Williams-Sonoma gets double-digit net revenue increases from Santa, ups guidance
Home & Textiles Today Staff -- Home Textiles Today, January 13, 2011
San Francisco - Five-nameplate high-end specialty retailer Williams-Sonoma had a jolly holiday, with a 10.5% jump in net revenues and a 5.0% increase in comparable store sales over the eight-week holiday period ended Dec. 26.
Net revenues rose to $865 million versus the year-ago's $783 million.
As a result, the company is increasing its fourth quarter revenue guidance to a range of $1.170 billion to $1.190 billion and fourth quarter GAAP diluted earnings per share (EPS) guidance to a range of $0.92 to $0.94. Excluding an estimated $0.04 EPS impact of unusual business events relating to asset impairment and early lease termination charges for underperforming retail stores, fourth quarter non-GAAP diluted EPS is expected to be in the range of $0.96 to $0.98.
"We are extremely pleased with our holiday sales performance. A positive consumer response to our key merchandising and marketing strategies, combined with strong operational execution, drove a 10.5% improvement in year-over-year sales, higher gross margins, and better than expected leverage of controllable expenses," said Laura Alber, president and ceo.
Also strong for Williams-Sonoma in the period was its e-commerce business, which Alber noted, "as expected...continued to grow as a percentage of total net revenues," reaching 32% in 2010 versus 27% in 2009. Year-over-year revenues in e-commerce increased 30% in the holiday period.
"Based on these results, and the trends we are seeing in the month of January," she added, the company is increasing its fourth quarter and fiscal year 2010 diluted EPS guidance. Revenue in the fourth quarter is now expected to increase in the range of 7% to 9% and diluted EPS is expected to be in the range of $0.96 to 98 cents versus 86 cents last year on a non-GAAP basis. For fiscal 2010, revenue is now projected to increase in the range of 12% to 13% and diluted EPS on a non-GAAP basis to be in the range of $1.83 to $1.85 versus 95 cents last year.
Looking ahead to fiscal 2011 and beyond, the company will remain focused "on the fundamental strategies that have driven our success over the past two years and have allowed us to gain market share and improve profitability," Alber went on. "To continue to gain market share, we will attract new customers to our brands through relevant product offerings and highly targeted marketing, grow our merchandise categories where we see ‘white space' in the market place, and expand the reach of our brands into new markets - both domestically and internationally."
Additionally, Williams-Sonoma this year said it will further drive efficiencies in its worldwide supply chain, reinvent the customer experience in our retail stores to drive increased traffic and higher sales per square foot, and further expand our initiatives in e-commerce, which operates at a significantly higher operating margin than our other sales channels. The company also expects its e-commerce segment to continue to increase as a percentage of total company revenues.
Collectively, the company said it expects these initiatives to drive top-line revenue growth -- despite store closings and the discontinuation of our Williams-Sonoma Home retail operations -- in the mid-single digits and non-GAAP diluted EPS growth in the low double digits.
From a cash flow perspective, inventory growth is expected to grow slightly ahead of sales growth based upon the need to replenish core inventory levels that were depleted due to better than expected sales in the fourth quarter of 2010, and capital spending is expected to be in the range of $135 to $150 million as our investments in e-commerce and new stores for West Elm increase. Depreciation in fiscal 2011 is expected to be in the range of $137 to $142 million and the amortization of deferred lease incentives is expected to be approximately $28 million.
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