Q3 comparable brand revenue -2.9% Q3
operating margin of 17.8%; diluted EPS growth of 7.1% to $1.96
New stock repurchase authorization of $1 billion Raises
full-year 2024 outlook
Williams-Sonoma, Inc. (NYSE: WSM) today announced operating
results for the third quarter ended October 27, 2024 versus the
third quarter ended October 29, 2023.
“We are pleased with the results of our third quarter, beating
both top and bottom-line expectations. The quarter was driven by
continued improvement in our sales trend, market-share gains, and
strong profit. In Q3, our comp came in at -2.9%, with an operating
margin of 17.8%, delivering a 7.1% increase in earnings per share
to $1.96. Our operating results reflect the operational
improvements that we have been focused on all year, and demonstrate
the strength of our margin profile in a difficult environment,”
said Laura Alber, President and Chief Executive Officer.
Alber concluded, “Our strategy of focusing on returning to
growth, enhancing our world-class customer service, and driving
margin is working. And, as we head into the last quarter of the
year, we are optimistic and confident about our business. The
fourth quarter is the time of year when we shine. And, therefore,
we are raising our full-year guidance. We now expect full-year
revenues to come in at a range of down 3% to down 1.5%, and we are
raising our guidance on operating margin 40 bps to be in the range
of 17.8% to 18.2%.”
THIRD QUARTER 2024 HIGHLIGHTS
- Comparable brand revenue -2.9%.
- Gross margin of 46.7% +230bps to LY driven by (i) higher
merchandise margins of +130bps and (ii) supply chain efficiencies
of +100bps. Occupancy rate flat to LY, with occupancy costs of $195
million, -2.7% to LY.
- SG&A rate of 28.9% +150bps to LY driven by higher
employment and advertising expense, partially offset by lower
general expenses. SG&A of $521 million, +2.7% to LY.
- Operating income of $321 million with an operating margin of
+17.8%. +80bps to LY.
- Diluted EPS of $1.96. +7.1% to LY.
- Merchandise inventories +3.8% to the third quarter LY to $1.45
billion.
- Maintained strong liquidity position of $827 million in cash
and operating cash flow of $254 million, enabling the company to
deliver returns to stockholders of $606 million through $533
million in stock repurchases and $73 million in dividends.
STOCK REPURCHASE AUTHORIZATION
In September 2024, the Board of Directors approved a new $1
billion stock repurchase authorization, which will become effective
once the Company’s current stock repurchase authorization,
announced in March 2024, is fully utilized. Including the balance
of $293 million remaining under our March 2024 program, the total
stock repurchase authorization is currently $1.3 billion. The
Company’s stock repurchase programs authorize the purchase of the
Company’s common stock through open market and privately negotiated
transactions, including through Rule 10b5-1 plans, at such times
and in such amounts as management deems appropriate. The timing and
actual number of shares repurchased will depend on a variety of
factors, including price, corporate and regulatory requirements,
capital availability and other market conditions. The stock
repurchase programs do not have an expiration date and may be
limited or terminated at any time without prior notice.
FIRST QUARTER 2024 OUT-OF-PERIOD ADJUSTMENT
Subsequent to the filing of our Form 10-K, in April 2024, the
Company determined that it over-recognized freight expense in
fiscal years 2021, 2022 and 2023 for a cumulative amount of $49
million. The Company evaluated the error, both qualitatively and
quantitatively, and determined that no prior interim or annual
periods were materially misstated. The Company then evaluated
whether the cumulative amount of the over-accrual was material to
its projected fiscal 2024 results, and determined the cumulative
amount was not material. Therefore, the Condensed Consolidated
Financial Statements for the thirty-nine weeks ended October 27,
2024 include an out-of-period adjustment of $49 million, recorded
in the first quarter of fiscal 2024, to reduce cost of goods sold
and accounts payable, which corrected the cumulative error on the
balance sheet as of January 28, 2024.
SECOND QUARTER 2024 COMMON STOCK SPLIT
On July 9, 2024, the Company effected a 2-for-1 stock split of
its common stock through a stock dividend. All historical share and
per share amounts in this release have been retroactively adjusted
to reflect the stock split.
OUTLOOK
- We are raising our fiscal 2024 guidance to reflect higher net
revenue trends and higher operating margin expectations.
- In fiscal 2024, we now expect annual net revenue decline in the
range of -3.0% to -1.5% with comps in the range of -4.5% to -3.0%
in fiscal 2024.
- We are raising our guidance on our operating margin for fiscal
2024. We now expect an operating margin between 18.4% to 18.8%,
including the impact of the first quarter out-of-period adjustment
of 60bps. Without this adjustment, we expect an operating margin
between 17.8% to 18.2% in fiscal 2024.
- For fiscal 2024, we expect annual interest income to be
approximately $50 million and our annual effective tax rate to be
approximately 25.0%.
- 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
net revenue 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,
November 20, 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, and for the same reasons, we are unable to address
the probable significance of the unavailable information. 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. 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 updated fiscal year 2024
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, political, competitive and other conditions beyond our
control, 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; the impact of current and potential future tariffs and
our ability to mitigate impacts; the outcome of our growth
initiatives; our ability to anticipate consumer preferences and
buying trends; dependence on timely introduction and customer
acceptance of our merchandise; our ability to introduce and grow
new brands and brand extensions; delays in store openings;
competition from companies with concepts or products similar to
ours; labor and material shortages; 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; challenges
associated with our increasing global presence; the continuing
impact of global conflicts, such as the conflicts in Ukraine and
the Middle East, and shortages of various raw materials on our
global supply chain, retail store operations and customer demand;
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;
new interpretations of or changes to current accounting rules;
impact of actual and potential wars, conflicts or acts of
terrorism; 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 28, 2024 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 27,
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-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, 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
For the Thirty-nine Weeks
Ended
October 27, 2024
October 29, 2023
October 27, 2024
October 29, 2023
(In thousands, except per share
amounts)
$
% of Revenues
$
% of Revenues
$
% of Revenues
$
% of Revenues
Net revenues
$
1,800,668
100.0
%
$
1,853,650
100.0
%
$
5,249,323
100.0
%
$
5,471,715
100.0
%
Cost of goods sold
958,953
53.3
1,031,290
55.6
2,778,767
52.9
3,216,729
58.8
Gross profit
841,715
46.7
822,360
44.4
2,470,556
47.1
2,254,986
41.2
Selling, general and administrative
expenses
521,072
28.9
507,283
27.4
1,536,169
29.3
1,468,884
26.8
Operating income
320,643
17.8
315,077
17.0
934,387
17.8
786,102
14.4
Interest income, net
11,802
0.7
7,182
0.4
43,063
0.8
16,015
0.3
Earnings before income taxes
332,445
18.5
322,259
17.4
977,450
18.6
802,117
14.7
Income taxes
83,492
4.6
84,974
4.6
237,086
4.5
206,794
3.8
Net earnings
$
248,953
13.8
%
$
237,285
12.8
%
$
740,364
14.1
%
$
595,323
10.9
%
Earnings per share (EPS):
Basic
$
1.99
$
1.85
$
5.81
$
4.60
Diluted
$
1.96
$
1.83
$
5.74
$
4.56
Shares used in calculation of
EPS:
Basic
125,333
128,285
127,334
129,436
Diluted
126,892
129,549
129,019
130,596
3rd Quarter Net Revenues and
Comparable Brand Revenue Growth (Decline)1
Net Revenues
Comparable Brand Revenue
Growth (Decline)
(In millions, except percentages)
Q3 24
Q3 23
Q3 24
Q3 23
Pottery Barn
$
718
$
778
(7.5
)%
(16.6
)%
West Elm
451
466
(3.5
)
(22.4
)
Williams Sonoma
252
252
(0.1
)
(1.9
)
Pottery Barn Kids and Teen
287
277
3.8
(6.9
)
Other2
93
81
N/A
N/A
Total
$
1,801
$
1,854
(2.9
)%
(14.6
)%
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, Mark and
Graham, and GreenRow.
Condensed Consolidated Balance
Sheets (unaudited)
As of
(In thousands, except per share
amounts)
October 27, 2024
January 28, 2024
October 29, 2023
Assets
Current assets
Cash and cash equivalents
$
826,784
$
1,262,007
$
698,807
Accounts receivable, net
105,620
122,914
124,238
Merchandise inventories, net
1,450,135
1,246,369
1,396,864
Prepaid expenses
84,810
59,466
100,045
Other current assets
19,432
29,041
27,381
Total current assets
2,486,781
2,719,797
2,347,335
Property and equipment, net
1,019,874
1,013,189
1,026,819
Operating lease right-of-use assets
1,147,673
1,229,650
1,235,425
Deferred income taxes, net
109,444
110,656
76,272
Goodwill
77,301
77,306
77,279
Other long-term assets, net
127,267
122,950
120,639
Total assets
$
4,968,340
$
5,273,548
$
4,883,769
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
665,803
$
607,877
$
675,505
Accrued expenses
235,146
264,306
203,958
Gift card and other deferred revenue
583,022
573,904
528,403
Income taxes payable
28,400
96,554
53,139
Operating lease liabilities
231,667
234,517
231,236
Other current liabilities
101,272
103,157
96,745
Total current liabilities
1,845,310
1,880,315
1,788,986
Long-term operating lease liabilities
1,083,809
1,156,104
1,163,631
Other long-term liabilities
132,612
109,268
117,918
Total liabilities
3,061,731
3,145,687
3,070,535
Stockholders' equity
Preferred stock: $0.01 par value; 7,500
shares authorized, none issued
—
—
—
Common stock: $0.01 par value; 253,125
shares authorized; 123,876, 128,301, and 128,270 shares issued and
outstanding at October 27, 2024, January 28, 2024 and October 29,
2023, respectively
1,239
1,284
1,283
Additional paid-in capital
545,205
587,960
571,765
Retained earnings
1,377,461
1,555,595
1,260,216
Accumulated other comprehensive loss
(16,861
)
(15,552
)
(18,604
)
Treasury stock, at cost
(435
)
(1,426
)
(1,426
)
Total stockholders' equity
1,906,609
2,127,861
1,813,234
Total liabilities and stockholders'
equity
$
4,968,340
$
5,273,548
$
4,883,769
Retail Store Data
(unaudited)
Beginning of quarter
End of quarter
As of
July 28, 2024
Openings
Closings
October 27, 2024
October 29, 2023
Pottery Barn
185
2
(1
)
186
191
Williams Sonoma
158
2
—
160
163
West Elm
122
—
—
122
123
Pottery Barn Kids
45
1
—
46
46
Rejuvenation
11
—
—
11
10
Total
521
5
(1
)
525
533
Condensed Consolidated
Statements of Cash Flows (unaudited)
For the Thirty-nine Weeks
Ended
(In thousands)
October 27, 2024
October 29, 2023
Cash flows from operating
activities:
Net earnings
$
740,364
$
595,323
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Depreciation and amortization
171,657
166,027
Loss on disposal/impairment of assets
4,494
19,143
Non-cash lease expense
192,501
186,764
Deferred income taxes
(9,003
)
(7,993
)
Tax benefit related to stock-based
awards
10,472
12,455
Stock-based compensation expense
66,061
66,435
Other
(2,205
)
(2,411
)
Changes in:
Accounts receivable
17,287
(8,928
)
Merchandise inventories
(203,937
)
56,770
Prepaid expenses and other assets
(21,393
)
(35,857
)
Accounts payable
37,239
164,958
Accrued expenses and other liabilities
(17,060
)
(48,978
)
Gift card and other deferred revenue
9,367
49,878
Operating lease liabilities
(200,947
)
(200,168
)
Income taxes payable
(68,154
)
(8,005
)
Net cash provided by operating
activities
726,743
1,005,413
Cash flows from investing
activities:
Purchases of property and equipment
(154,354
)
(134,830
)
Other
360
402
Net cash used in investing
activities
(153,994
)
(134,428
)
Cash flows from financing
activities:
Repurchases of common stock
(707,477
)
(313,001
)
Payment of dividends
(208,861
)
(174,571
)
Tax withholdings related to stock-based
awards
(90,733
)
(51,108
)
Net cash used in financing
activities
(1,007,071
)
(538,680
)
Effect of exchange rates on cash and cash
equivalents
(901
)
(842
)
Net (decrease) increase in cash and cash
equivalents
(435,223
)
331,463
Cash and cash equivalents at beginning of
period
1,262,007
367,344
Cash and cash equivalents at end of
period
$
826,784
$
698,807
Exhibit 1
3rd Quarter GAAP to Non-GAAP
Reconciliation (unaudited)
For the Thirteen Weeks
Ended
For the Thirty-nine Weeks
Ended
October 27, 2024
October 29, 2023
October 27, 2024
October 29, 2023
(In thousands, except per share data)
$
% of revenues
$
% of revenues
$
% of revenues
$
% of revenues
Occupancy costs
$
194,950
10.8
%
$
200,399
10.8
%
$
588,348
11.2
%
$
606,270
11.1
%
Exit Costs1
—
—
—
(239
)
Non-GAAP occupancy costs
$
194,950
10.8
%
$
200,399
10.8
%
$
588,348
11.2
%
$
606,031
11.1
%
Gross profit
$
841,715
46.7
%
$
822,360
44.4
%
$
2,470,556
47.1
%
$
2,254,986
41.2
%
Exit Costs1
—
—
—
2,141
Non-GAAP gross profit
$
841,715
46.7
%
$
822,360
44.4
%
$
2,470,556
47.1
%
$
2,257,127
41.3
%
Selling, general and administrative
expenses
$
521,072
28.9
%
$
507,283
27.4
%
$
1,536,169
29.3
%
$
1,468,884
26.8
%
Exit Costs1
—
—
—
(15,790
)
Reduction-in-force Initiatives2
—
—
—
(8,316
)
Non-GAAP selling, general and
administrative expenses
$
521,072
28.9
%
$
507,283
27.4
%
$
1,536,169
29.3
%
$
1,444,778
26.4
%
Operating income
$
320,643
17.8
%
$
315,077
17.0
%
$
934,387
17.8
%
$
786,102
14.4
%
Exit Costs1
—
—
—
17,931
Reduction-in-force Initiatives2
—
—
—
8,316
Non-GAAP operating income
$
320,643
17.8
%
$
315,077
17.0
%
$
934,387
17.8
%
$
812,349
14.8
%
$
Tax rate
$
Tax rate
$
Tax rate
$
Tax rate
Income taxes
$
83,492
25.1
%
$
84,974
26.4
%
$
237,086
24.3
%
$
206,794
25.8
%
Exit Costs1
—
—
—
4,690
Reduction-in-force Initiatives2
—
—
—
2,174
Non-GAAP income taxes
$
83,492
25.1
%
$
84,974
26.4
%
$
237,086
24.3
%
$
213,658
25.8
%
Diluted EPS
$
1.96
$
1.83
$
5.74
$
4.56
Exit Costs1
—
—
—
0.10
Reduction-in-force Initiatives2
—
—
—
0.05
Non-GAAP diluted EPS3
$
1.96
$
1.83
$
5.74
$
4.71
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 Q1 2023, we incurred costs
related to reduction-in-force initiatives of $8.3 million primarily
in our corporate functions.
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/20241120363922/en/
Jeff Howie EVP, Chief Financial Officer – (415) 402 4324 Jeremy
Brooks SVP, Chief Accounting Officer & Head of Investor
Relations – (415) 733 2371
Williams Sonoma (NYSE:WSM)
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