How did Williams-Sonoma perform financially in fiscal 2007?

Net revenues increased 5.8% to $3,944,934,000, while net earnings declined to $195,757,000 from $208,868,000 and diluted EPS fell 1.7% to $1.76. Results benefited from an extra week, partly offset by the FIN 48 impact and higher markdowns.

What is the outlook for fiscal 2008?

Management believes revenue growth could be in the negative low-single digits, with sector declines likely amid a challenging macroeconomic environment. The company plans to open 31 new stores, expand or remodel 20 more, and invest $215,000,000 to $235,000,000 in property and equipment.

How is Williams-Sonoma returning capital to shareholders?

In fiscal 2007 the company repurchased 6,195,500 shares for about $190,378,000 and paid dividends of about $48,863,000 in cash. The Board authorized an additional $150,000,000 repurchase program in January 2008 and raised the quarterly dividend to $0.12 per share in March 2008.

What were the main drivers of the margin pressure?

Gross margin fell to 38.9% from 39.9%, driven primarily by increased markdowns, higher raw material costs and higher inventory-related costs, along with occupancy costs tied to the rollout of emerging brands.

How strong is the company's liquidity position?

Cash and cash equivalents were $118,950,000 at year-end, and no amounts were outstanding under the $300,000,000 credit facility, with $36,229,000 in undrawn standby letters of credit. Management believes cash and credit facilities will provide adequate liquidity over the next 12 months.

WSM 10-K FY2008 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed April 3, 2008. Cited figures are marked; the original filing is the authoritative source.

Williams-Sonoma, Inc. reported fiscal 2007, a 53-week year ended February 3, 2008, with net revenues up 5.8% to $3,944,934,000^a from $3,727,513,000, driven by growth in all brands.

Diluted earnings per share declined 1.7% to $1.76^b from $1.79, including a net $0.013 per diluted share negative impact from FIN 48 partially offset by an estimated $0.05 benefit from the extra week. Net earnings were $195,757,000 versus $208,868,000 in fiscal 2006. Retail revenues rose 5.9% to $2,281,218,000 while direct-to-customer revenues rose 5.7% to $1,663,716,000, with Internet revenues up 19.0% to $1,103,750,000.

Comparable store sales grew only 0.3%, and Pottery Barn Kids comparable store sales declined 1.5%. Management stated that fiscal 2008 faces one of the most challenging macroeconomic environments in many years, and that revenue growth could be in the negative low-single digits. The company plans to reduce inventory levels and costs, open 31 new stores and remodel or expand 20 others, and capital expenditures are projected at $215,000,000 to $235,000,000^c.

Gross margin fell to 38.9% of net revenues from 39.9%, and cost of goods sold rose to 61.1% of net revenues, driven by increased markdowns and raw material costs. Capital returns remained significant: the company repurchased 6,195,500 shares for about $190,378,000^d in fiscal 2007, and the Board authorized an additional $150,000,000 repurchase program in January 2008.

The quarterly dividend was raised from $0.115 to $0.12 per share in March 2008. Cash and cash equivalents ended the year at $118,950,000, down from $275,429,000, and the company had no borrowings outstanding under its $300,000,000 credit facility at year-end.

02—Key points

Key Highlights

Net revenues rose 5.8% to $3,944,934,000, with positive growth in all brands; the 53rd week contributed to the increase.
Diluted EPS decreased 1.7% to $1.76 from $1.79; net earnings were $195,757,000 versus $208,868,000.
Gross margin declined to 38.9% of net revenues from 39.9%, with cost of goods sold up to 61.1% from 60.1% due to markdowns and higher raw material costs.
Internet revenues grew 19.0% to $1,103,750,000 and remained the fastest-growing shopping channel; comparable store sales grew only 0.3%.
Management expects fiscal 2008 revenue growth in the negative low-single digits and is prioritizing inventory and cost reductions.
Returned $239,241,000 to shareholders through repurchases and dividends; a new $150,000,000 repurchase program was authorized in January 2008.
Cash and cash equivalents fell to $118,950,000 from $275,429,000, and operating cash flow was $245,539,000 versus $309,114,000.

03—Questions

Frequently Asked Questions

How did Williams-Sonoma perform financially in fiscal 2007?
Net revenues increased 5.8% to $3,944,934,000, while net earnings declined to $195,757,000 from $208,868,000 and diluted EPS fell 1.7% to $1.76. Results benefited from an extra week, partly offset by the FIN 48 impact and higher markdowns.
What is the outlook for fiscal 2008?
Management believes revenue growth could be in the negative low-single digits, with sector declines likely amid a challenging macroeconomic environment. The company plans to open 31 new stores, expand or remodel 20 more, and invest $215,000,000 to $235,000,000 in property and equipment.
How is Williams-Sonoma returning capital to shareholders?
In fiscal 2007 the company repurchased 6,195,500 shares for about $190,378,000 and paid dividends of about $48,863,000 in cash. The Board authorized an additional $150,000,000 repurchase program in January 2008 and raised the quarterly dividend to $0.12 per share in March 2008.
What were the main drivers of the margin pressure?
Gross margin fell to 38.9% from 39.9%, driven primarily by increased markdowns, higher raw material costs and higher inventory-related costs, along with occupancy costs tied to the rollout of emerging brands.
How strong is the company's liquidity position?
Cash and cash equivalents were $118,950,000 at year-end, and no amounts were outstanding under the $300,000,000 credit facility, with $36,229,000 in undrawn standby letters of credit. Management believes cash and credit facilities will provide adequate liquidity over the next 12 months.

04—Continue

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