01—Abstract
Summary
Summary of the 10-K filed April 1, 2010. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported fiscal 2009 (52 weeks ended January 31, 2010) net revenues of $3,102,704,000,a down 7.7% from $3,361,472,000 in fiscal 2008, as the economic downturn drove a comparable store sales decrease of 5.1%.
Diluted earnings per share rose to $0.72b from $0.28, and earnings before income taxes were $120,289,000 versus $41,953,000. Management cited reduced inventories to their lowest level in five years ($466,124,000) and year-end cash of $513,943,000, the highest in the company's history, with net cash provided by operating activities of $490,718,000. The company decided that the future potential of Williams-Sonoma Home is limited and is planning to restructure its unprofitable segments, including the operations of its 11 retail stores, with certain merchandise categories to be moved into the Williams-Sonoma kitchen brand.
For fiscal 2010, management guided to a total company net revenue increase of 3% to 6% and diluted earnings per share in the range of $1.12 to $1.22c, and it expects a 37% to 40% effective tax rate. The quarterly dividend was raised from $0.12 to $0.13 per share in March 2010. The company operated 610 stores at year-end and entered a franchise agreement with the M.H.
Alshaya Company to expand into the Middle East. The filing also notes a $300,000,000d unsecured revolving credit facility with no amounts outstanding at January 31, 2010, and a new 1,351,000 square foot South Brunswick, New Jersey distribution center to be occupied in phases beginning in June 2010.
02—Key points
Key Highlights
- Net revenues fell 7.7% to $3,102,704,000, with retail revenues down 4.3% and direct-to-customer revenues down 12.5%.
- Diluted EPS increased to $0.72 from $0.28, with pre-tax earnings of $120,289,000 versus $41,953,000 a year earlier.
- Comparable store sales declined 5.1%, though sales trends improved in the fourth quarter when comparable store sales were positive in all core brands.
- Gross margin as a percent of net revenues rose to 35.6% from 33.8%, and impairment charges on underperforming retail stores totaled $28,941,000.
- Year-end cash and cash equivalents reached $513,943,000, the highest in company history, and no amounts were outstanding under the $300,000,000 credit facility.
- Williams-Sonoma Home was judged to have limited future potential; its 11 stores are being restructured, with categories moving to the Williams-Sonoma brand.
- Fiscal 2010 guidance calls for net revenue growth of 3% to 6% and diluted EPS of $1.12 to $1.22, and the quarterly dividend was raised to $0.13 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Williams-Sonoma kept $0.02.
- Revenue$3.10B100.0%
- Cost of revenue−$2.00B64.4%
- Gross profit$1.10B35.6%
- Operating costs−$981.8M31.6%
- Operating income$121.4M3.9%
- Interest, other & tax−$44.0M1.4%
- Net income$77.4M2.5%
Where FY2010 revenue went
$3.10B- Cost of revenue: $2.00B, 64% of revenue
- SG&A: $981.8M, 32% of revenue
- Net income: $77.4M, 2.5% of revenue
- Interest, other & tax: $44.0M, 1.4% of revenue
Kept 2.5% as net incomeNet income $77.4M · 2.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed April 1, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $3.10B$3.36B | −7.7% |
| Gross Profit | $1.10B$1.14B | −2.8% |
| SG&A Expenses | $981.79M$1.09B | −10.2% |
| Operating Income | $121.44M— | — |
| Net Income | $77.44M$30.02M | +157.9% |
| EPS (Basic) | $0.73$0.28 | +160.7% |
| EPS (Diluted) | $0.72$0.28 | +157.1% |
| Shares Outstanding (Basic) | 105.76M105.53M | +0.2% |
| Shares Outstanding (Diluted) | 107.37M106.88M | +0.5% |
05—Questions
Frequently Asked Questions
Why did the company's earnings improve even though revenue declined?
Net revenues fell 7.7%, but management reported improving selling margins and reduced cost of goods sold, which fell to 64.4% of net revenues from 66.2%. Selling, general and administrative expenses also declined by $111,224,000. Gross margin as a percent of net revenues rose to 35.6% from 33.8%, and diluted EPS increased to $0.72 from $0.28.
What is happening with Williams-Sonoma Home?
After an extensive review of strategic alternatives, management concluded that the brand's future potential is limited. It is planning to restructure the unprofitable segments of the business, including the operations of its 11 retail stores. Merchandise categories supporting the bridal registry, expanded flagship and designer assortments will move to the Williams-Sonoma kitchen brand, available online and in select Williams-Sonoma stores.
What does the company expect for fiscal 2010?
The company plans a total net revenue increase of 3% to 6%, diluted earnings per share in the range of $1.12 to $1.22, and a retail leased square footage decrease of approximately 1% to 2%. It expects an effective tax rate of 37% to 40% and plans to capital spending of $70,000,000 to $75,000,000.
Is the company's liquidity position strong?
Year-end cash and cash equivalents were $513,943,000, up from $148,822,000 a year earlier. The company had a $300,000,000 unsecured revolving credit facility with no borrowings outstanding at January 31, 2010, and management believes cash and credit facilities will provide adequate liquidity over the next 12 months. Net cash provided by operating activities was $490,718,000 in fiscal 2009.
What is the dividend policy after fiscal 2009?
The quarterly cash dividend was $0.12 per share throughout fiscal 2009. In March 2010, the Board authorized an increase to $0.13 per share, payable on May 24, 2010 to shareholders of record as of April 27, 2010. The filing states the dividend is subject to capital availability and may be limited or terminated at any time.
06—Continue