01—Abstract
Summary
Summary of the 10-K filed April 2, 2009. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported a difficult fiscal 2008 (52 weeks ended February 1, 2009).
Net revenues declined 14.8% to $3,361,472,000a from $3,944,934,000, and diluted earnings per share fell to $0.28 from $1.76. Gross margin as a percent of net revenues dropped to 33.8% from 38.9%, reflecting deleverage of fixed occupancy costs, greater markdowns, and higher inventory reserves. Comparable store sales decreased 17.2%, and the company recorded $33,995,000 of impairment charges on underperforming retail stores.
Net earnings were $30,024,000,b down from $195,757,000 in fiscal 2007. The balance sheet and cash flow showed some resilience. Cash and cash equivalents rose to $148,822,000, and operating cash flow was $230,163,000.
Merchandise inventories fell $120,762,000,c or 17.4%, to $572,899,000 net, and capital spending was reduced to $191,789,000. The company had no borrowings under its $300,000,000 credit facility at year-end, and shareholders' equity was $1,147,984,000. Management said it expects a net revenue decline of 12% to 17% in fiscal 2009.
To respond, management launched a $75,000,000d infrastructure cost reduction program that included an approximate 18% cut in full-time headcount, and it terminated the $150,000,000 share repurchase program in December 2008. The quarterly dividend was maintained at $0.12 per share, with a new $0.12 dividend declared in March 2009, though the filing notes that the dividend may be limited or terminated at any time.
02—Key points
Key Highlights
- Net revenues fell 14.8% to $3,361,472,000 and comparable store sales decreased 17.2% in fiscal 2008.
- Diluted EPS was $0.28 versus $1.76 in fiscal 2007; net earnings were $30,024,000 versus $195,757,000.
- Gross margin fell to 33.8% of net revenues from 38.9%, driven by occupancy deleverage, greater markdowns, and higher inventory reserves.
- Inventory was reduced by $120,762,000 (17.4%) and operating cash flow was $230,163,000; cash rose to $148,822,000.
- A $75,000,000 infrastructure cost reduction program was implemented in January 2009, including roughly 1,400 positions eliminated.
- The $300,000,000 unsecured credit facility had no borrowings outstanding at February 1, 2009, and the company said it expects to remain in covenant compliance through fiscal 2009.
- Management expects fiscal 2009 net revenues to decline 12% to 17% and gross capital spending of $90,000,000 to $100,000,000.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed April 2, 2009Financial Statements
| Revenue | $3.36B |
| Gross Profit | $1.14B |
| SG&A Expenses | $1.09B |
| Net Income | $30.02M |
| EPS (Basic) | $0.28 |
| EPS (Diluted) | $0.28 |
| Shares Outstanding (Basic) | 105.53M |
| Shares Outstanding (Diluted) | 106.88M |
05—Questions
Frequently Asked Questions
How did Williams-Sonoma perform financially in fiscal 2008?
Net revenues decreased 14.8% to $3,361,472,000, and net earnings fell to $30,024,000, or $0.28 per diluted share, from $195,757,000, or $1.76 per diluted share, in fiscal 2007. The decline was attributed mainly to the economic downturn, which drove a 17.2% decrease in comparable store sales.
Is the company's liquidity position sound?
Cash and cash equivalents were $148,822,000 at year-end, and no amounts were outstanding under the $300,000,000 credit facility. Standby letters of credit totaling $39,559,000 were outstanding under the facility. Management believes cash on hand and available credit will provide adequate liquidity over the next 12 months.
What actions is management taking to improve profitability?
Management implemented a $75,000,000 infrastructure cost reduction program, which included an approximate 18% reduction in full-time headcount and the closure of a Memphis distribution facility and a Camp Hill care center. It also plans to reduce catalog advertising costs, expects fewer markdowns and lower inventory levels to improve selling gross margin, and is working with landlords on potential store closures.
Will the company continue paying dividends?
The company paid $0.12 per share quarterly during fiscal 2008, and on March 24, 2009, its Board declared another $0.12 quarterly dividend payable May 26, 2009. The filing states that the quarterly dividend may be limited or terminated at any time, and the Board may decrease or discontinue dividends at its discretion.
What is the outlook for fiscal 2009?
Management expects a net revenue decline of 12% to 17%, a reduction in merchandise inventories of 11% to 16% from fiscal 2008, and gross capital spending of $90,000,000 to $100,000,000. Retail leased square footage is expected to increase approximately 1%, and the effective tax rate is expected to be in the range of 35% to 41%.
06—Continue