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Williams-Sonoma, Inc. Announces Strong Third Quarter 2012 Results - EPS Grows 20% Over 2011 Raises Financial Guidance For Fiscal Year 2012

Stocks in this article: WSM

Retail net revenues in Q3 12 increased 4.2% to $497 million from $478 million in Q3 11, primarily driven by Pottery Barn and West Elm and partially offset by a decrease in Williams-Sonoma. Retail leased square footage was flat to last year. Comparable store sales in Q3 12 increased 2.9% versus 6.3% in Q3 11.

Gross margin expressed as a percentage of net revenues in Q3 12 increased to 39.0% from 38.3% in Q3 11.

Selling, general and administrative (“SG&A”) expenses in Q3 12 were $289 million or 30.6% of net revenues versus $263 million or 30.4% in Q3 11. Included in the 20 basis point increase from Q3 11 to Q3 12 were planned incremental investments to support e-commerce, global expansion and business development growth strategies.

Operating margin expressed as a percentage of net revenues in Q3 12 increased to 8.4% from 7.9% in Q3 11.

Merchandise inventories at the end of Q3 12 increased 9.9% to $688 million from $627 million at the end of Q3 11.

FY 12 FINANCIAL GUIDANCE (for the 53-weeks ending February 3, 2013)

  • Fourth Quarter and Fiscal Year Guidance

Guidance for Fourth Quarter and Fiscal Year 2012

       
Fourth Quarter   Fiscal Year
Q4 12   Q4 11 FY 12   FY 11
  GUID

(14 weeks)

ACT

  (13 weeks)  

GUID

(53 weeks)

ACT

  (52 weeks)  

Total Net Revenues (millions) $1,360 - $1,400 $1,268 $3,995 - $4,035 $3,721

Total % Growth vs. Prior Year(53-week vs. 52-week)

7 - 10 % 6.1% 7 - 8 % 6.2%

Total Adjusted % Growth vs. Prior Year (53-week vs. 53-week)

2 - 4 % 6.1% 5 - 6 % 6.2%

Comparable Brand Revenue Growth*(53-week vs. 53-week)

2 - 4 % 6.6% 5 - 6 % 7.3%
Non-GAAP Operating Margin** 14.5 - 15.1 % 15.6% 10.1 - 10.3 % 10.3%
Non-GAAP Diluted EPS $1.21 - $1.28 $1.17 $2.45 - $2.52 $2.24
GAAP Diluted EPS $1.21 - $1.28 $1.17 $2.41 - $2.48 $2.22
Leased Square Footage % Change <1> - 0 % <1.5%> <1> - 0 % <1.5%>
* See the company’s 10-K and 10-Q filings for the definition of comparable brand revenue growth.
** The non-GAAP operating margin above excludes the impact of unusual business events of approximately 20 basis points in FY 12. We anticipate GAAP operating margin to be in the range of 9.9 - 10.1 % in FY 12.
 

Guidance for Fiscal Year 2012

       
FY 12   FY 11
  GUID

(53 weeks)

ACT

 (52 weeks) 

DTC Net Revenue % Growth vs. Prior Year(53-week vs. 52-week)

12 - 14 % 12.4%

Adjusted DTC Net Revenue % Growth vs. Prior Year (53-week vs. 53-week)

9 - 11 % 12.4%

Comparable Store Sales Growth*(53-week vs. 53-week)

2 - 3 % 3.5%
Income Tax Rate 38.2 - 38.6 % 37.9%
Capital Spending (millions) $200 - $220 $130
Depreciation and Amortization (millions) $133 - $135 $131
Amortization of Deferred Lease Incentives (millions) $26 - $27 $28
Stock-based Compensation Expense (millions) $31 - $32 $24
* See the company’s 10-K and 10-Q filings for the definition of comparable stores.
 
  • Store Openings and Closings

Store Opening and Closing Guidance by Retail Concept

               
Q4 11   Q3 YTD 12

ACT

  Q4 12

GUID

  FY 12

GUID

  ACT
Retail Concept

Total

Open   Close  

 End 

Open   Close  

 End 

Open   Close  

 End 

Williams-Sonoma 259 3  

<3

>

259 2  

<10

>

251 5  

<13

> *

251
Pottery Barn 194 6  

<7

>

193 2  

<3

>

192 8  

<10

> *

192
Pottery Barn Kids 83

1

 

<1

>

83

2

 

<1

>

84

3

 

<2

> *

84
West Elm 37 9  

<1

>

45 4  

<2

>

47 13  

<3

> *

47
Rejuvenation 3 1   -   4 -   -   4 1   -   4
Total** 576 20  

<12

>

584 10  

<16

>

578 30  

<28

>

578
* FY 12 store closing numbers include 20 permanent store closures. FY 12 total store opening and closing numbers for Williams-Sonoma, Pottery Barn, Pottery Barn Kids and West Elm include 1, 5, 1 and 1 stores, respectively, for temporary closure and re-opening due to remodeling. Remodeled stores are defined as those stores temporarily closed and subsequently re-opened due to square footage expansion, store modification, or relocation.
** Temporary “pop-up” stores, where lease terms are typically short-term in nature and are used to test new markets, are not included in the totals above as they are not considered permanent stores. At the close of Q3 12, we operated three pop-up stores -- one in West Elm and two in PBteen.
 

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, November 14, 2012, 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 a live webcast and can be accessed through the Internet at www.williams-sonomainc.com/webcast. A replay of the webcast will be available at www.williams-sonomainc.com/webcast.

SEC REGULATION G -- NON-GAAP INFORMATION

This press release includes non-GAAP operating margin and diluted EPS. These non-GAAP financial measures exclude the impact of employee separation charges and the impact of asset impairment and early lease termination charges for underperforming retail stores. We have reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in the text of this release and in Exhibit 1. 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 diluted EPS actual results and FY 12 guidance on a comparable basis with our quarterly and FY 11 results. 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 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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