01—Abstract
Summary
Summary of the 8-K filed November 20, 2024. Cited figures are marked; the original filing is the authoritative source.
Williams-Sonoma, Inc. (NYSE: WSM) reported third-quarter 2024 results for the thirteen weeks ended October 27, 2024, as described in a press release furnished as Exhibit 99.1.
Net revenues were $1,800,668 thousanda versus $1,853,650 thousand a year earlier, with comparable brand revenue down 2.9%. Gross margin rose to 46.7% from 44.4%, and operating income was $320,643 thousand, an operating margin of 17.8% versus 17.0%. Diluted EPS was $1.96 compared with $1.83, and net earnings were $248,953 thousand.
The company also raised its fiscal 2024 outlook. It now expects annual net revenue decline of -3.0%b to -1.5% and comparable revenue declines of -4.5% to -3.0%, with operating margin between 18.4% and 18.8% including a 60bps out-of-period freight adjustment. Excluding that adjustment, operating margin is expected between 17.8% and 18.2%.
Fiscal 2024 is a 53-week year. The board approved a new $1 billionc stock repurchase authorization, which takes effect once the existing March 2024 program is fully used; the total authorization is stated as $1.3 billion including the $293 million remaining. At October 27, 2024, cash and cash equivalents were $826,784 thousand, merchandise inventories were $1,450,135 thousand, and total stockholders' equity was $1,906,609 thousand.
Year-to-date, the company repurchased $707,477 thousandd of common stock and paid $208,861 thousand in dividends. The filing notes that the Form 10-Q for the quarter has not yet been filed, so the results are preliminary and subject to change.
02—Key points
Key Highlights
- Q3 2024 comparable brand revenue declined 2.9%, while gross margin expanded to 46.7% from 44.4%, driven by higher merchandise margins (+130bps) and supply chain efficiencies (+100bps).
- Operating income of $320.6 million produced a 17.8% operating margin, up 80bps from 17.0% a year earlier.
- Diluted EPS rose 7.1% to $1.96 from $1.83.
- Full-year 2024 guidance was raised: net revenue decline of -3.0% to -1.5% and operating margin of 18.4% to 18.8% including a 60bps out-of-period adjustment.
- A new $1 billion stock repurchase authorization was approved, bringing total authorization to $1.3 billion including the $293 million remaining under the March 2024 program.
- Year-to-date, the company returned capital through $707.5 million in stock repurchases and $208.9 million in dividends, while cash fell to $826.8 million from $1.26 billion at fiscal year-end 2023.
- A $49 million out-of-period freight expense adjustment recorded in Q1 2024 reduced cost of goods sold and accounts payable.
03—Questions
Frequently Asked Questions
How did Williams-Sonoma perform in the third quarter of 2024?
Net revenues were $1.80 billion, down from $1.85 billion, with comparable brand revenue down 2.9%. Gross margin improved to 46.7%, operating income was $320.6 million at a 17.8% operating margin, and diluted EPS was $1.96 versus $1.83.
What did the company change in its fiscal 2024 outlook?
The company raised its guidance, now expecting annual net revenue decline of -3.0% to -1.5% with comparable declines of -4.5% to -3.0%. Operating margin is expected at 18.4% to 18.8%, including a 60bps out-of-period adjustment; without it, the range is 17.8% to 18.2%.
What is the new stock repurchase authorization?
The board approved a $1 billion repurchase authorization in September 2024. It takes effect once the March 2024 program is fully used, and including the $293 million remaining under that program, total authorization is $1.3 billion. Repurchases can be made through open market and privately negotiated transactions, including Rule 10b5-1 plans, and the programs have no expiration date.
Why are the reported results considered preliminary?
The company states it has not yet filed its Form 10-Q for the quarter ended October 27, 2024, and that results are subject to change for any necessary adjustments or changes in accounting estimates identified before that filing.
What was the $49 million adjustment?
The company determined in April 2024 that it over-recognized freight expense in fiscal 2021, 2022 and 2023 by a cumulative $49 million. It judged this not material to prior periods or to fiscal 2024 projections and recorded it as an out-of-period adjustment in Q1 2024, reducing cost of goods sold and accounts payable.
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