Williams-Sonoma E-Commerce Growth Explodes
June 14, 2018
Williams-Sonoma reported operating results for the first fiscal quarter (“Q1 18”) ended April 29, 2018 versus the first fiscal quarter (“Q1 17”) ended April 30, 2017.
1 st Quarter 2018
These results include the adoption of ASU No. 2014-09, which pertains to revenue recognition, in the first quarter of 2018. The year-over-year impact of this change in accounting is a financial benefit of $13.6 million in net revenues, $1.6 million in operating income and $0.01 in EPS. From a rate perspective, this amounts to a benefit of approximately 130bps of revenue growth, 30bps of comparable brand revenue growth, 70bps of gross margin improvement, 60bps of selling, general and administrative expense deleverage and 10bps of operating margin improvement. See Exhibit 2 for more details on the financial impact of adoption.
Fiscal Year 2018 Guidance
Laura Alber, President and Chief Executive Officer, commented, “Following a robust fourth quarter, we saw continued strength in the first quarter. We achieved strong results against our guidance range across all metrics, with our e-commerce revenues outpacing to almost 54% of our total revenues. Our customer growth continued to trend positively for both new and existing customers, demonstrating the success of our balanced customer acquisition strategy.”
Alber continued, “These results speak to the power of our established multi-channel model, distinctive brand portfolio and world-class customer service heritage – all of which are our company’s competitive strengths. Based on this strong start to the year, we are raising our full year guidance for net revenues by $20 million and for EPS by $0.03.”
1 st QUARTER 2018 RESULTS
Net revenues increased 8.2% to $1.203 billion in Q1 18 from $1.112 billion in Q1 17. Excluding certain discrete items, non-GAAP net revenues were $1.202 billion in Q1 18 or an 8.2% increase on Q1 17. See Exhibit 1.
Comparable brand revenue in Q1 18 increased 5.5% compared to an increase of 0.1% in Q1 17 as shown in the table below:
E-commerce net revenues in Q1 18 increased 11.3% to $646 million from $581 million in Q1 17. Excluding certain discrete items, non-GAAP e-commerce net revenues were $645 million in Q1 18 or an 11.2% increase on Q1 17. See Exhibit 1.
Retail net revenues in Q1 18 increased 4.9% to $557 million from $531 million in Q1 17.
Operating margin in Q1 18 was 5.5% compared to 5.6% in Q1 17. Excluding certain discrete items, non-GAAP operating margin was 6.3% in Q1 18 versus 6.1% in Q1 17. See Exhibit 1.
The effective income tax rate in Q1 18 was 30.9% versus 36.8% in Q1 17. Excluding certain discrete items, the non-GAAP effective income tax rate was 23.8% in Q1 18 versus 34.5% in Q1 17. See Exhibit 1.
EPS in Q1 18 was $0.54 versus $0.45 in Q1 17. Excluding certain discrete items, non-GAAP EPS was $0.67 in Q1 18 versus $0.51 in Q1 17. See Exhibit 1.
Merchandise inventories at the end of Q1 18 increased 1.5% to $1.053 billion from $1.037 billion at the end of Q1 17.
STOCK REPURCHASE PROGRAM
During Q1 18, we repurchased 732,000 shares of common stock at an average cost of $51.53 per share and a total cost of approximately $38 million. As of April 29, 2018, there was approximately $481 million remaining under our current stock repurchase program.