Financial Release
01/09/07 | Williams-Sonoma, Inc. Reports 2006 Holiday Sales and Reiterates 4th Quarter and FY 2006 Guidance
| PRESS RELEASE WILLIAMS-SONOMA, INC. 3250 Van Ness Avenue San Francisco, CA 94109 |
CONTACT: |
FOR IMMEDIATE RELEASE
4th Quarter and FY 2006 Guidance
San Francisco, CA, January 9, 2007 -- Williams-Sonoma, Inc. (NYSE: WSM) today announced that net revenues for the eight-week holiday period ended December 24, 2006 increased 3.6% to $900.4 million versus the eight-week holiday period ended December 25, 2005, including a comparable store sales increase of 1.1%. As this performance was consistent with management's expectations, the company also announced that it was reiterating its fourth quarter and fiscal year 2006 revenue and diluted earnings per share guidance, which was previously provided on November 16, 2006.
(All Amounts in Millions Except Percentages)
| Eight-Week Period Ended | % YOY Increase | |||
| December 24, 2006 |
December 25, 2005 |
Including HE (a) |
Excluding HE (a) |
|
| Retail Net Revenues | $576.7 | $551.0 | 4.7% | 5.3% |
| Direct-to-Customer Net Revenues | $323.7 | $317.7 | 1.9% | 4.3% |
| Total Net Revenues | $900.4 | $868.7 | 3.6% | 4.9% |
| Comparable Store Sales % Increase | 1.1% | 4.5% | - | - |
All brands delivered positive revenue growth during the holiday period, with the exception of Pottery Barn, which was negative in both channels. Also during the eight-week period ended December 24, 2006, the company repurchased and retired 3,124,100 shares of its common stock at a weighted average cost of $32.03 per share and an aggregate cost of approximately $100.1 million.
Reiterated fourth quarter and fiscal year 2006 revenue and diluted earnings per share guidance is summarized in the table below:
| Reiterated Guidance | ||||
| Q4 2006 |
Q4 YOY % Increase |
FY 2006 |
FY 2006 YOY % Increase |
|
| Net Revenues (in Billions, except %) | $1.234 - $1.264 | 1.6% - 4.1% | $3.706 - $3.736 | 4.7% - 5.6% |
| Comparable Store Sales % Change | - | (1.0%) - 1.5% | - | 0.0% - 1.0% |
| GAAP Diluted EPS | $1.00 - $1.06 | (2.0%) - 3.9% | $1.74 - $1.80 | (3.9%) - (0.6%) |
| Impact of Unusual Business Events (b) | $0.00 | - | ($0.029) | - |
| Non-GAAP Diluted EPS Excluding Unusual Business Events (b) |
$1.00 - $1.06 | (8.3%) - (2.8%) | $1.70 - $1.76 | (9.6%) - (6.4%) |
| Impact of FAS 123R (b) | $0.034 | - | $0.145 | - |
| Impact of FSP FAS 13-1 (b) | $0.002 | - | $0.013 | - |
| Non-GAAP Diluted EPS Excluding Unusual Business Events and New Accounting Pronouncements (b) |
$1.03 - $1.09 | (5.5%) - 0.0% | $1.86 - $1.92 | (1.1%) - 2.1% |
Howard Lester, Chairman and Chief Executive Officer, commented, "Despite a difficult and highly promotional retail environment throughout the holiday season, the strength of our brands and our holiday execution allowed us to drive our business and deliver against the higher end of the expectations that we set for ourselves. We are remaining conservative, however, in our guidance for the balance of the quarter as we still have approximately 28% of our revenue to deliver in January, since our holiday period ended on December 24th."
Mr. Lester continued, "As we look forward to 2007, which will be a 53-week year, we are focused on four key initiatives: (1) revitalizing the Pottery Barn brand; (2) aggressively identifying real estate expansion opportunities for the West Elm brand; (3) continuing to drive operational efficiencies in our furniture supply chain, including reducing returns, replacements, and damages; and (4) capitalizing on the success of our 2006 key growth strategies including our Pottery Barn outdoor catalog, our small and mid-size store merchandising initiative in the Williams-Sonoma brand and our apparel introduction in Pottery Barn Kids. To support our growth in 2007, we are expecting a mid-single-digit percentage increase in retail leased square footage and a low-single-digit percentage increase in catalog circulation."
"We are, however, cautious in our outlook for 2007 for two reasons. First, we remain concerned about the "home-related" macro-economic environment, as well as the competitive landscape - which we believe will continue to be highly promotional as home-centered retailers work through excess inventories. Second, we believe that our strategies for revitalizing the Pottery Barn brand could result in increased margin pressure, particularly in the first half of the year. Accordingly, our preliminary estimates for fiscal year 2007 assume a mid-single-digit to high-single-digit percentage increase in net revenues versus the fiscal year 2006 guidance we provided today, and a flat to mid-single-digit percentage increase in diluted earnings per share versus the fiscal year 2006 guidance we provided today for Non-GAAP Diluted Earnings Per Share Excluding Unusual Business Events as shown in Exhibit 1. We will provide updated and more in-depth guidance for fiscal 2007 when we have more visibility to post-holiday sales trends and finalize our 2007 business plans."
SEC REGULATION G -- NON-GAAP INFORMATION
This press release includes non-GAAP net revenue and revenue growth percentages, non-GAAP gross margin percentages, non-GAAP selling, general and administrative expenses, and non-GAAP diluted earnings per share. These non-GAAP financial measures exclude the impact of the implementation of FAS 123R and FSP FAS 13-1, the impact of the CEO departure charge, the benefit of unredeemed gift certificate income, and the benefit of the VISA/MasterCard litigation settlement in fiscal year 2006 and the impact of the Hold Everything consolidation charge in fiscal years 2005 and 2006. 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 comparisons between historical operating results and our 2006 quarterly and fiscal year guidance. 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.
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 prove 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 future financial guidance and results, increases in retail leased square footage and increases in catalog circulation.
The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include accounting adjustments as we close our books for the fourth quarter of 2006 and as audited year-end financial statements are prepared; new interpretations of current accounting rules; our ability to successfully transition the Hold Everything merchandise strategies; changes to current accounting rules; changes in tax laws applicable to cash dividends or share repurchases; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; construction and other delays in store openings; competition from companies with concepts or products similar to our concepts and products; 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 commensurate with customer demand; our ability to anticipate and manage customer returns; successful catalog management, including timing, sizing and merchandising; uncertainties in Internet marketing, infrastructure and regulation; changes in consumer spending based on weather, economic, political, competitive and other conditions beyond our control; construction delays on infrastructure projects based on weather or other events; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; dependence on external funding sources for operating capital; our ability to control employment, occupancy and other operating costs; our ability to improve and control 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 shareholders and other documents filed with or furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended January 29, 2006 and all subsequent current reports on Form 8-K and quarterly reports on 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
Williams-Sonoma, Inc. is a nationwide specialty retailer of high quality products for the home. These products, representing six distinct merchandise strategies - Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm and Williams-Sonoma Home - are marketed through 582 stores, seven mail order catalogs and six e-commerce websites.