01—Abstract
Summary
Summary of the 10-K filed April 30, 1999. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported fiscal 1998 (the 52 weeks ended January 31, 1999) as a record year of growth in its filing.
Net sales rose to $1,103,954,000,a an increase of $170,697,000 (18.3%) over fiscal 1997. Retail sales grew 19.7% to $720,320,000, driven mainly by new store openings: the Company opened 57 stores and closed 35, ending the year with 298 stores. Catalog sales increased 15.7% to $383,634,000.
Comparable store sales grew 5.0%. Net earnings were $54,897,000,b or $.96 per diluted share, up from $41,347,000 or $.75 per diluted share in fiscal 1997. Cost of goods sold and occupancy fell to 59.0% of net sales from 59.7%, while selling, general and administrative expense rose slightly to 32.7% of net sales from 32.4%.
The balance sheet strengthened during the year. Shareholders' equity increased to $302,030,000c from $193,198,000, largely due to the conversion of $40,000,000 of 5 1/4% Convertible Notes into about 3,064,000 common shares and to stock option exercises. Cash and cash equivalents were $107,308,000 at year-end, and the Company had no borrowings outstanding under its line of credit.
Long-term debt and other liabilities fell to $44,649,000d from $89,789,000. Merchandise inventories rose to $173,160,000, and the Company stated this is in line with expected first-quarter 1999 sales. Planned fiscal 1999 gross capital expenditures are approximately $116,000,000, including about $57,000,000 for new stores and $22,000,000 for information systems.
The Company has never paid a cash dividend, and its bank credit agreement and Senior Note covenants restrict dividend payments. Management reports that the Company's business is highly seasonal, with a significant portion of sales and net income realized from October through December.
The Company also reported Year 2000 remediation work, with testing expected to be completed by mid-1999 and an estimated maximum fiscal 1999 cost of $0.5 million. The Company reported no material pending legal proceedings.
02—Key points
Key Highlights
- Net sales of $1,103,954,000, up 18.3% from $933,257,000 in fiscal 1997
- Net earnings of $54,897,000, or $.96 per diluted share, versus $.75 per diluted share in fiscal 1997
- Retail sales rose 19.7% to $720,320,000 on new store openings; catalog sales rose 15.7% to $383,634,000
- Comparable store sales grew 5.0%; the Company operated 298 stores at year-end, up from 276
- Convertible Notes of $40,000,000 converted into about 3,064,000 common shares, raising shareholders' equity to $302,030,000
- Year-end cash and equivalents of $107,308,000 with no borrowings under the line of credit
- Fiscal 1999 plan of approximately $116,000,000 in gross capital expenditures, including about $57,000,000 for new stores
03—Questions
Frequently Asked Questions
How did Williams-Sonoma's sales and earnings perform in fiscal 1998?
Net sales increased 18.3% to $1,103,954,000, and net earnings rose to $54,897,000 ($.96 per diluted share) from $41,347,000 ($.75 per diluted share). Retail sales grew 19.7%, mainly from new stores, and catalog sales grew 15.7%.
Does Williams-Sonoma pay dividends?
No. The filing states the Company has never declared or paid a cash dividend. Its bank credit agreement prohibits dividends, and its 7.2% Senior Note agreement limits the maximum dollar amount that can be paid. The Company intends to retain earnings to finance growth.
How did the convertible notes conversion affect the balance sheet?
Substantially all of the $40,000,000 5 1/4% Convertible Subordinated Notes were converted into about 3,064,000 common shares before the April 21, 1998 redemption. This increased paid-in capital by $39,004,000, and it is the main reason shareholders' equity rose to $302,030,000 from $193,198,000.
What are the Company's plans for store growth and capital spending in fiscal 1999?
The Company plans to increase leased square footage by approximately 21% and to spend approximately $116,000,000 on gross capital expenditures, including about $57,000,000 for new stores, $22,000,000 for information systems, and $21,000,000 for warehouse equipment in a new leased distribution facility in Olive Branch, Mississippi.
Are there seasonal risks investors should consider?
Yes. The filing states that a significant portion of sales and net income is realized from October through December, while sales and net income are generally significantly lower from January through July. The Company hires many temporary employees for the peak season and incurs significant fixed catalog production and mailing costs.
04—Continue