01—Abstract
Summary
Summary of the 10-K filed April 22, 1998. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported net sales of $933.3 milliona for the 52 weeks ended February 1, 1998 (fiscal 1997), an increase of $121.5 million, or 15%, over fiscal 1996's 53-week period.
Retail sales were $601.7 millionb (64.5% of net sales), up 17.2%, driven mainly by new store openings. The company ended the year with 276 retail stores across 37 states and the District of Columbia, and catalog sales were $331.5 million (35.5% of net sales), up 11.2%. Comparable store sales grew 2.8%.
Net earnings rose to $41.3 millionc, or $1.50 diluted earnings per share, from $22.7 million, or $0.86, in fiscal 1996, with the gross margin improvement (cost of goods sold and occupancy fell to 59.7% of net sales from 60.8%) a key driver. The balance sheet strengthened over the year: total assets rose to $477.2 million from $404.4 million, shareholders' equity increased to $193.2 million, and cash and cash equivalents reached $97.2 million. Operating cash flow was $75.9 million, down from $110.7 million, mainly due to higher inventory levels.
Capital spending was $59.3 milliond in fiscal 1997, and the company plans gross capital expenditures of $70 million to $75 million in fiscal 1998. The company intends to redeem its $40 million 5.25% Convertible Notes in April 1998, and it expects substantially all of them to convert into common stock. The company has never paid a cash dividend and is restricted from doing so under its bank credit agreement and Senior Note covenants.
On March 11, 1998, the board declared a two-for-one stock split, to be distributed May 15, 1998. The company's stock traded on the NASDAQ National Market System at $59.75 on March 27, 1998.
The filing also disclosed a $2.3 million pre-tax charge for closing the San Francisco call center, with a new call center scheduled to open in Oklahoma City in the third quarter of fiscal 1998. The company reported no material pending legal proceedings and estimated Year 2000 remediation costs of up to $4.5 million over 1998 and 1999.
02—Key points
Key Highlights
- Net sales of $933.3 million in fiscal 1997, up 15% from $811.8 million in fiscal 1996 (53 weeks).
- Net earnings of $41.3 million, or $1.50 diluted EPS, versus $22.7 million, or $0.86, in fiscal 1996.
- Retail sales grew 17.2% to $601.7 million, led by 44 new stores; the chain ended the year with 276 stores.
- Catalog sales rose 11.2% to $331.5 million, with Pottery Barn accounting for 43.4% of total catalog sales.
- Cost of goods sold and occupancy fell to 59.7% of net sales from 60.8%, and SG&A fell to 32.4% from 33.8%.
- Board declared a two-for-one stock split payable May 15, 1998; the company has never paid a cash dividend.
- Plans $70 million to $75 million in gross capital expenditures for fiscal 1998, and intends to redeem $40 million of Convertible Notes in April 1998.
03—Questions
Frequently Asked Questions
How did Williams-Sonoma perform financially in fiscal 1997?
Net sales were $933.3 million, up $121.5 million, or 15%, from fiscal 1996. Net earnings rose to $41.3 million from $22.7 million, and diluted EPS was $1.50 compared with $0.86. The company attributed the margin gains mainly to lower cost of merchandise and reduced SG&A rates.
What is driving growth across the retail and catalog businesses?
Retail sales increased 17.2% to $601.7 million, primarily from new store openings: the company opened 44 stores and closed 24 smaller ones. Comparable store sales grew 2.8%. Catalog sales rose 11.2% to $331.5 million, with Pottery Barn contributing 66.1% of catalog sales growth.
Is the company paying dividends, and what is the stock split?
Williams-Sonoma has never declared or paid a cash dividend, and its bank credit agreement and Senior Note covenants restrict such payments. On March 11, 1998, the board declared a two-for-one stock split, distributed as one share for each share held, to shareholders of record on May 4, 1998, with the distribution on May 15, 1998.
What are the company's key capital needs and financing plans?
The company plans gross capital expenditures of $70 million to $75 million in fiscal 1998, including $10 million for information systems. It intends to redeem its $40 million 5.25% Convertible Notes in April 1998 and expects most to convert into common stock. It also expects to replace its 364-day line-of-credit facility, which expires May 29, 1998, with a new agreement on similar terms.
What operational risks or one-time charges should investors note?
The company recorded a fourth-quarter pre-tax charge of $2.3 million to close its San Francisco call center, with a new call center scheduled to open in Oklahoma City in the third quarter of fiscal 1998. Operating cash flow fell to $75.9 million from $110.7 million, mainly due to inventory build. Year 2000 remediation could cost as much as $4.5 million over 1998 and 1999.
04—Continue