $0.23, to $1.13 per
share.
- Expanded our stock repurchase capacity to $1 billion,
superseding the company's current stock repurchase
authorization.
OUTLOOK
- In fiscal 2024, we expect annual net revenue growth in the
range of -3% to +3% with comps in the range of -4.5% to +1.5%; and
an operating margin between 16.5% to 16.8%.
- Fiscal 2024 is a 53-week year. Our financial statements will be
prepared on a 53-week basis in fiscal 2024 and a 52-week basis in
fiscal 2023. However, we will report comps on a 53-week versus
53-week comparable basis. All other year-over-year comparisons will
be 53-weeks in fiscal 2024 versus 52-weeks in fiscal 2023. We
expect the additional week in fiscal 2024 to contribute 150bps to
revenue growth and 10bps to operating margin, both of which are
reflected in our guidance.
- Over the long-term, we continue to expect mid-to-high
single-digit annual net revenue growth with an operating margin in
the mid-to-high teens.
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today,
March 13, 2024, 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
U.S. (“GAAP”). We have not provided a reconciliation of non-GAAP
guidance measures to the corresponding GAAP measures on a
forward-looking basis as we cannot do so without unreasonable
efforts due to the potential variability and limited visibility of
excluded items; these excluded items include exit costs associated
with the closure of our West Coast manufacturing facility and the
exiting of Aperture, a division of our Outward, Inc. subsidiary, as
well as costs related to reduction-in-force initiatives. For the
same reasons, we are unable to address the probable significance of
such excluded items. 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 and our fiscal year 2024
outlook and long-term financial targets.
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 changing interest rates, on
consumer spending; war in Ukraine and the Middle East, and
shortages of various raw materials on our global supply chain,
retail store operations and customer demand; labor and material
shortages; 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 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; 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, transportation 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 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 29,
2023 and all subsequent quarterly reports on Form 10-Q and current
reports on Form 8-K. We have not filed our Form 10-K for the fiscal
year ended January 28, 2024. 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-K. 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, 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-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 values-based culture and commitment
to achieving our sustainability goals. 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 sustainability efforts, please
visit: https://sustainability.williams-sonomainc.com/
WSM-IR
Condensed Consolidated
Statements of Earnings (unaudited)
For the Thirteen Weeks
Ended
January 28, 2024
January 29, 2023
(In thousands, except per share
amounts)
$
% of Revenues
$
% of Revenues
Net revenues
$
2,278,937
100.0
%
$
2,453,079
100.0
%
Cost of goods sold
1,230,322
54.0
1,443,229
58.8
Gross profit
1,048,615
46.0
1,009,850
41.2
Selling, general and administrative
expenses
590,524
25.9
540,063
22.0
Operating income
458,091
20.1
469,787
19.2
Interest income, net
13,147
0.6
1,383
0.1
Earnings before income taxes
471,238
20.7
471,170
19.2
Income taxes
116,799
5.1
116,177
4.7
Net earnings
$
354,439
15.6
%
$
354,993
14.5
%
Earnings per share (EPS):
Basic
$
5.53
$
5.35
Diluted
$
5.44
$
5.28
Shares used in calculation of
EPS:
Basic
64,143
66,349
Diluted
65,147
67,201
4th Quarter Net Revenues and
Comparable Brand Revenue Growth (Decline)1
Net Revenues
Comparable Brand Revenue
Growth (Decline)
(In millions, except percentages)
Q4 23
Q4 22
Q4 23
Q4 22
Pottery Barn
$
874
$
967
(9.6
) %
5.8
%
West Elm
453
534
(15.3
)
(10.7
)
Williams Sonoma
524
524
1.6
(2.5
)
Pottery Barn Kids and Teen
311
323
(2.5
)
4.0
Other2
117
105
N/A
N/A
Total
$
2,279
$
2,453
(6.8
) %
(0.6
) %
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 Q4 2023 and Q4 2022, and includes business-to-business
revenues.
2 Primarily consists of net revenues from
Rejuvenation, our international franchise operations, Mark and
Graham and GreenRow.
Condensed Consolidated
Statements of Earnings (unaudited)
For the Fiscal Year
Ended
January 28, 2024
January 29, 2023
(In thousands, except per share
amounts)
$
% of Revenues
$
% of Revenues
Net revenues
$
7,750,652
100.0
%
$
8,674,417
100.0
%
Cost of goods sold
4,447,051
57.4
4,996,684
57.6
Gross profit
3,303,601
42.6
3,677,733
42.4
Selling, general and administrative
expenses
2,059,408
26.6
2,179,311
25.1
Operating income
1,244,193
16.1
1,498,422
17.3
Interest income, net
29,162
0.4
2,260
—
Earnings before income taxes
1,273,355
16.4
1,500,682
17.3
Income taxes
323,593
4.2
372,778
4.3
Net earnings
$
949,762
12.3
%
$
1,127,904
13.0
%
Earnings per share (EPS):
Basic
$
14.71
$
16.58
Diluted
$
14.55
$
16.32
Shares used in calculation of
EPS:
Basic
64,574
68,021
Diluted
65,272
69,100
Fiscal Year Net Revenues and
Comparable Brand Revenue Growth (Decline)1
Net Revenues
Comparable Brand Revenue
Growth (Decline)
(In millions, except percentages)
FY 23
FY 22
FY 23
FY 22
Pottery Barn
$
3,206
$
3,556
(9.7
) %
14.9
%
West Elm
1,855
2,278
(18.8
)
2.5
Williams Sonoma
1,260
1,287
(0.7
)
(1.7
)
Pottery Barn Kids and Teen
1,060
1,133
(5.5
)
0.4
Other2
370
420
N/A
N/A
Total
$
7,751
$
8,674
(9.9
) %
6.5
%
1 See the Company’s 10-K and 10-Q filings
for the definition of comparable brand revenue, which is calculated
on a 52-week basis for fiscal 2023 and fiscal 2022, and includes
business-to-business revenues.
2 Primarily consists of net revenues from
Rejuvenation, our international franchise operations, Mark and
Graham and GreenRow.
Condensed Consolidated Balance
Sheets (unaudited)
As of
(In thousands, except per share
amounts)
January 28, 2024
January 29, 2023
Assets
Current assets
Cash and cash equivalents
$
1,262,007
$
367,344
Accounts receivable, net
122,914
115,685
Merchandise inventories, net
1,246,369
1,456,123
Prepaid expenses
59,466
64,961
Other current assets
29,041
31,967
Total current assets
2,719,797
2,036,080
Property and equipment, net
1,013,189
1,065,381
Operating lease right-of-use assets
1,229,650
1,286,452
Deferred income taxes, net
110,656
81,389
Goodwill
77,306
77,307
Other long-term assets, net
122,950
116,407
Total assets
$
5,273,548
$
4,663,016
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
607,877
$
508,321
Accrued expenses
264,306
247,594
Gift card and other deferred revenue
573,904
479,229
Income taxes payable
96,554
61,204
Operating lease liabilities
234,517
231,965
Other current liabilities
103,157
108,138
Total current liabilities
1,880,315
1,636,451
Long-term operating lease liabilities
1,156,104
1,211,693
Other long-term liabilities
109,268
113,821
Total liabilities
3,145,687
2,961,965
Stockholders' equity
Preferred stock: $0.01 par value; 7,500
shares authorized, none issued
—
—
Common stock: $0.01 par value; 253,125
shares authorized; 64,151 and 66,226 shares issued and outstanding
at January 28, 2024 and January 29, 2023, respectively
642
663
Additional paid-in capital
588,602
573,117
Retained earnings
1,555,595
1,141,819
Accumulated other comprehensive loss
(15,552
)
(13,809
)
Treasury stock, at cost
(1,426
)
(739
)
Total stockholders' equity
2,127,861
1,701,051
Total liabilities and stockholders'
equity
$
5,273,548
$
4,663,016
Retail Store Data
(unaudited)
Beginning of quarter
End of quarter
As of
October 29, 2023
Openings
Closings
January 28, 2024
January 29, 2023
Pottery Barn
191
1
(8)
184
188
Williams Sonoma
163
—
(7)
156
165
West Elm
123
—
(2)
121
122
Pottery Barn Kids
46
—
—
46
46
Rejuvenation
10
1
—
11
9
Total
533
2
(17)
518
530
Condensed Consolidated
Statements of Cash Flows (unaudited)
For the Fiscal Year
Ended
(In thousands)
January 28, 2024
January 29, 2023
Cash flows from operating
activities:
Net earnings
$
949,762
$
1,127,904
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Depreciation and amortization
232,590
214,153
Loss on disposal/impairment of assets
21,869
25,116
Non-cash lease expense
255,286
231,350
Deferred income taxes
(29,085
)
(23,823
)
Stock-based compensation expense
84,754
90,268
Other
(2,796
)
(2,339
)
Changes in:
Accounts receivable
(7,461
)
15,687
Merchandise inventories
209,168
(208,908
)
Prepaid expenses and other assets
1,016
(11,823
)
Accounts payable
99,043
(113,521
)
Accrued expenses and other liabilities
4,935
(61,995
)
Gift card and other deferred revenue
95,005
31,839
Operating lease liabilities
(269,162
)
(242,855
)
Income taxes payable
35,349
(18,231
)
Net cash provided by operating
activities
1,680,273
1,052,822
Cash flows from investing
activities:
Purchases of property and equipment
(188,458
)
(354,117
)
Other
201
162
Net cash used in investing
activities
(188,257
)
(353,955
)
Cash flows from financing
activities:
Repurchases of common stock
(313,001
)
(880,038
)
Payment of dividends
(232,475
)
(217,345
)
Tax withholdings related to stock-based
awards
(52,831
)
(81,290
)
Net cash used in financing
activities
(598,307
)
(1,178,673
)
Effect of exchange rates on cash and cash
equivalents
954
(3,188
)
Net increase (decrease) in cash and cash
equivalents
894,663
(482,994
)
Cash and cash equivalents at beginning of
period
367,344
850,338
Cash and cash equivalents at end of
period
$
1,262,007
$
367,344
Exhibit 1
GAAP to Non-GAAP
Reconciliation
(unaudited)
For the Thirteen Weeks
Ended
For the Fiscal Year
Ended
January 28, 2024
January 29, 2023
January 28, 2024
January 29, 2023
(In thousands, except per share data)
$
% of revenues
$
% of revenues
$
% of revenues
$
% of revenues
Occupancy costs
$
208,020
9.1
%
$
203,715
8.3
%
$
814,290
10.5
%
$
785,425
9.1
%
Exit Costs1
—
—
(239
)
—
Non-GAAP occupancy costs
$
208,020
9.1
%
$
203,715
8.3
%
$
814,051
10.5
%
$
785,425
9.1
%
Gross profit
$
1,048,615
46.0
%
$
1,009,850
41.2
%
$
3,303,601
42.6
%
$
3,677,733
42.4
%
Exit Costs1
—
—
2,141
—
Non-GAAP gross profit
$
1,048,615
46.0
%
$
1,009,850
41.2
%
$
3,305,742
42.7
%
$
3,677,733
42.4
%
Selling, general and administrative
expenses
$
590,524
25.9
%
$
540,063
22.0
%
$
2,059,408
26.6
%
$
2,179,311
25.1
%
Impairment of Aperture2
—
(17,687
)
—
(17,687
)
Exit Costs1
—
—
(15,790
)
—
Reduction-in-force Initiatives3
—
—
(8,316
)
—
Non-GAAP selling, general and
administrative expenses
$
590,524
25.9
%
$
522,376
21.3
%
$
2,035,302
26.3
%
$
2,161,624
24.9
%
Operating income
$
458,091
20.1
%
$
469,787
19.2
%
$
1,244,193
16.1
%
$
1,498,422
17.3
%
Impairment of Aperture2
—
17,687
—
17,687
Exit Costs1
—
—
17,931
—
Reduction-in-force Initiatives3
—
—
8,316
—
Non-GAAP operating income
$
458,091
20.1
%
$
487,474
19.9
%
$
1,270,440
16.4
%
$
1,516,109
17.5
%
$
Tax rate
$
Tax rate
$
Tax rate
$
Tax rate
Income taxes
$
116,799
24.8
%
$
116,177
24.7
%
$
323,593
25.4
%
$
372,778
24.8
%
Impairment of Aperture2
—
2,840
—
2,840
Exit Costs1
—
—
4,690
—
Reduction-in-force Initiatives3
—
—
2,174
—
Non-GAAP income taxes
$
116,799
24.8
%
$
119,017
24.4
%
$
330,457
25.4
%
$
375,618
24.7
%
Diluted EPS
$
5.44
$
5.28
$
14.55
$
16.32
Impairment of Aperture2
—
0.22
—
0.21
Exit Costs1
—
—
0.20
—
Reduction-in-force Initiatives3
—
—
0.09
—
Non-GAAP diluted EPS4
$
5.44
$
5.50
$
14.85
$
16.54
1 During Q1 2023, we incurred exit costs of $17.9 million,
including $9.3 million associated with the closure of our West
Coast manufacturing facility and $8.6 million associated with the
exiting of Aperture, a division of our Outward, Inc. subsidiary. 2
During Q4 2022, we incurred an impairment charge of approximately
$17.7 million, including $9.7 million related to the impairment of
software and hardware and $8.0 million related to the impairment of
goodwill, associated with Aperture, a division of our Outward, Inc.
subsidiary. 3 During Q1 2023, we incurred costs related to
reduction-in-force initiatives of $8.3 million primarily in our
corporate functions. 4 Per share amounts may not sum due to
rounding to the nearest cent per diluted share.
Return on Invested Capital (“ROIC”)
We believe ROIC is a useful financial measure for investors in
evaluating the efficient and effective use of capital, and is an
important component of long-term shareholder return.
The following table presents the calculation of ROIC, together
with a reconciliation of net earnings to non-GAAP net operating
profit after tax ("NOPAT"):
For the Fiscal Year
Ended
(In thousands)
January 28, 2024
Net earnings
$
949,762
Interest income, net
(29,162
)
Income taxes
323,593
Operating income
1,244,193
Exit Costs 1
17,931
Reduction-in-force Initiatives 1
8,316
Operating lease costs
296,779
Adjusted Operating Income
1,567,219
Income tax adjustment 2
(398,074
)
NOPAT (numerator)
$
1,169,145
1 For more information on the nature of these adjustments, see
the footnotes to the GAAP to Non-GAAP Reconciliation.
2 Adjustment reflects a hypothetical provision for income taxes
on adjusted operating income, using the Company's effective tax
rate of 25.4%.
As of
(In thousands)
January 28, 2024
January 29, 2023
Average
Total assets
$
5,273,548
$
4,663,016
Total current liabilities
(1,880,315
)
(1,636,451
)
Cash in excess of $200 million
(1,062,007
)
(167,344
)
Invested capital (denominator)
$
2,331,226
$
2,859,221
$
2,595,224
Return on invested capital
45.0
%
SEC Regulation G – Non-GAAP Information
These tables include non-GAAP occupancy costs, gross profit,
gross margin, selling, general and administrative expense,
operating income, Adjusted 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20240313523576/en/
Jeff Howie EVP, Chief Financial Officer – (415) 402 4324 Jeremy
Brooks SVP, Chief Accounting Officer & Head of Investor
Relations – (415) 733 2371
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