01—Abstract
Summary
Summary of the 10-Q filed May 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported net revenues of $1.66 billiona for the thirteen weeks ended April 28, 2024, down from $1.76 billion in the prior-year quarter, with company comparable brand revenue declining 4.9%.
Management attributed the decline to continuing customer hesitancy toward furniture purchases, partially offset by strength in emerging brands, children's home furnishings and the kitchen business. Pottery Barn, the largest brand, had a 10.8%b comparable brand revenue decline, while West Elm declined 4.1% and Pottery Barn Kids and Teen grew 2.8%. Profitability improved substantially.
Gross profit rose to $802.5 millionc, or 48.3% of net revenues, from 38.5% a year earlier, and operating income increased to $323.8 million from $199.5 million. Results include an out-of-period adjustment of $49.0 million that reduced cost of goods sold, which management said contributed $0.59 to diluted earnings per share of $4.07 (versus $2.35 a year earlier). Net earnings were $265.7 million compared with $156.5 million.
On capital allocation, the company ended the quarter with $1.25 billiond in cash and cash equivalents and no revolver borrowings. It repurchased $43.8 million of stock under a new $1.0 billion authorization approved in March 2024, leaving $956.2 million remaining, and raised its quarterly dividend 26%, from $0.90 to $1.13 per share.
02—Key points
Key Highlights
- Net revenues were $1,660.3 million, down $95.1 million or 5.4% year over year; company comparable brand revenue declined 4.9%.
- Gross margin rose to 48.3% from 38.5%, driven by higher merchandise margins of 480 basis points, an out-of-period freight adjustment of 290 basis points, and supply chain efficiencies of 240 basis points.
- Diluted EPS was $4.07 versus $2.35, including a $0.59 benefit from the $49.0 million out-of-period freight adjustment.
- Operating income was $323.8 million versus $199.5 million; SG&A rose to 28.8% of net revenues from 27.1%, driven by advertising and performance-based incentive compensation.
- Cash and cash equivalents were $1,254.8 million, with operating cash flow of $226.8 million and no borrowings under the $500 million revolver.
- The Board authorized a new $1.0 billion stock repurchase program in March 2024; $956.2 million remained at quarter end, and $43.8 million was repurchased during the quarter.
- The quarterly cash dividend increased 26%, from $0.90 to $1.13 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Williams-Sonoma kept $0.16.
- Revenue$1.66B100.0%
- Cost of revenue−$865.2M52.1%
- Gross profit$795.2M47.9%
- Operating costs−$478.1M28.8%
- Operating income$317.1M19.1%
- Interest, other & tax−$56.7M3.4%
- Net income$260.4M15.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed May 24, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $1.66B$1.76B | −5.4% |
| Gross Profit | $795.17M$675.06M | +17.8% |
| SG&A Expenses | $478.06M$475.58M | +0.5% |
| Operating Income | $317.11M$199.48M | +59.0% |
| Net Income | $260.42M$156.53M | +66.4% |
| EPS (Basic) | $2.03$2.38 | −14.7% |
| EPS (Diluted) | $1.99$2.35 | −15.3% |
| Shares Outstanding (Basic) | 128.41M65.85M | +95.0% |
| Shares Outstanding (Diluted) | 130.63M66.70M | +95.9% |
05—Questions
Frequently Asked Questions
Why did revenue decline while profitability improved?
Net revenues fell 5.4% with company comparable brand revenue down 4.9%, driven by customer hesitancy toward furniture purchases, especially at Pottery Barn and West Elm. Profitability improved mainly because gross margin rose to 48.3% from 38.5%, including a $49.0 million out-of-period freight adjustment, and because the prior-year quarter included $24.1 million of exit and reduction-in-force costs that did not recur.
How significant is the out-of-period freight adjustment to the quarter's results?
The company over-recognized freight expense in fiscal 2021 through 2023 by a cumulative $49.0 million and recorded the correction in the first quarter of fiscal 2024. Management said it added 290 basis points to gross margin and $0.59 to diluted EPS, and it determined the error was not material to prior periods or projected fiscal 2024 results.
What are the company's liquidity and capital return plans?
The company held $1.3 billion in cash and cash equivalents, had no revolver borrowings, and said its liquidity should be adequate over the next 12 months. It returned $106.6 million to stockholders through dividends and repurchases in the quarter, and the Board raised the quarterly dividend to $1.13 per share and approved a new $1.0 billion repurchase program.
What drove the weakness in the Pottery Barn and West Elm brands?
Pottery Barn, the largest brand, saw a 10.8% comparable brand revenue decline, driven by reduced higher-ticket furniture sales. West Elm declined 4.1%, affected by customer pullback in furniture given its high furniture assortment and a strategy to reduce promotional activity. Pottery Barn Kids and Teen grew 2.8% and Williams Sonoma grew 0.9%.
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