How did Williams-Sonoma perform financially in fiscal 2003?

Net revenues grew 16.7% to $2.75 billion, gross margin was $1.11 billion (40.3% of net revenues), and earnings before income taxes rose to $255.6 million from $202.3 million. Net earnings were $157.2 million, and diluted earnings per share were $1.32. The filing states the company delivered its highest pre-tax operating margin and diluted earnings per share in its history.

What drove revenue growth?

Growth came from a 11.8% increase in store leased square footage, driven by 46 new store openings and 19 remodeled stores, along with a 4.0% comparable store sales increase. Direct-to-customer sales grew 21.1%, supported by a 17.4% increase in catalogs circulated and strong Internet sales growth. Pottery Barn and Pottery Barn Kids accounted for 64.0% of retail revenue growth.

Does the company pay dividends, and how is it returning capital to shareholders?

The company has never declared or paid a cash dividend and does not currently intend to pay one. It returns capital through share repurchases under a January 2003 program authorizing up to 4,000,000 shares. During fiscal 2003 it repurchased and retired 1,785,000 shares in the fourth quarter for about $59.7 million, and the remaining 215,000 shares under the program were repurchased in the first four weeks of fiscal 2004.

What are the main risks identified in the filing?

Key risks include shifts in consumer preferences and inventory management, sensitivity to consumer spending, intense competition, dependence on foreign vendors (about 61% of fiscal 2003 merchandise purchases were foreign sourced from 41 countries), and the ability to open new stores successfully. Other risks cited are order fulfillment and delivery, catalog postage and paper costs, Internet business execution, merchandise returns, and the complexity of managing multiple channels and brands. The company also notes it is a defendant in one Internet-related patent infringement case.

What are management's plans for fiscal 2004?

Management plans to increase retail leased square footage by approximately 8% to 9%, opening 36 new stores and remodeling 19, while closing 25 permanent or remodeled stores. It expects to launch the Williams-Sonoma Home catalog in the third quarter and a Hold Everything e-commerce website in the fourth quarter. Capital expenditures are expected to be $180 million to $190 million, and the company expects an effective tax rate of 38.3%.

WSM 10-K FY2004 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 15, 2004. Cited figures are marked; the original filing is the authoritative source.

Williams-Sonoma, Inc. reported fiscal 2003 (52 weeks ended February 1, 2004) as a record year for pre-tax operating margin and diluted earnings per share, per the filing's overview.

Net revenues rose 16.7% to $2.75 billion^a, and diluted earnings per share increased 26.9% to $1.32. Net earnings were $157.2 million, up from $124.4 million, and gross margin held at 40.3% of net revenues. Retail revenues were $1.62 billion and direct-to-customer revenues were $1.13 billion, with Internet sales up 66.1% to $332.9 million.

Comparable store sales grew 4.0%, and the company ended the year with 512 stores. The company's balance sheet and cash position are solid. Cash and cash equivalents were $163.9 million^b, shareholders' equity was $804.6 million, and total assets were $1.47 billion.

Operating cash flow fell to $209.4 million^c from $310.2 million, mainly because of higher merchandise inventories. Capital expenditures were $212.0 million, including a $37.0 million corporate aircraft. The company repurchased about 1.8 million shares in fiscal 2003 for $59.7 million, and it has a $200 million unsecured credit facility that was undrawn.

Management expects fiscal 2004 capital spending of $180 million to $190 million^d and plans to add 36 new stores and remodel 19. The filing lists risks that investors should weigh, including consumer spending sensitivity, reliance on foreign vendors (about 61% of purchases were foreign sourced from 41 countries), dependence on new store openings, catalog and paper cost pressures, and the complexity of a multi-channel business. The company has never paid a cash dividend and does not intend to pay one.

02—Key points

Key Highlights

Net revenues increased 16.7% to $2.75 billion in fiscal 2003, with retail sales at $1.61 billion and direct-to-customer sales at $966.4 million.
Diluted earnings per share rose 26.9% to $1.32, and net earnings reached $157.2 million versus $124.4 million in fiscal 2002.
Comparable store sales increased 4.0%, and the store base grew to 512 stores from 478.
Internet sales grew 66.1% to $332.9 million, and PBteen generated approximately $50.0 million in revenues in ten months of operations.
Operating cash flow declined to $209.4 million from $310.2 million, primarily due to higher merchandise inventories.
Cash and cash equivalents totaled $163.9 million, with a $200 million undrawn credit facility; long-term debt and other long-term obligations were $38.4 million.
The company repurchased approximately 1.8 million shares for $59.7 million in fiscal 2003 and has never paid a cash dividend.

03—Questions

Frequently Asked Questions

How did Williams-Sonoma perform financially in fiscal 2003?
Net revenues grew 16.7% to $2.75 billion, gross margin was $1.11 billion (40.3% of net revenues), and earnings before income taxes rose to $255.6 million from $202.3 million. Net earnings were $157.2 million, and diluted earnings per share were $1.32. The filing states the company delivered its highest pre-tax operating margin and diluted earnings per share in its history.
What drove revenue growth?
Growth came from a 11.8% increase in store leased square footage, driven by 46 new store openings and 19 remodeled stores, along with a 4.0% comparable store sales increase. Direct-to-customer sales grew 21.1%, supported by a 17.4% increase in catalogs circulated and strong Internet sales growth. Pottery Barn and Pottery Barn Kids accounted for 64.0% of retail revenue growth.
Does the company pay dividends, and how is it returning capital to shareholders?
The company has never declared or paid a cash dividend and does not currently intend to pay one. It returns capital through share repurchases under a January 2003 program authorizing up to 4,000,000 shares. During fiscal 2003 it repurchased and retired 1,785,000 shares in the fourth quarter for about $59.7 million, and the remaining 215,000 shares under the program were repurchased in the first four weeks of fiscal 2004.
What are the main risks identified in the filing?
Key risks include shifts in consumer preferences and inventory management, sensitivity to consumer spending, intense competition, dependence on foreign vendors (about 61% of fiscal 2003 merchandise purchases were foreign sourced from 41 countries), and the ability to open new stores successfully. Other risks cited are order fulfillment and delivery, catalog postage and paper costs, Internet business execution, merchandise returns, and the complexity of managing multiple channels and brands. The company also notes it is a defendant in one Internet-related patent infringement case.
What are management's plans for fiscal 2004?
Management plans to increase retail leased square footage by approximately 8% to 9%, opening 36 new stores and remodeling 19, while closing 25 permanent or remodeled stores. It expects to launch the Williams-Sonoma Home catalog in the third quarter and a Hold Everything e-commerce website in the fourth quarter. Capital expenditures are expected to be $180 million to $190 million, and the company expects an effective tax rate of 38.3%.

04—Continue

← View all 10-K filings