01—Abstract
Summary
Summary of the 8-K filed May 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. reported first-quarter 2024 results for the thirteen weeks ended April 28, 2024.
Net revenues were $1.66 billiona versus $1.76 billion a year earlier, and comparable brand revenue declined 4.9%. Operating income was $323.8 million, an operating margin of 19.5%, and diluted EPS was $4.07. Both figures include an out-of-period adjustment of $49 million that reduced cost of goods sold.
The company stated that it over-recognized freight expense in fiscal 2021, 2022 and 2023, and that the cumulative amount was not material. Without the adjustment, the operating margin was 16.6% and diluted EPS was $3.48b. The company reiterated its fiscal 2024 guidance for net revenue growth of -3% to +3% and comparable brand revenue of -4.5% to +1.5%.
It raised its operating margin outlook to 17.6%c to 18.0%, which includes a 60 basis point impact from the out-of-period adjustment. Excluding that impact, the expected operating margin is 17.0% to 17.4%. Fiscal 2024 is a 53-week year, and the company expects the extra week to contribute 150 basis points to net revenue growth and 10 basis points to operating margin.
The company ended the quarter with $1.25 billiond in cash and cash equivalents and generated $226.8 million in operating cash flow. It returned $107 million to stockholders through $63 million in dividends and $44 million in stock repurchases.
Merchandise inventories were $1.22 billion, down 13.1% from the prior-year quarter. The filing states that the press release is furnished under Item 2.02 and is not filed with the SEC.
02—Key points
Key Highlights
- Q1 2024 comparable brand revenue declined 4.9%, with net revenues of $1.66 billion versus $1.76 billion in the prior-year quarter.
- Operating margin was 19.5% ($323.8 million operating income), including a 290 basis point benefit from an out-of-period adjustment; without it, the operating margin was 16.6%.
- Diluted EPS was $4.07, including a $0.59 per share benefit from the out-of-period adjustment; without it, diluted EPS was $3.48.
- The out-of-period adjustment of $49 million corrects an over-recognition of freight expense in fiscal 2021 through 2023, which the company deemed not material to prior periods or to fiscal 2024 projections.
- Fiscal 2024 operating margin guidance was raised to 17.6% to 18.0% (17.0% to 17.4% excluding the adjustment), while net revenue growth (-3% to +3%) and comparable brand revenue (-4.5% to +1.5%) guidance was reiterated.
- Gross margin was 48.3% including the adjustment, or 45.4% without it, with SG&A at 28.8% of revenues, driven by higher advertising spend and incentive compensation.
- Liquidity remained strong with $1.25 billion in cash and cash equivalents and $226.8 million in operating cash flow; merchandise inventories fell 13.1% year over year to $1.22 billion.
03—Questions
Frequently Asked Questions
Why did operating margin improve so much in the first quarter?
The filing attributes a 290 basis point benefit to the operating margin from an out-of-period adjustment of $49 million that reduced cost of goods sold. The company determined it had over-recognized freight expense in fiscal 2021, 2022 and 2023. Without this adjustment, the operating margin was 16.6%.
Did the company change its fiscal 2024 guidance?
Net revenue growth guidance of -3% to +3% and comparable brand revenue guidance of -4.5% to +1.5% were reiterated. The operating margin outlook was raised to 17.6% to 18.0%, including a 60 basis point impact from the out-of-period adjustment, or 17.0% to 17.4% without it.
How much did the company return to stockholders this quarter?
The company returned $107 million to stockholders, consisting of $63 million in dividends and $44 million in stock repurchases. Operating cash flow for the quarter was $226.8 million.
What is the impact of fiscal 2024 being a 53-week year?
The company expects the additional week to contribute 150 basis points to net revenue growth and 10 basis points to operating margin, both of which are reflected in its guidance. Comparable brand revenue will be reported on a 53-week versus 53-week basis.
How are the company's inventory and store footprint trending?
Merchandise inventories were $1.22 billion, down 13.1% from the prior-year quarter. The company had 517 retail stores at the end of the quarter, compared with 531 a year earlier.
04—Continue