Williams-Sonoma, Inc. reports strong second quarter 2018 results
SAN FRANCISCO--(BUSINESS WIRE)--Aug 22, 2018--Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the second fiscal quarter (“Q2 18”) ended July 29, 2018 versus the second fiscal quarter (“Q2 17”) ended July 30, 2017.
2 nd Quarter 2018Net revenue growth of 6.1% Comparable brand revenue growth of 4.6% E-commerce net revenue growth accelerates to 53.9% of total company net revenues GAAP operating margin of 5.8%; non-GAAP operating margin of 6.8% in-line with Q2 17 GAAP diluted EPS of $0.62; non-GAAP diluted EPS of $0.77 outperforms guidance, driven by gross margin expansion Merchandise inventories growth of 2.5%, significantly below net revenue growth
Fiscal Year 2018 GuidanceNon-GAAP net revenue guidance raised to $5,565 billion – $5,665 billion Comparable brand revenue growth raised at the low end to 3.0% - 5.0% Non-GAAP operating margin raised at the low end to 8.4% - 9.0% Non-GAAP diluted EPS raised to $4.26 - $4.36
Laura Alber, President and Chief Executive Officer, commented, “Today, we are announcing another quarter of strong results with topline growth at the high-end of guidance, gross margin significantly above last year and a substantial EPS outperformance. Our powerful multi-channel, multi-brand platform, together with our strong execution of our strategic initiatives in digital leadership, product innovation, retail transformation and operational excellence are having a positive impact on all parts of our business. Given the results in the first half and the momentum our initiatives are creating, we are raising our full-year guidance for net revenues, comp revenue growth, operating margin and EPS.”
2 nd QUARTER 2018 RESULTS
Net revenues increased 6.1% to $1.275 billion in Q2 18 from $1.202 billion in Q2 17. Excluding certain discrete items, non-GAAP net revenues were $1.274 billion in Q2 18 or a 6.1% increase over Q2 17. See Exhibit 1.
Comparable brand revenue in Q2 18 increased 4.6% compared to an increase of 2.8% in Q2 17 as shown in the table below:
E-commerce net revenues in Q2 18 increased 8.9% to $687 million from $631 million in Q2 17. Excluding certain discrete items, non-GAAP e-commerce net revenues were $686 million in Q2 18 or an 8.8% increase over Q2 17. See Exhibit 1.
Retail net revenues in Q2 18 increased 3.1% to $588 million from $571 million in Q2 17.
Operating margin in Q2 18 was 5.8% compared to 6.8% in Q2 17. Excluding certain discrete items, non-GAAP operating margin was 6.8% in Q2 18. See Exhibit 1.
The effective income tax rate in Q2 18 was 28.8% versus 34.8% in Q2 17. Excluding certain discrete items, the non-GAAP effective income tax rate was 24.5% in Q2 18. See Exhibit 1.
EPS in Q2 18 was $0.62 versus $0.61 in Q2 17. Excluding certain discrete items, non-GAAP EPS was $0.77 in Q2 18. See Exhibit 1.
Merchandise inventories at the end of Q2 18 increased 2.5% to $1.100 billion from $1.073 billion at the end of Q2 17.
These results include the adoption of ASU No. 2014-09, which pertains to revenue recognition. See Exhibit 2 for more details on the financial impact of adoption.
STOCK REPURCHASE PROGRAM
During Q2 18, we repurchased 2,409,000 shares of common stock at an average cost of $56.90 per share for a total cost of approximately $137 million. As of July 29, 2018, there was approximately $344 million remaining under our current stock repurchase program.
CONFERENCE CALL AND WEBCAST INFORMATION
Williams-Sonoma, Inc. will host a live conference call today, August 22, 2018, 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 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. 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 financial measures as presented herein may not be comparable to similarly titled measures used by other companies.
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 statements relating to: our ability to continue to successfully execute our strategic iniatives; our optimism about the future; our ability to drive long-term profitable growth; our future financial guidance, including Q3 18 and FY 2018 guidance; our stock repurchase program; and our proposed store openings and closures.
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; new interpretations of or changes to current accounting rules or tax regulations; the potential impact of tariffs, including our ability to mitigate the potential impact; 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; 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, 2018 and all subsequent quarterly reports on Form 10-Q and current reports on Form 8-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 a specialty retailer of high-quality products for the home. These products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, 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 and South Korea, as well as e-commerce websites in certain locations. In 2017, we acquired Outward, Inc., a 3-D imaging and augmented reality platform for the home furnishings and décor industry.
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