Skip to content
AnalystLens

Williams-Sonoma Annual Report, Year Ended Jan 28, 2007

Filing Date
Filed March 29, 2007
Period End
January 28, 2007
Security
WSM
In the record · 2016–202610-K1110-Q328-K84

WSM filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 84 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · Mar ’17Mar ’17
  2. Leadership change8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Material agreement8-K · Jun ’25Jun ’25

01—Abstract

Summary

Summary of the 10-K filed March 29, 2007. Cited figures are marked; the original filing is the authoritative source.

Williams-Sonoma, Inc. reported net revenues of $3.73 billiona for fiscal 2006 (52 weeks ended January 28, 2007), up 5.3% from $3.54 billion in fiscal 2005, with growth in all brands.

Net earnings were $208.9 millionb, or $1.79 per diluted share, down from $1.81 in fiscal 2005. Management said the home-centered macroeconomic environment softened in the back half of the year, leading to lower direct-to-customer response rates, weaker retail traffic and high competitive markdown pressure, particularly at Pottery Barn, the company's largest brand, where revenues fell substantially short of expectations. Comparable store sales grew only 0.3%, and gross margin as a percent of net revenues declined to 39.9% from 40.6%.

Management has a comprehensive recovery plan underway and expects improvement throughout 2007 and 2008. Cash generation remained solid, with net cash from operating activities of $309.1 millionc and capital expenditures of $191.0 million. The company returned about $219.9 million to shareholders through share repurchases ($185.5 million) and dividends ($34.4 million paid).

Cash and equivalents ended the year at $275.4 milliond, and the company has a $300 million unsecured credit facility with no amounts borrowed. In March 2007 the board raised the quarterly dividend from $0.10 to $0.115 per share and authorized repurchase of an additional 5,000,000 shares. For fiscal 2007 management plans to focus on revitalizing Pottery Barn, growing the emerging brands (West Elm, PBteen and Williams-Sonoma Home), and increasing pre-tax operating margin through cost containment.

Management expects further short-term compression in operating margin in fiscal 2007 due to soft home-furnishings demand, Pottery Barn recovery costs and higher incentive compensation. Retail leased square footage is expected to rise 5% to 6%, with 21 new stores planned.

02—Key points

Key Highlights

  1. Net revenues rose 5.3% to $3.73 billion in fiscal 2006, with positive growth in all brands; retail revenues grew 6.0% and direct-to-customer revenues grew 4.5%.
  2. Diluted EPS declined 1.1% to $1.79 from $1.81, and net earnings were $208.9 million versus $214.9 million the prior year.
  3. Comparable store sales increased only 0.3%, versus 4.9% in fiscal 2005, and gross margin fell to 39.9% of net revenues from 40.6%.
  4. Pottery Barn, the largest brand, fell substantially short of expectations amid weaker retail traffic, lower catalog response and competitive markdown pressure; a comprehensive recovery plan is underway.
  5. Internet revenues grew 21.0% to $927.6 million and were described as the fastest growing shopping channel.
  6. Operating cash flow was $309.1 million, and the company returned about $219.9 million to shareholders through repurchases and dividends.
  7. The quarterly dividend was raised 15% to $0.115 per share in March 2007, and an additional 5,000,000 shares were authorized for repurchase.

03—Questions

Frequently Asked Questions

  1. How did Williams-Sonoma perform in fiscal 2006?

    Net revenues grew 5.3% to $3,727,513,000, but net earnings declined to $208,868,000 from $214,866,000 and diluted EPS fell to $1.79 from $1.81. Management attributed the weaker second half to softer home-centered demand, lower direct-to-customer response, weaker retail traffic and markdown pressure.

  2. What is the outlook for fiscal 2007?

    Management expects short-term compression in operating margin in fiscal 2007 due to continued softness in the home-furnishings environment, Pottery Barn recovery plan costs and higher incentive compensation. It plans to add 13 net new stores, expand or remodel 20 stores, and expects the emerging brands to contribute a larger share of growth.

  3. How is the company returning cash to shareholders?

    During fiscal 2006 the company repurchased 5,824,500 shares for about $185.5 million and paid $34.4 million in dividends. In March 2007 the board increased the quarterly dividend to $0.115 per share and authorized repurchase of up to an additional 5,000,000 shares.

  4. What is the company's liquidity position?

    Cash and cash equivalents were $275.4 million at January 28, 2007. The company has a $300 million unsecured revolving credit facility, under which no amounts were borrowed in fiscal 2006 or 2005, though $37.4 million of standby letters of credit were outstanding.

  5. What are the main risks flagged in the filing?

    Key risks include dependence on discretionary consumer spending, intense competition, reliance on foreign vendors (about 62% of merchandise purchases were foreign-sourced), the ability to open new stores successfully, catalog and paper cost increases, and inventory management, along with ongoing systems changes and the outsourcing of data center operations to IBM.

04—Continue

← View all 10-K filings