01—Abstract
Summary
Summary of the 10-K filed March 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported fiscal 2019 (52 weeks ended February 2, 2020) net revenues of $5.90 billiona, up 4.0% from $5.67 billion in fiscal 2018, with comparable brand revenue growth of 6.0%.
Growth was primarily driven by West Elm and Pottery Barn, partially offset by the loss of the additional week in fiscal 2018. Gross margin declined to 36.3% from 37.0%, mainly due to lower occupancy leverage, higher shipping costs and the incremental impact of China tariffs. Operating income rose to $465.9 millionb from $436.0 million, operating margin expanded to 7.9% from 7.7%, and diluted earnings per share were $4.49 versus $4.05 in fiscal 2018.
Net earnings were $356.1 millionc. The filing was dated March 27, 2020 and is dominated by the COVID-19 outbreak. On March 17, 2020, the company announced the temporary closure of all U.S. and Canadian retail stores, expected to last until at least April 2, 2020; retail store revenue represents approximately 44% of net revenues.
The company stated it anticipates a material impact on its fiscal 2020 earnings, cash flows and liquidity, has delayed issuing fiscal 2020 guidance, and drew down $488 milliond on its revolver on March 23, 2020, bringing the outstanding balance to $500 million. Management believes it has adequate liquidity for the next 12 months.
At year-end the company held $432.2 million in cash, had $300 million outstanding on its term loan maturing January 8, 2021 (which it intends to renew and extend), and had $575.0 million remaining under its stock repurchase program. Operating lease liabilities of $1.32 billion were recorded following the adoption of ASU 2016-02 on February 4, 2019.
02—Key points
Key Highlights
- Net revenues of $5,898,008 thousand in fiscal 2019, up 4.0%; comparable brand revenue growth of 6.0%, with West Elm comparable brand revenue up 14.4%.
- Gross margin fell to 36.3% from 37.0%, driven by lower occupancy leverage, higher shipping costs and China tariffs.
- Operating income of $465.9 million (7.9% operating margin) versus $436.0 million (7.7%) in fiscal 2018; diluted EPS of $4.49 versus $4.05.
- Temporary closure of all U.S. and Canadian retail stores announced March 17, 2020, through at least April 2, 2020; retail stores represent about 44% of net revenues.
- Company drew $488 million on its revolving credit line on March 23, 2020, bringing the outstanding balance to $500 million as a precaution.
- Cash of $432.2 million at February 2, 2020; $300 million term loan due January 8, 2021, which management intends to renew and extend.
- Adoption of ASU 2016-02 (Leases) added $1,166 million of operating lease right-of-use assets and $1,322.5 million of operating lease liabilities to the balance sheet; fiscal 2020 guidance has been delayed due to COVID-19.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Williams-Sonoma kept $0.06.
- Revenue$5.90B100.0%
- Cost of revenue−$3.76B63.7%
- Gross profit$2.14B36.3%
- Operating costs−$1.67B28.4%
- Operating income$465.9M7.9%
- Interest, other & tax−$109.8M1.9%
- Net income$356.1M6.0%
Where FY2020 revenue went
$5.90B- Cost of revenue: $3.76B, 64% of revenue
- SG&A: $1.67B, 28% of revenue
- Net income: $356.1M, 6.0% of revenue
- Interest, other & tax: $109.8M, 1.9% of revenue
Kept 6.0% as net incomeNet income $356.1M · 6.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 27, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.90B$5.67B | +4.0% |
| Gross Profit | $2.14B$2.10B | +1.8% |
| SG&A Expenses | $1.67B$1.67B | +0.5% |
| Operating Income | $465.87M$435.95M | +6.9% |
| Net Income | $356.06M$333.68M | +6.7% |
| EPS (Basic) | $4.56$4.10 | +11.2% |
| EPS (Diluted) | $4.49$4.05 | +10.9% |
| Shares Outstanding (Basic) | 78.11M81.42M | −4.1% |
| Shares Outstanding (Diluted) | 79.22M82.34M | −3.8% |
05—Questions
Frequently Asked Questions
How did Williams-Sonoma perform financially in fiscal 2019?
Net revenues rose 4.0% to $5.90 billion, comparable brand revenue grew 6.0%, and operating income increased to $465.9 million. Net earnings were $356.1 million, and diluted EPS was $4.49 compared with $4.05 in fiscal 2018, which included an extra week.
How is COVID-19 expected to affect the company?
The company stated that it expects a material impact on its consolidated statements of earnings, balance sheet, cash flows and liquidity in fiscal 2020. It closed all U.S. and Canadian stores temporarily, has kept its e-commerce sites and distribution centers operating, and has delayed issuing fiscal 2020 guidance until it has better visibility.
Is the company's liquidity sufficient?
Management believes its cash on hand and available credit facilities will provide adequate liquidity over the next 12 months. The company had $432.2 million in cash and drew $488 million on its $500 million revolver in March 2020, bringing the outstanding revolver balance to $500 million.
What factors pressured gross margin in fiscal 2019?
Gross margin declined to 36.3% from 37.0%, primarily due to lower year-over-year occupancy leverage from one less week of sales, higher shipping costs from a larger mix of furniture and drop-ship sales, and the incremental impact of China tariffs. The company is pursuing a tariff mitigation plan that includes vendor cost reductions, production moves and select price increases.
How much capital is available for share repurchases and dividends?
About $574,982,000 remained under the stock repurchase program as of February 2, 2020. In fiscal 2019, the company repurchased 2,341,931 shares for $148.8 million and declared dividends of $1.92 per share, totaling approximately $156.1 million.
06—Continue