Williams-Sonoma (NYSE: WSM) reported Q3 EPS of $2.56, $1.03 better than the analyst estimate of $1.53. Revenue for the quarter came in at $1.77 billion versus the consensus estimate of $1.58 billion.

THIRD QUARTER 2020

• Net revenue growth of 22.4% to $1.765 billion, driven by acceleration across all brands
• Demand comparable brand revenue growth accelerated to 31%, which includes orders placed but not yet filled or charged to the customer in the quarter
• Net comparable brand revenue growth of 24.4%, with sequential and year-over-year acceleration in all brands, including Williams Sonoma at a record 30.4%, Pottery Barn at 24.1%, Pottery Barn Kids and Teen at 23.8% and West Elm at 21.8%
• E-commerce net comparable brand revenue growth accelerated to 49.3% with e-commerce penetration holding at almost 70% of total net revenues
• GAAP and non-GAAP gross margin of 40.0%, expanding approximately 400bps and driven by higher year-over-year merchandise margins and occupancy leverage
• GAAP and non-GAAP occupancy costs were $174 million, leveraging approximately 250bps
• GAAP SG&A rate of 24.4%; non-GAAP SG&A rate of 24.3%, leveraging approximately 410bps and reflecting substantially higher advertising ROI and the strength of our topline performance
• GAAP operating margin of 15.6%; non-GAAP operating margin of 15.7%, more than double that of last year and the highest quarterly operating margin performance outside of a holiday fourth quarter
• GAAP diluted EPS of $2.54; non-GAAP diluted EPS of $2.56, over 150% higher than last year
• Maintained strong liquidity position of $773 million in cash, including approximately $727 million in operating cash flow resulting from our strong performance year to date, enabling the company to repay in full all short-term borrowings under its $500 million revolver, reinstate its share repurchase program and repurchase $109 million in shares in the third quarter, and commit to increasing its next quarterly dividend payment by 10% to $0.53 per share

“In the third quarter, sales again outperformed expectations with demand comp up nearly 31% compared to a net comp of 24%, driven by strength across all brands. E-commerce accelerated sequentially to a record net comp of over 49% and we were pleased to see our store performance improve throughout the quarter to a net comp of negative 11%. Even more encouraging is the retail demand comp at negative 4%. And, we delivered these sales more profitably, with operating margins reaching record levels at 15.7%,” said Laura Alber, President and Chief Executive Officer.

“Our company’s mission is to enhance the quality of people’s lives at home. We have built our business with this mission at the forefront, investing in areas that matter most to our customers. These include:

• High quality, well-designed, sustainable products at a great value because of our scale and vertical supply chain;
• Inspiring marketing, and;
• The convenience of our high-touch digital-first omnichannel experience.

And this, combined with our loved brands that serve a wide range of customers across aesthetics and price points, is our distinctive positioning and our competitive advantage,” Alber continued.

Alber concluded, “Our vision is to own the home. And, with our distinctive positioning we will only become more relevant. We have the strategies, the team and the world-class platform to maximize the industry trends that favor our business and successfully execute on our growth opportunities. We are confident that we will continue to drive accelerating sales growth with increasing profitability and evolve into an even more attractive business for our stakeholders during and post pandemic.”

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 (See Exhibit 1)

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