Williams-Sonoma Q1 2010 Earnings Call Transcript

Williams-Sonoma Q1 2010 Earnings Call Transcript
Publish date:

Williams-Sonoma (WSM)

Q1 2010 Earnings Call

May 20, 2010 10:00 am ET


Laura Alber - President

W. Lester - Chairman, Chief Executive Officer and Member of Incentive Award Committee

Sharon Mccollam - Chief Operating Officer, Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Pat Connolly - Chief Marketing Officer, Executive Vice President, Director and Member of Incentive Award Committee

Stephen Nelson - Director of Investor Relations


David Magee - SunTrust Robinson Humphrey Capital Markets

Oliver Chen

Tiffany Wade

Christian Buss - Thomas Weisel Partners Equity Research

Joseph Feldman - Telsey Advisory Group

Bradley Thomas - KeyBanc Capital Markets Inc.

Austin Pauls

Christopher Horvers - JP Morgan Chase & Co

TJ McConville

Jennifer Milan - Sterne Agee & Leach Inc.

Vincent Sinisi - BofA Merrill Lynch

Matt Nemer - Wells Fargo Securities, LLC

Robert Higginbotham - Goldman Sachs Group Inc.

Laura Champine - Cowen and Company, LLC

Neely Tamminga - Piper Jaffray Companies

Avery Marie Sheffield



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Ladies and gentlemen, thank you for standing by. Welcome to the Williams-Sonoma Inc. First Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Steve Nelson, Director of Investor Relations, to discuss non-GAAP measures and forward-looking statements.

Stephen Nelson

Good morning. This morning's conference call should be considered in conjunction with the press release that we issued earlier today. Our press release and this call contain non-GAAP financial measures that exclude the impact of unusual business events. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and an explanation of why these non-GAAP financial measures are useful are discussed in Exhibit 1 of the press release.

The forward-looking statements included in this morning's call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operations, business initiatives, guidance, growth plans and prospects of the company in 2010 and beyond, and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current press releases and SEC filings for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect circumstances or events that may arise after this call.

I will now turn the conference call over to Howard Lester, our Chairman and Chief Executive Officer.

W. Lester

Good morning, and thank you for joining us. With me today is Laura Alber, our next CEO; Pat Connolly, our Chief Marketing Officer; and Sharon McCollam, our Chief Operating and Chief Financial Officer. I'd like to begin today by sharing with you my perspective on the strength of our operating results in the first quarter, and then I'll turn the call over to Sharon and Laura for more details on the quarter and the balance of the year.

But before I begin, I'd like to take a moment to thank all of you who have supported us here at Williams-Sonoma over the past 30 years. As I approach my retirement next week, I could not help but reflect on the contribution that so many have made to our collective success. First and foremost, I want to thank our Associates, who have dedicated their careers to building our dreams and serving our customers. I'd also like to thank our supply chain partners, our landlords and our service providers for all they've contributed as well.

And then, of course, there all of you, our shareholders. What's amazing to me now is that as much as it has been a joy and an honor to lead this great company, I'm finding equal joy in watching the people who have been crucial to building it over the past decades take the helm. While it is so bittersweet to step away, I'm doing so at a time when our management team, led by Laura, has never been stronger, and our future has never been brighter.

There's no better evidence of this than our first quarter results. Our revenue growth was 17%, non-GAAP diluted earnings per share increased $0.37 to $0.23 versus a $0.14 loss last year. This is our highest first quarter non-GAAP diluted EPS in history, and our operating margin is at a peak levels as well.

It represents what's possible when a strategy is well executed and centered on the company's most important asset, its customers. While cost containment and inventory management were critical, there was equal focus on our brand proposition and the customer experience. Collectively, these initiatives transformed our business. And we are now a structurally more profitable and efficient company as demonstrated by these results and the momentum is continuing.

As such, our guidance has been increased to reflect the upside. Revenue growth for fiscal year 2010 is now expected to be in the range of 6% to 9% and diluted earnings per share in the range of $1.39 to $1.48. I really have to commend the entire management team for having the ability to drive the performance that we've seen over the past several quarters. But particularly, Laura and Sharon, for their extraordinary leadership during these unprecedented times. I could not be more proud of what these teams have accomplished.

I'll now turn the call over to Sharon to discuss the details of the first quarter.

Sharon Mccollam

Thank you so much, Howard. Good morning, everyone. Our first quarter performance once again substantially exceeded our expectations. The P&L highlights were as follows: Net revenues increased 17% to $718 million; retail net revenues increased 15%, including a comparable store sales increase of 17%; direct-to-customer net revenues increased 20%, despite catalog and paid circulation reductions of 3% and 4% respectively; Internet revenues were up 24%; non-GAAP diluted earnings per share were $0.23 versus a loss of $0.14 last year. These results were above both the high end of our guidance and the first call consensus estimate. Stronger-than-expected sales and greater-than-expected full price selling drove these better-than-expected results.

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