Williams-Sonoma (WSM) Tops Q2 EPS by 80c, Revenues Beat

August 26, 2020 4:17 PM EDT

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Williams-Sonoma (NYSE: WSM) reported Q2 EPS of $1.80, $0.80 better than the analyst estimate of $1.00. Revenue for the quarter came in at $1.49 billion versus the consensus estimate of $1.47 billion.

SECOND QUARTER 2020

  • Net revenue growth of 8.8% to $1.491 billion, driven by a significant acceleration in e-commerce revenue growth to approximately 46%
  • E-commerce penetration reached an all-time high of almost 76% of total company revenues
  • Demand comparable brand revenue growth of almost 19%, which includes orders placed but not yet filled in the quarter (See Exhibit 1)
  • Net comparable brand revenue growth of 10.5%, with sequential and year-over-year acceleration in nearly all brands, including Williams Sonoma at a record 29.4%, Pottery Barn at 8.1% and West Elm at 7.0%
  • Gross margin expansion of 160bps, driven by higher year-over-year merchandise margins and occupancy leverage
  • Occupancy costs were $166 million, down 5.8% from last year and leveraging 170bps
  • GAAP SG&A leverage of approximately 450bps; non-GAAP SG&A leverage of approximately 460bps, reflecting substantially higher advertising ROI and the positive impact of cost reductions across the business, combined with the strength of our topline performance
  • GAAP operating margin of 12.4%; non-GAAP operating margin of 13.1%, nearly double that of last year and the highest quarterly operating margin performance outside of a holiday fourth quarter
  • GAAP diluted EPS of $1.70; non-GAAP diluted EPS of $1.80, nearly 107% higher than last year
  • Maintains strong liquidity position of $948 million in cash, including approximately $216 million in operating cash flow resulting from our strong Q2 20 performance
  • Board of Directors declares quarterly cash dividend of $0.48 per common share, reflecting strong commitment to shareholder returns

“We delivered an exceptional second quarter with net comp growth of 10.5% and demand comp growth of almost 19%, operating margin expansion to nearly double that of last year, and record earnings growth of over 100%. E-commerce again drove our results growing 46% in the quarter, and our stores performed better-than-expected, improving throughout the quarter as we re-opened. In a time when home is more important than ever, we have taken this opportunity to push our longer term plans. We will:

  1. Accelerate digital growth and fundamentally shift the channel mix of our business;
  2. Focus our marketing strategy on content and building customer relationships; and
  3. Step up our profitability in our longer term earnings outlook.

Our digital-first strategy, our trusted and curated brands, our omni-channel approach, and our commitment to sustainability will continue to provide a powerful source of differentiation and competitive advantage as we execute against these priorities,” said Laura Alber, President and Chief Executive Officer.

“As always, and especially in challenging times, what makes us proud as a company goes well beyond the products we sell. In the last several months, we have witnessed not only the ongoing impact of a global pandemic but also heartbreaking reminders of racial injustice in our country,” Alber continued. “As we continue to support COVID-19 relief efforts in our communities, we are also taking action to help drive positive change and create a more equitable, inclusive future for all. These are extraordinary times that require us to continuously evolve and rethink how we best serve all our stakeholders. We are rising to the challenge, learning and adapting, and leading with our values in everything we do.”

Alber concluded, “Longer term, we believe the behavioral changes and industry shifts that have emerged from the pandemic will persist and continue to favor our business. We are investing in the next phase of our growth and the opportunities that position us for accelerated market share gain.”

GUIDANCE

Given the dynamic nature of the COVID-19 crisis and the continuing macroeconomic uncertainty that could impact its performance, the company is not providing guidance for fiscal year 2020.

Long-Term Financial Guidance

  • Total net revenues growth of mid to high single digits
  • Non-GAAP operating margin expansion
  • Above-industry average ROIC

For earnings history and earnings-related data on Williams-Sonoma (WSM) click here.



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