Williams-Sonoma Reports Fourth Quarter and Fiscal Year Results

March 13, 2024  by HFBusiness Staff in Business Strategy, Industry   

“We are pleased with our strong finish to 2023. We delivered an annual operating margin of 16.4% with full-year earnings per share of $14.85, beating our 2023 comp guidance of -10% to -12% and hitting our operating margin range of 16% to 16.5%,” said Laura Alber, president and CEO.

Alber concluded, “We outperformed in 2023 despite the slowest housing market in several decades and geopolitical unrest. Although this pressured our top-line trend, we stayed focused on full-price selling, supply chain efficiencies, and best-in-class customer service. We have transformed our business model and as a result, we delivered an operating margin well ahead of our pre-pandemic profitability.”

FOURTH QUARTER 2023 HIGHLIGHTS

• Comparable brand revenue -6.8% with a 2-year comp -7.4% and a 4-year comp +29.1%.

• Gross margin of 46.0% +480bps to LY with selling margin +560bps due to higher merchandise margins and lower costs from supply chain efficiencies, offset by occupancy deleverage of 80bps. Occupancy costs of $208 million, +2.1% to LY.

• SG&A rate of 25.9% +390bps to LY on a GAAP basis and +460bps to LY on a non-GAAP basis driven by employment and general expense deleverage. SG&A of $591 million, +9.3% to LY on a GAAP basis and +13.0% to LY on a non-GAAP basis.

• Operating income of $458 million with an operating margin of 20.1%.

• Diluted EPS of $5.44 per share.

FISCAL YEAR 2023 HIGHLIGHTS

• Comparable brand revenue -9.9% with a 2-year comp -3.4% and a 4-year comp +35.6%.

• Gross margin of 42.6%, +20bps to LY on a GAAP basis with selling margin +170bps due to higher merchandise margins and supply chain efficiencies, offset by occupancy deleverage of 150bps. Gross margin of 42.7%, +30bps to LY on a non-GAAP basis with selling margin +170bps due to higher merchandise margins and supply chain efficiencies, and occupancy deleverage of 140bps. Occupancy costs of $814 million, +3.7% to LY on a GAAP basis and +3.6% on a non-GAAP basis.

• SG&A rate of 26.6%, +150bps to LY on a GAAP basis and 26.3%, +140bps to LY on a non-GAAP basis, driven by employment and general expense deleverage. GAAP SG&A of $2.1 billion, -5.5% to LY, and non-GAAP SG&A of $2.0 billion, -5.8% to LY.

• GAAP operating income of $1.24 billion with an operating margin of 16.1%; non-GAAP operating income of $1.27 billion with an operating margin of 16.4%.

• GAAP diluted EPS of $14.55 and non-GAAP diluted EPS of $14.85.

• Merchandise inventories -14.4% to LY to $1.2 billion.

• ROIC of 45.0% driven by net earnings.

• Maintained strong liquidity position of $1.3 billion in cash and $1.7 billion in operating cash flow enabling the company to deliver returns to stockholders of $545 million through $313 million in stock repurchases and $232 million in dividends.

DIVIDENDS AND STOCK REPURCHASE AUTHORIZATIONS

• Increased our quarterly dividend 26%, or $0.23, to $1.13 per share.

• Expanded our stock repurchase capacity to $1 billion, superseding the company's current stock repurchase authorization.

OUTLOOK

• In fiscal 2024, we expect annual net revenue growth in the range of -3% to +3% with comps in the range of -4.5% to +1.5%; and an operating margin between 16.5% to 16.8%.

• Fiscal 2024 is a 53-week year. Our financial statements will be prepared on a 53-week basis in fiscal 2024 and a 52-week basis in fiscal 2023. However, we will report comps on a 53-week versus 53-week comparable basis. All other year-over-year comparisons will be 53-weeks in fiscal 2024 versus 52-weeks in fiscal 2023. We expect the additional week in fiscal 2024 to contribute 150bps to revenue growth and 10bps to operating margin, both of which are reflected in our guidance.

• Over the long-term, we continue to expect mid-to-high single-digit annual net revenue growth with an operating margin in the mid-to-high teens.

CONFERENCE CALL AND WEBCAST INFORMATION
A replay of the webcast will be available at http://ir.williams-sonomainc.com/events.