01—Abstract
Summary
Summary of the 10-K filed April 4, 2019. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported net revenues of $5.67 billiona for fiscal 2018 (53 weeks ended February 3, 2019), up $379,234,000, or 7.2%, from fiscal 2017, with comparable brand revenue growth of 3.7%.
E-commerce net revenues rose 10.9% to $3.08 billionb, representing 54.3% of net revenues, while retail net revenues grew 3.0% to $2.59 billion. Operating income declined to $435,953,000 from $453,811,000, and operating margin fell to 7.7% from 8.6%, as selling, general and administrative expenses rose to 29.4% of net revenues from 27.9%, driven partly by the reclassification of certain income into net revenues under ASU 2014-09. Diluted earnings per share were $4.05, compared with $3.02 in fiscal 2017, and net earnings were $333,684,000, versus $259,545,000 the prior year, though fiscal 2017 included a provisional Tax Act charge.
Capital returns were significant: the company repurchased 5,373,047 shares for $295,304,000c and paid dividends of $140,325,000 in cash during fiscal 2018. In March 2019, the Board authorized an additional $500,000,000 for share repurchases and raised the quarterly dividend from $0.43 to $0.48 per share, an annual rate of $1.92. Cash and cash equivalents were $338,954,000 at year-end, and the company had a $300,000,000 term loan outstanding alongside an undrawn $500,000,000 revolver.
Management stated that cash on hand and available credit should provide adequate liquidity over the next 12 months. The company also disclosed that it expects to adopt the new lease accounting standard in fiscal 2019, which it estimates will increase total liabilities by approximately $1.4 billiond in lease obligations.
02—Key points
Key Highlights
- Net revenues rose 7.2% to $5,671,593,000, with e-commerce up 10.9% and retail up 3.0%; e-commerce reached 54.3% of net revenues.
- Comparable brand revenue growth was 3.7%, and all brands posted positive comparable brand revenue growth in fiscal 2018.
- Operating income fell to $435,953,000 from $453,811,000, with operating margin of 7.7% versus 8.6%, as SG&A rose to 29.4% of net revenues.
- Diluted EPS increased to $4.05 from $3.02, and net earnings rose to $333,684,000 from $259,545,000.
- Gross margin was 37.0%, up from 36.5% in fiscal 2017.
- Returned approximately $435,629,000 to stockholders through repurchases and dividends; a further $500,000,000 repurchase authorization and a dividend increase to $0.48 per quarter were approved in March 2019.
- Store count ended at 625 after 23 openings and 29 closings, with $9,639,000 in retail store asset impairment charges and $13.2 million of impairment and early lease termination expense.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Williams-Sonoma kept $0.06.
- Revenue$5.67B100.0%
- Cost of revenue−$3.57B63.0%
- Gross profit$2.10B37.0%
- Operating costs−$1.67B29.4%
- Operating income$436.0M7.7%
- Interest, other & tax−$102.3M1.8%
- Net income$333.7M5.9%
Where FY2019 revenue went
$5.67B- Cost of revenue: $3.57B, 63% of revenue
- SG&A: $1.67B, 29% of revenue
- Net income: $333.7M, 5.9% of revenue
- Interest, other & tax: $102.3M, 1.8% of revenue
Kept 5.9% as net incomeNet income $333.7M · 5.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed April 4, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $5.67B$5.29B | +7.2% |
| Gross Profit | $2.10B$1.93B | +8.8% |
| SG&A Expenses | $1.67B$1.48B | +12.7% |
| Operating Income | $435.95M$453.81M | −3.9% |
| Net Income | $333.68M$259.55M | +28.6% |
| EPS (Basic) | $4.10$3.03 | +35.3% |
| EPS (Diluted) | $4.05$3.02 | +34.1% |
| Shares Outstanding (Basic) | 81.42M85.59M | −4.9% |
| Shares Outstanding (Diluted) | 82.34M86.08M | −4.3% |
05—Questions
Frequently Asked Questions
What drove the decline in operating income despite higher revenue?
Operating income declined to $435,953,000 from $453,811,000 even as net revenues grew 7.2%. SG&A expenses rose $187,160,000, or 12.7%, to 29.4% of net revenues from 27.9%, reflecting higher incentive compensation, increased hourly wages and digital advertising, the acquisition of Outward, and impairment and early lease termination charges for underperforming stores. The company also noted the reclassification of certain other income from SG&A into net revenues under ASU 2014-09.
How strong is the company's liquidity and balance sheet position?
At February 3, 2019, the company held $338,954,000 in cash and cash equivalents, of which $185,810,000 was held by foreign subsidiaries. It had $300,000,000 outstanding under its term loan, which matures January 8, 2021, and no amounts outstanding under its $500,000,000 revolver. Management stated it was in compliance with all financial covenants and believes cash on hand and available credit will provide adequate liquidity for the next 12 months.
What are the company's capital return plans?
In fiscal 2018 the company repurchased 5,373,047 shares for $295,304,000 and paid $140,325,000 in dividends. About $223,815,000 remained under the repurchase program at year-end. In March 2019, the Board authorized an additional $500,000,000 for repurchases and raised the quarterly dividend from $0.43 to $0.48 per share, an annual rate of $1.92.
How concentrated is the company's sourcing and what tariff risks does it face?
Approximately 66% of merchandise purchases in fiscal 2018 were sourced from foreign vendors, predominantly in Asia and Europe, while the largest manufacturer accounted for approximately 2% of purchases. The filing notes that the U.S. administration enacted tariffs on certain furniture and related products from China, and that the company may not be able to fully mitigate their impact or pass price increases to customers.
What accounting change will affect the balance sheet in fiscal 2019?
The company will adopt ASU 2016-02, Leases, in fiscal 2019. It estimates this will increase total long-term assets and total liabilities by approximately $1.2 billion, including an increase in lease obligation liabilities of approximately $1.4 billion and right-of-use assets of approximately $1.2 billion, while not expecting a material impact on the Consolidated Statement of Earnings or Cash Flows.
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