Williams-Sonoma (WSM, Financial), a specialty retailer of home furnishings and gourmet cookware, reported second quarter earnings and held a conference call with investors on Tuesday morning. As expected for a company who sells discretionary consumer products, the company has seen stagnant sales and profits over the past couple of years, with fiscal 2007 and 2010 looking nearly identical on the bottom line. The company’s stock has performed in line with the S&P 500 and the DJIA over the past one and five year periods, as has rebounded more than 500% since dipping below $5 a share during the market bottom in March 2009. Here are some of the highlights from the second quarter and the call:
Net revenues in second quarter 2011 increased 5.1% to $815 million, compared to 1% overall growth in the home furnishings industry.
Retail net revenues decreased 0.7% to $447 ($450 million in Q2 2010), partially driven by the closure of Williams-Sonoma Home stores in late 2010; excluding the Williams-Sonoma Home stores, retail net revenues increased 0.9%. Comparable store sales in Q2 11 increased 1.4% (off of a 13.6% comp in Q2 2010), with the largest brands in the company’s portfolio posting relatively weak single digit numbers (0.7% comparable growth from the Williams-Sonoma brand and 3.6% from the Pottery Barn brand); the smaller brands posted positive double digit growth figures, with Pottery Barn Kids, PBteen, and West Elm increasing comparable brand revenues 8%, 20% and 29%, respectively (all of which were lapping 20%+ growth in 2010).
As management noted on the call, part of the plan in retail is to diversify away from the constrained consumers in the United States and continue to expand in international markets – “In international, we continue to aggressively explore profitable opportunities for retail expansion in other regions of the world as our eight franchise stores in Dubai, Kuwait and Saudi Arabia continue to introduce new customers to our brands. In the back half of the year, we expect to add 5 additional franchise locations in Saudi Arabia, including two Pottery Barn and three Pottery Barn Kids stores.”
Direct-to-customer (“DTC”) net revenues increased 13.0% to $368 million (versus $326 million). E-commerce net revenues increased 18.4% to $317 million, and accounted for nearly 39% of the company’s total sales in the quarter. The company also completed the launch of new international shipping websites (through a third party) across all brands, which enables them to ship from the United States to customers in over 75 countries around the world (and gives them some insight into where they have demand prior to building out in new countries/locations). As a whole, DTC net revenues generated 45% of total company net revenues in second quarter 11.
During the quarter, the company repurchased 806,282 shares of its common stock for approximately $31 million, an average cost of $38.44/share (compare that to today’s close of less than $30 a share; you know what they say about buybacks…).
GAAP earnings per share came in at $0.37/share, an increase of 32% compared to $0.28 in Q2 2010; after adjusting for asset impairment charges and other onetime items from last year, the non-GAAP increase was 19% year over year. The company had projected per-share earnings of $0.33-$0.36 cents on revenue of $805 million to $825 million in May.
In the third quarter, management is expecting net revenues to be in the range of $845 million- $865 million, and non-GAAP diluted EPS to come in at $0.36-$0.39, versus $0.35 in 2010.
The company raised its full-year earnings estimate of non-GAAP EPS to $2.17-$2.22 from its earlier forecast of $2.13-$2.21, driven by 5-6% expected revenue growth; the new guidance suggests EPS growth will increase 11-14% from the figure reported in 2010 ($1.95).
Net revenues in second quarter 2011 increased 5.1% to $815 million, compared to 1% overall growth in the home furnishings industry.
Retail net revenues decreased 0.7% to $447 ($450 million in Q2 2010), partially driven by the closure of Williams-Sonoma Home stores in late 2010; excluding the Williams-Sonoma Home stores, retail net revenues increased 0.9%. Comparable store sales in Q2 11 increased 1.4% (off of a 13.6% comp in Q2 2010), with the largest brands in the company’s portfolio posting relatively weak single digit numbers (0.7% comparable growth from the Williams-Sonoma brand and 3.6% from the Pottery Barn brand); the smaller brands posted positive double digit growth figures, with Pottery Barn Kids, PBteen, and West Elm increasing comparable brand revenues 8%, 20% and 29%, respectively (all of which were lapping 20%+ growth in 2010).
As management noted on the call, part of the plan in retail is to diversify away from the constrained consumers in the United States and continue to expand in international markets – “In international, we continue to aggressively explore profitable opportunities for retail expansion in other regions of the world as our eight franchise stores in Dubai, Kuwait and Saudi Arabia continue to introduce new customers to our brands. In the back half of the year, we expect to add 5 additional franchise locations in Saudi Arabia, including two Pottery Barn and three Pottery Barn Kids stores.”
Direct-to-customer (“DTC”) net revenues increased 13.0% to $368 million (versus $326 million). E-commerce net revenues increased 18.4% to $317 million, and accounted for nearly 39% of the company’s total sales in the quarter. The company also completed the launch of new international shipping websites (through a third party) across all brands, which enables them to ship from the United States to customers in over 75 countries around the world (and gives them some insight into where they have demand prior to building out in new countries/locations). As a whole, DTC net revenues generated 45% of total company net revenues in second quarter 11.
During the quarter, the company repurchased 806,282 shares of its common stock for approximately $31 million, an average cost of $38.44/share (compare that to today’s close of less than $30 a share; you know what they say about buybacks…).
GAAP earnings per share came in at $0.37/share, an increase of 32% compared to $0.28 in Q2 2010; after adjusting for asset impairment charges and other onetime items from last year, the non-GAAP increase was 19% year over year. The company had projected per-share earnings of $0.33-$0.36 cents on revenue of $805 million to $825 million in May.
In the third quarter, management is expecting net revenues to be in the range of $845 million- $865 million, and non-GAAP diluted EPS to come in at $0.36-$0.39, versus $0.35 in 2010.
The company raised its full-year earnings estimate of non-GAAP EPS to $2.17-$2.22 from its earlier forecast of $2.13-$2.21, driven by 5-6% expected revenue growth; the new guidance suggests EPS growth will increase 11-14% from the figure reported in 2010 ($1.95).
