Williams-Sonoma, Inc. Updates 2nd Quarter and FY 2006 Financial Guidance to Reflect CEO Departure Charge, Favorable Unredeemed Gift Certificate Income, and Current Business Trends.SAN FRANCISCO San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden -- Company Reiterates 2nd Quarter and FY 2006 Non-GAAP Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Guidance Williams-Sonoma Williams-Sonoma, Inc. (NYSE: WSM) is an American company that sells specialty cooking utensils and other housewares, along with a variety of foods including gourmet coffees. Its principal office is in San Francisco, California. , Inc. (NYSE NYSE See: New York Stock Exchange :WSM WSM Samoa (ISO Country code) WSM Wave Structure of Matter WSM Workers Solidarity Movement (Ireland) WSM Web Services Management WSM Weston-Super-Mare (Somerset, England) ) today announced an update to its second quarter and fiscal year 2006 financial guidance to reflect the charge associated with the departure of the company's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Ed Mueller
Mueller may refer to:
adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of a change in accounting estimate associated with unredeemed gift certificates, and current business trends. Howard Howard, English noble family. Landowners in Norfolk from the 13th cent., the Howards obtained the duchy of Norfolk through the marriage of Sir Robert Howard to Margaret Mowbray, daughter of Thomas Mowbray, 1st duke of Norfolk. Lester Les´ter n. 1. (Meteor.) A dry sirocco in the Madeira Islands. , Chairman, commented, "We are pleased today to be reiterating our second quarter and fiscal year 2006 non-GAAP diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of guidance (see table below). On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, we are increasing our diluted earnings per share guidance by $0.05 in the second quarter and $0.06 for the fiscal year. Although the second quarter is turning out to be more challenging on the top-line in the Pottery Barn Pottery Barn is an American-based chain of home furnishing stores with stores in the United States and Canada. It is a wholly owned subsidiary of Williams-Sonoma, Inc. History brand than we previously expected, we are extremely pleased with the financial benefits that we are realizing from our ongoing operational and cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. initiatives. As we look forward to the third and fourth quarters, we are remaining cautious in our outlook, but believe that the strength of our brands, our multi-channel See multichannel. strategy, and the competitive advantages we have built in our supply chain network will allow us to continue to drive our business, despite a potentially softer macro-economic environment." Sharon Sharon, city, United States Sharon (shâr`ən), city (1990 pop. 17,493), Mercer co., NW Pa., on the Shenango River, near the Ohio line; settled c.1800, inc. as a city 1920. McCollam, Executive Vice President, Chief Operating and Chief Financial Officer, commented, "Included in our second quarter and fiscal year 2006 GAAP earnings per share guidance in the table below are the effects of two unusual items. The first item is the severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charge associated with the departure of our CEO, which we estimate at approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5.7 million before tax or $0.029 per diluted share. The second item is a benefit of approximately $12.0 million before tax or $0.062 per diluted share associated with unredeemed gift certificates. During the second quarter of fiscal year 2006, we completed an analysis of our historical gift certificate and gift card redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. patterns, which included an independent actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin study. Based on this analysis, we concluded that the likelihood of our gift certificates and gift cards being redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. beyond four years from the date of issuance is remote. As a result, we have changed our estimate of the elapsed time e·lapsed time n. The measured duration of an event. Noun 1. elapsed time - the time that elapses while some event is occurring for recording income associated with unredeemed gift certificates and gift cards to four years from our prior estimate of seven years. This change in estimate will result in income recognition of approximately $12 million before tax in other income in the second quarter of fiscal 2006. Both of these unusual items are reflected in our Selling, General, and Administrative expense guidance."
Summary of Q2 and FY 2006 GAAP and Non-GAAP
Diluted Earnings Per Share Guidance
(See Exhibit 1 for Notes 1 through 6)
Q2
Q2 2006 2005 % YOY
Guidance(a) Actual Increase
----------------------------- -------------- ------ ----------------
GAAP Diluted EPS
$0.25 - $0.27 $0.26 (3.8%) - 3.8%
----------------------------- -------------- ------ ----------------
Unusual Items:
----------------------------- -------------- ------ ----------------
Hold Everything Transition
Charge (Note 1) $0.003 - -
----------------------------- -------------- ------ ----------------
CEO Departure Charge (Note 2) $0.029 - -
----------------------------- -------------- ------ ----------------
Unredeemed Gift
Certificate Income (Note 3) ($0.062) - -
----------------------------- -------------- ------ ----------------
Subtotal of Unusual Items ($0.030) - -
----------------------------- -------------- ------ ----------------
Diluted EPS Excluding Unusual
Items $0.22 - $0.24 $0.26 (7.7%) - (15.4%)
----------------------------- -------------- ------ ----------------
Impact of FAS 123R (Note 4) $0.042 - -
----------------------------- -------------- ------ ----------------
Impact of FSP FAS 13-1
(Note 5) $0.005 - -
----------------------------- -------------- ------ ----------------
Subtotal of 2006 Accounting
Pronouncements $0.047 - -
----------------------------- -------------- ------ ----------------
Non-GAAP Diluted EPS
Excluding Unusual Items and
2006 Accounting
Pronouncements (Note 6) $0.27 - $0.29 $0.26 3.8% -11.5%
----------------------------- -------------- ------ ----------------
FY 2006 FY 2005 % YOY
Guidance(a) Actual Increase
----------------------------- ---------------- --------- ------------
GAAP Diluted EPS $1.97 - $2.01 $1.81 8.8% - 11.0%
----------------------------- ---------------- --------- ------------
Unusual Items:
----------------------------- ---------------- --------- ------------
Hold Everything Transition
Charge (Note 1) $0.023 $0.07 -
----------------------------- ---------------- --------- ------------
CEO Departure Charge (Note 2) $0.029 - -
----------------------------- ---------------- --------- ------------
Unredeemed Gift
Certificate Income (Note 3) ($0.062) - -
----------------------------- ---------------- --------- ------------
Subtotal of Unusual Items ($0.010) $0.07 -
----------------------------- ---------------- --------- ------------
Diluted EPS Excluding Unusual
Items $1.96 - $2.00 $1.88 4.3% -6.4%
----------------------------- ---------------- --------- ------------
Impact of FAS 123R (Note 4) $0.168 - -
----------------------------- ---------------- --------- ------------
Impact of FSP FAS 13-1
(Note 5) $0.023 - -
----------------------------- ---------------- --------- ------------
Subtotal of 2006 Accounting
Pronouncements $0.191 - -
----------------------------- ---------------- --------- ------------
Non-GAAP Diluted EPS
Excluding Unusual Items and
2006 Accounting
Pronouncements (Note 6) $2.15 - $2.19 $1.88 14.4% -16.5%
----------------------------- ---------------- --------- ------------
(a) Due to rounding to the nearest cent per diluted share, totals may
not equal the sum of the line items in the table above.
-- SECOND QUARTER 2006 FINANCIAL GUIDANCE
-- Net Revenues
-- Net revenues are projected to be in the range of $823.0
million to $837.0 million, versus previous guidance in the
range of $842.0 million to $856.0 million. This represents
a projected increase in net revenues in the range of 6.0%
to 7.8% versus $776.2 million in the second quarter of
fiscal year 2005. Excluding Hold Everything (see Note 1 in
Exhibit 1), net revenues in the second quarter of fiscal
year 2006 are projected to increase in the range of 7.8%
to 9.6%.
-- Retail net revenues are projected to be in the range of
$463.0 million to $471.0 million, versus previous guidance
in the range of $466.0 million to $474.0 million. This
represents a projected increase in retail net revenues in
the range of 6.7% to 8.5% versus $434.1 million in the
second quarter of fiscal year 2005. Excluding Hold
Everything, retail net revenues in the second quarter of
fiscal year 2006 are projected to increase in the range of
7.7% to 9.6%.
-- Comparable store sales growth is projected to be in the
range of 1.5% to 3.0%, versus previous guidance in the
range of 1.5% to 3.5%. This compares to comparable store
sales growth in the second quarter of fiscal year 2005 of
3.7%. Comparable stores exclude new retail concepts until
such time as the company believes that comparable store
results in those concepts are meaningful to evaluating the
performance of the retail strategy. For fiscal year 2006,
the company expects to exclude West Elm and
Williams-Sonoma Home. Hold Everything will also be
excluded, as its remaining eight stores were closed during
the first quarter of fiscal year 2006.
-- Retail leased square footage is projected to increase
approximately 7.0%, unchanged from previous guidance.
Selling square footage is projected to increase
approximately 6.0%, unchanged from previous guidance. This
compares to retail leased and selling square footage
growth in the second quarter of fiscal year 2005 of 11.8%
and 10.8%, respectively.
-- Direct-to-customer net revenues (comprised of both catalog
and Internet revenues) are projected to be in the range of
$360.0 million to $366.0 million, versus previous guidance
in the range of $376.0 million to $382.0 million. This
represents a projected increase in direct-to-customer net
revenues in the range of 5.2% to 7.0% versus $342.1
million in the second quarter of fiscal year 2005.
Excluding Hold Everything, direct-to-customer net revenues
in the second quarter of fiscal year 2006 are projected to
increase in the range of 7.9% to 9.7%.
-- Gross Margin
-- Gross margin as a percentage of net revenues in the second
quarter of fiscal year 2006, including the impact of the
implementation of FSP FAS 13-1 and the Hold Everything
charge, is expected to be in the range of 37.8% to 38.0%,
unchanged from previous guidance. Gross margin as a
percentage of net revenues in the second quarter of fiscal
year 2005 was 38.0%. This represents a projected decrease
in the gross margin rate of 20 basis points at the low end
of the range and no change in the gross margin rate at the
high end of the range.
-- Gross margin as a percentage of net revenues in the second
quarter of fiscal year 2006, excluding the impact of the
implementation of FSP FAS 13-1 and the Hold Everything
charge, is expected to be in the range of 38.0% to 38.2%,
versus previous guidance in the range of 38.2% to 38.4%.
Gross margin as a percentage of net revenues in the second
quarter of fiscal year 2005 was 38.0%. On a comparable
year-over-year basis, this represents no change in the
gross margin rate at the low end of the range and a
projected increase of 20 basis points at the high end of
the range. This is a non-GAAP comparison.
-- Selling, General and Administrative Expenses (SG&A)
-- Selling, general and administrative expenses as a
percentage of net revenues in the second quarter of fiscal
year 2006, including the impact of FAS 123R and Unusual
Items (see Exhibit 1), are expected to be in the range of
32.1% to 32.3%, versus previous guidance in the range of
33.2% to 33.4%. Selling, general and administrative
expenses as a percentage of net revenues in the second
quarter of fiscal year 2005 were 31.6%. This represents a
projected increase in the SG&A expense rate of 50 to 70
basis points.
-- Selling, general and administrative expenses as a
percentage of net revenues in the second quarter of fiscal
year 2006, excluding the impact of FAS 123R and Unusual
Items (see Exhibit 1), are expected to be in the range of
31.8% to 32.0%, versus previous guidance in the range of
32.1% to 32.3%. Selling, general and administrative
expenses as a percentage of net revenues in the second
quarter of fiscal year 2005 were 31.6%. This represents a
projected increase in the SG&A expense rate on a
comparable year-over-year basis in the range of 20 to 40
basis points. This is a non-GAAP comparison.
-- Interest (Income) Expense - Net
-- Interest (Income) Expense - Net in the second quarter of
fiscal year 2006 is projected to be interest income in the
range of $2.9 million to $3.2 million, versus previous
guidance in the range of $1.7 million to $1.9 million.
This compares to interest income in the second quarter of
fiscal year 2005 of $0.4 million.
-- Income Taxes
-- The income tax rate in the second quarter of fiscal year
2006 is projected to be in the range of 38.6% to 38.8%,
unchanged from previous guidance. This compares to an
income tax rate in the second quarter of fiscal year 2005
of 37.9%.
-- Diluted Earnings Per Share
-- Diluted earnings per share in the second quarter of fiscal
year 2006, including the impact of 2006 Accounting
Pronouncements and Unusual Items (see Exhibit 1), are
expected to be in the range of $0.25 to $0.27, versus
previous guidance in the range of $0.20 to $0.22. Diluted
earnings per share in the second quarter of fiscal year
2005 were $0.26.
-- Diluted earnings per share in the second quarter of fiscal
year 2006, excluding the impact of 2006 Accounting
Pronouncements and Unusual Items (see Exhibit 1), are
expected to be in the range of $0.27 to $0.29, unchanged
from previous guidance. Diluted earnings per share in the
second quarter of fiscal year 2005 were $0.26. This
represents, on a comparable basis, a projected increase in
diluted earnings per share of 3.8% to 11.5%. This is a
non-GAAP comparison.
-- See Exhibit 1 for a reconciliation of 2006 and 2005 GAAP
to non-GAAP diluted earnings per share, which includes and
excludes the impact of the 2006 Accounting Pronouncements
and Unusual Items. This reconciliation is being provided
to facilitate a meaningful evaluation of the company's
quarterly and fiscal year 2006 diluted earnings per share
guidance on a comparable basis with our 2005 quarterly and
fiscal year results.
-- Merchandise Inventories
-- Merchandise inventories at the end of the second quarter
of fiscal year 2006 are projected to be in the range of
$553.0 million to $562.0 million, versus previous guidance
in the range of $560.0 million to $575.0 million.
Merchandise inventories at the end of the second quarter
of fiscal year 2005 were $521.5 million. This represents a
projected increase in merchandise inventories in the range
of 6.0% to 7.8%.
-- Depreciation and Amortization
-- Depreciation and amortization expense in the second
quarter of fiscal year 2006 is projected to be in the
range of $33.0 million to $34.0 million, unchanged from
previous guidance. This compares to depreciation and
amortization expense of $30.6 million in the second
quarter of fiscal year 2005.
-- Amortization of Deferred Lease Incentives
-- Amortization of deferred lease incentives in the second
quarter of fiscal year 2006 is projected to be
approximately $7.0 million, unchanged from previous
guidance. This compares to amortization of deferred lease
incentives of $6.0 million in the second quarter of fiscal
year 2005.
-- FISCAL YEAR 2006 FINANCIAL GUIDANCE
-- Net Revenues
-- Net revenues are projected to be in the range of $3.832
billion to $3.902 billion, versus previous guidance in the
range of $3.871 billion to $3.928 billion. This represents
a projected increase in net revenues in the range of 8.3%
to 10.3% versus $3.539 billion in fiscal year 2005.
Excluding Hold Everything, net revenues in fiscal year
2006 are projected to increase in the range of 9.7% to
11.8%.
-- Retail net revenues are projected to be in the range of
$2.198 billion to $2.233 billion, versus previous guidance
in the range of $2.210 billion to $2.240 billion. This
represents a projected increase in retail net revenues in
the range of 8.1% to 9.8% versus $2.033 billion in fiscal
year 2005. Excluding Hold Everything, retail net revenues
in fiscal year 2006 are projected to increase in the range
of 8.9% to 10.6%.
-- Comparable store sales growth is projected to be in the
range of 2.0% to 3.5%, versus previous guidance in the
range of 2.0% to 4.0%. This compares to comparable store
sales growth in fiscal year 2005 of 4.9%. Comparable
stores exclude new retail concepts until such time as the
company believes that comparable store results in those
concepts are meaningful to evaluating the performance of
the retail strategy. For fiscal year 2006, the company
expects to exclude West Elm and Williams-Sonoma Home. Hold
Everything will also be excluded, as its remaining eight
stores were closed during the first quarter of fiscal year
2006.
-- Retail leased square footage is projected to increase in
the range of 8.5% to 9.0%, unchanged from previous
guidance. Selling square footage is projected to increase
in the range of 7.5% to 8.0%, unchanged from previous
guidance. This compares to retail leased and selling
square footage growth in fiscal year 2005 of 8.6% and
7.9%, respectively.
Store Opening and Closing Guidance by Retail Concept
Q4 Q1 Q2
2005 2006 2006
Actual Actual Guidance
--------------------- ----------- --------------- ---------------
Concept Total Open Close End Open Close End
--------------------- ----------- ---- ----- ---- ---- ----- ----
Williams-Sonoma 254 4 (5) 253 5 (3) 255
--------------------- ----------- ---- ----- ---- ---- ----- ----
Pottery Barn 188 2 0 190 4 (4) 190
--------------------- ----------- ---- ----- ---- ---- ----- ----
Pottery Barn Bed+Bath 0 0 0 0 0 0 0
--------------------- ----------- ---- ----- ---- ---- ----- ----
Pottery Barn Kids 89 2 0 91 0 0 91
--------------------- ----------- ---- ----- ---- ---- ----- ----
West Elm 12 2 0 14 0 0 14
--------------------- ----------- ---- ----- ---- ---- ----- ----
Williams-Sonoma Home 3 2 0 5 0 0 5
--------------------- ----------- ---- ----- ---- ---- ----- ----
Hold Everything 8 0 (8) 0 0 0 0
--------------------- ----------- ---- ----- ---- ---- ----- ----
Outlets 16 0 0 16 1 (1) 16
--------------------- ----------- ---- ----- ---- ---- ----- ----
Total 570 12 (13) 569 10 (8) 571
--------------------- ----------- ---- ----- ---- ---- ----- ----
Q3 and Q4 FY
2006 2006
Guidance Guidance
--------------------- ------------------------ ----------------
Concept Open Close End Open Close
--------------------- ------- ----- -------- ---- --------
Williams-Sonoma 10 (10) 255 19 (18) (a)
--------------------- ------- ----- -------- ---- --------
Pottery Barn 9 (3) 196 15 (7) (a)
--------------------- ------- ----- -------- ---- --------
Pottery Barn Bed+Bath 3 0 3 3 0
--------------------- ------- ----- -------- ---- --------
Pottery Barn Kids 2 (1) 92 4 (1) (a)
--------------------- ------- ----- -------- ---- --------
West Elm 8 0 22 10 0
--------------------- ------- ----- -------- ---- --------
Williams-Sonoma Home 2 0 7 4 0
--------------------- ------- ----- -------- ---- --------
Hold Everything 0 0 0 0 (8)
--------------------- ------- ----- -------- ---- --------
Outlets 0 0 16 1 (1) (a)
--------------------- ------- ----- -------- ---- --------
Total 34 (14) 591 56 (35)
--------------------- ------- ----- -------- ---- --------
(a) Fiscal year 2006 total store opening and closing numbers for
Williams-Sonoma, Pottery Barn and Outlets include 16 stores, 7
stores and 1 store, respectively, for temporary closures due to
remodeling. Fiscal year 2006 total store opening numbers for
Williams-Sonoma, Pottery Barn and Pottery Barn Kids include 1
store, 1 store and 1 store, respectively, in the New Orleans area
that reopened during the first quarter and 1 Pottery Barn store
that reopened in the second quarter after having been temporarily
closed in August 2005 due to Hurricane Katrina. Remodeled stores
are defined as those stores temporarily closed and subsequently
reopened due to square footage expansion, store modification, or
relocation. Consistent with our definition of comparable stores,
stores to be remodeled are removed from the comparable store base
upon temporary closure if the gross square footage is to change by
more than 20% or if the store is to be closed for seven or more
consecutive days.
-- Direct-to-customer net revenues (comprised of both catalog
and Internet revenues) are projected to be in the range of
$1.634 billion to $1.669 billion, versus previous guidance
in the range of $1.661 billion to $1.688 billion. This
represents a projected increase in direct-to-customer net
revenues in the range of 8.5% to 10.8% versus $1.506
billion in fiscal year 2005. Excluding Hold Everything,
direct-to-customer net revenues in fiscal year 2006 are
projected to increase in the range of 10.9% to 13.3%.
-- Catalog circulation growth is projected to be in the range
of -0.5% to 0.5%, with pages circulated projected to
increase in the range of 5.0% to 6.0%. Previous guidance
for catalog and page circulation was in the range of 0.5%
to 1.5% and 6.0% to 7.0%, respectively. This compares to
an approximate 4.6% increase in catalog circulation and a
9.7% increase in pages circulated in fiscal year 2005.
Excluding the circulation for the Hold Everything catalog
in fiscal years 2005 and 2006, catalog and page
circulation in fiscal year 2006 is expected to increase in
the range of 3.5% to 4.5% and 7.5% to 8.5%, respectively.
Quarterly Net Revenue Guidance by Operating Segment
(All Amounts in Millions, Except Percentages)
Q1 2006 Q2 2006 Q3 2006
Actual Guidance Guidance
----------- ------------ --------------
Net Retail Revenue $434 $463 - $471 $485 - $495
---------------------------- ----------- ------------ --------------
Net Direct-to-Customer
Revenue $360 $360 - $366 $415 - $426
---------------------------- ----------- ------------ --------------
Total Net Revenue $794 $823 - $837 $900 - $921
---------------------------- ----------- ------------ --------------
Year Over Year % Increase 10.2% 6.0% - 7.8% 8.7% - 11.3%
---------------------------- ----------- ------------ --------------
Year Over Year % Increase
Excluding Hold Everything
(a) 10.1% 7.8% - 9.6% 11.1% -13.7%
---------------------------- ----------- ------------ --------------
Comparable Store
Sales % Change 1.3% 1.5% - 3.0% 2.0% - 4.0%
---------------------------- ----------- ------------ --------------
Q4 2006 FY 2006
Guidance Guidance
------------------ ----------------
Net Retail Revenue $816 - $833 $2,198 - $2,233
---------------------------- ------------------ ----------------
Net Direct-to-Customer
Revenue $499 - $517 $1,634 - $1,669
---------------------------- ------------------ ----------------
Total Net Revenue $1,315 - $1,350 $3,832 - $3,902
---------------------------- ------------------ ----------------
Year Over Year % Increase 8.3% - 11.2% 8.3% - 10.3%
---------------------------- ------------------ ----------------
Year Over Year % Increase
Excluding Hold Everything(a) 9.9% - 12.9% 9.7% - 11.8%
---------------------------- ------------------ ----------------
Comparable Store
Sales % Change 2.0% - 4.5% 2.0% - 3.5%
---------------------------- ------------------ ----------------
(a) See Note 1 of Exhibit 1.
-- Gross Margin
-- Gross margin as a percentage of net revenues in fiscal
year 2006, including the impact of the implementation of
FSP FAS 13-1 and the Hold Everything charge, is expected
to be in the range of 40.6% to 40.8%, unchanged from
previous guidance. Gross margin as a percentage of net
revenues in fiscal year 2005 was 40.6%, including the
fiscal year 2005 impact of the Hold Everything charge.
This represents no change in the gross margin rate at the
low end of the range and a projected increase of 20 basis
points at the high end of the range.
-- Gross margin as a percentage of net revenues in fiscal
year 2006, excluding the impact of the implementation of
FSP FAS 13-1 and the Hold Everything charge, is expected
to be in the range of 40.8% to 41.0%, unchanged from
previous guidance. Gross margin as a percentage of net
revenues in fiscal year 2005, excluding the Hold
Everything charge, was 40.7%. This represents a projected
increase in the gross margin rate on a comparable
year-over-year basis in the range of 10 to 30 basis
points. This is a non-GAAP comparison.
-- Selling, General and Administrative (SG&A) Expenses
-- Selling, general and administrative expenses as a
percentage of net revenues in fiscal year 2006, including
the impact of FAS 123R and Unusual Items (see Exhibit 1),
are expected to be in the range of 30.9% to 31.1%, versus
previous guidance in the range of 31.2% to 31.4%. Selling,
general and administrative expenses in fiscal year 2005
were 30.8%, including the fiscal year 2005 impact of the
Hold Everything charge. This represents a projected
increase in the SG&A expense rate of 10 to 30 basis
points.
-- Selling, general and administrative expenses as a
percentage of net revenues in fiscal year 2006, excluding
the impact of FAS 123R and Unusual Items (see Exhibit 1),
are expected to be in the range of 30.3% to 30.5%,
unchanged from previous guidance. Selling, general and
administrative expenses as a percentage of net revenues in
fiscal year 2005, excluding the Hold Everything charge,
were 30.6%. This represents a projected decrease in the
SG&A expense rate on a comparable year-over-year basis of
10 to 30 basis points. This is a non-GAAP comparison.
-- Interest (Income) Expense - Net
-- Interest (Income) Expense - Net for fiscal year 2006 is
projected to be interest income in the range of $10.5
million to $11.5 million, versus previous guidance in the
range of $8.5 million to $9.5 million. This compares to
interest income in fiscal year 2005 of $3.7 million.
-- Income Taxes
-- The income tax rate for fiscal year 2006 is projected to
be in the range of 38.6% to 38.8%, unchanged from previous
guidance. This compares to an income tax rate in fiscal
year 2005 of 38.4%.
-- Diluted Earnings Per Share
-- Diluted earnings per share in fiscal year 2006, including
the impact of 2006 Accounting Pronouncements and Unusual
Items (see Exhibit 1), are expected to be in the range of
$1.97 to $2.01, versus previous guidance in the range of
$1.91 to $1.95. This represents a projected increase in
diluted earnings per share of 8.8% to 11.0%. Diluted
earnings per share in fiscal year 2005 were $1.81.
-- Diluted earnings per share in fiscal year 2006, excluding
the impact of 2006 Accounting Pronouncements and Unusual
Items (see Exhibit 1), are expected to be in the range of
$2.15 to $2.19 - an increase of 14.4% to 16.5% on a
comparable basis versus fiscal year 2005 - and unchanged
from previous guidance. Diluted earnings per share in
fiscal year 2005, excluding the $0.07 per diluted share
Hold Everything charge, were $1.88. This is a non-GAAP
comparison.
-- See Exhibit 1 for a reconciliation of 2006 and 2005 GAAP
to non-GAAP diluted earnings per share, which includes and
excludes the impact of the 2006 Accounting Pronouncements
and Unusual Items. This reconciliation is being provided
to facilitate a meaningful evaluation of the company's
quarterly and fiscal year 2006 diluted earnings per share
guidance on a comparable basis with our 2005 quarterly and
fiscal year results.
-- Merchandise Inventories
-- Merchandise inventories at the end of fiscal year 2006 are
projected to be in the range of $562.0 million to $573.0
million, versus previous guidance in the range of $565.0
million to $580.0 million. Merchandise inventories at the
end of fiscal year 2005 were $520.3 million. This
represents a projected increase in merchandise inventories
in the range of 8.0% to 10.1%.
-- Capital Spending
-- Fiscal year 2006 capital spending is projected to be in
the range of $190.0 million to $210.0 million, unchanged
from previous guidance. This compares to capital spending
of $151.8 million in fiscal year 2005.
-- Depreciation and Amortization
-- Depreciation and amortization expense in fiscal year 2006
is projected to be in the range of $135.0 million to
$137.0 million, unchanged from previous guidance. This
compares to depreciation and amortization expense of
$123.2 million in fiscal year 2005.
-- Amortization of Deferred Lease Incentives
-- Amortization of deferred lease incentives in fiscal year
2006 is projected to be in the range of $28.0 million to
$29.0 million, unchanged from previous guidance. This
compares to amortization of deferred lease incentives of
$24.9 million in fiscal year 2005.
--SEC REGULATION G -- NON-GAAP INFORMATION This press release includes non-GAAP net revenue growth percentages, non-GAAP gross margin percentages, non-GAAP selling, general and administrative expenses, and non-GAAP diluted earnings per share due to excluding the impact of the implementation of FAS 123R and FSP FSP - File Service Protocol FAS 13-1 in fiscal year 2006, the impact of the Hold Everything consolidation charge in fiscal years 2005 and 2006, the CEO departure charge in fiscal year 2006, and the benefit from unredeemed gift certificate income in fiscal year 2006. We have reconciled rec·on·cile v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles v.tr. 1. To reestablish a close relationship between. 2. To settle or resolve. 3. or compared these non-GAAP financial measures with the most directly comparable GAAP financial measures in the text of this release and in Exhibit 1. We believe that these non-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of our business and facilitate comparisons between historical operating results and our 2006 quarterly and fiscal year guidance. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the diluted earnings per share calculation in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. --FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. or they prove incorrect Incorrect means to not be correct and may also refer to:
In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Such forward-looking statements include statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our future financial guidance and results. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include accounting adjustments that may occur as we close our books for the remaining three quarters of fiscal year 2006; the impact of organizational changes in connection with the departure of our CEO; new interpretations of current accounting rules; our ability to successfully transition the Hold Everything merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain strategies; changes to current accounting rules; changes in tax laws applicable to cash dividends or share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. ; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; construction and other delays in store openings; competition from companies with concepts or products similar to our concepts and products; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with customer demand; our ability to anticipate and manage customer returns; successful catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. management, including timing, sizing and merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. ; uncertainties in Internet marketing See Internet advertising. , infrastructure and regulation; changes in consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. based on weather, economic, political, competitive and other conditions beyond our control; construction delays on infrastructure projects based on weather or other events; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; dependence on external funding sources for operating capital Noun 1. operating capital - capital available for the operations of a firm (e.g. manufacturing or transportation) as distinct from financial transactions and long-term improvements capital, working capital - assets available for use in the production of further assets ; our ability to control employment, occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy and other operating costs operating costs npl → gastos mpl operacionales ; our ability to improve and control our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. ; and other risks and uncertainties described more fully in our public announcements, reports to shareholders and other documents filed with or furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission, including our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended January January: see month. 29, 2006 and all subsequent current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and quarterly reports on Form 10-Q Form 10-Q See 10-Q. . All forward-looking statements in this press release are based on information available to us as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" , and we assume no obligation to update these forward-looking statements. --ABOUT WILLIAMS-SONOMA Williams-Sonoma, Inc. is a nationwide specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. retailer of high quality products for the home. These products, representing six distinct merchandise strategies -- Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm West Elm is a retail chain that features contemporary furniture designs and other housewares. It is a subsidiary of Williams-Sonoma, Inc.. [1] By the end of 2007, West Elm plans to have 28 store locations open in the United States. and Williams-Sonoma Home - are marketed through 569 stores, seven mail order catalogs and five e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. websites.
Exhibit 1
Reconciliation of 2006 and 2005 GAAP to Non-GAAP
Diluted Earnings Per Share
(Totals Rounded to the Nearest Cent Per Diluted Share)
Q1 2006 Q2 2006 Q3 2006
Actual Guidance (a) Guidance (a)
------------------------------- ------- -------------- --------------
GAAP Diluted EPS $0.20 $0.25 - $0.27 $0.33 - $0.35
-------------------------------- ------- -------------- --------------
Hold Everything Transition
Charge (Note 1) $0.017 $0.003 $0.003
-------------------------------- ------- -------------- --------------
CEO Departure Charge (Note 2) - $0.029 -
-------------------------------- ------- -------------- --------------
Unredeemed Gift Certificate
Income (Note 3) - ($0.062) -
-------------------------------- ------- -------------- --------------
Subtotal of Unusual Items - $0.030 -
-------------------------------- ------- -------------- --------------
2006 Diluted EPS Excluding
Unusual Items $0.21 $0.22 - $0.24 $0.33 - $0.35
-------------------------------- ------- -------------- --------------
Impact of FAS 123R (Note 4) $0.042 $0.042 $0.042
-------------------------------- ------- -------------- --------------
Impact of FSP FAS 13-1
(Note 5) $0.003 $0.005 $0.010
-------------------------------- ------- -------------- --------------
Subtotal of 2006
Accounting
Pronouncements $0.045 $0.047 $0.052
-------------------------------- ------- -------------- --------------
Non-GAAP Diluted EPS Excluding
Unusual Items and 2006
Accounting Pronouncements
(Note 6) $0.26 $0.27 - $0.29 $0.38 - $0.40
-------------------------------- ------- -------------- --------------
Q4 2006 FY 2006
Guidance (a) Guidance (a)
------------------------------- -------------- --------------
GAAP Diluted EPS $1.18 - $1.22 $1.97 - $2.01
-------------------------------- -------------- --------------
Hold Everything Transition
Charge (Note 1) - $0.023
-------------------------------- -------------- --------------
CEO Departure Charge (Note 2) - $0.029
-------------------------------- -------------- --------------
Unredeemed Gift Certificate
Income (Note 3) - ($0.062)
-------------------------------- -------------- --------------
Subtotal of Unusual Items - ($0.010)
-------------------------------- -------------- --------------
2006 Diluted EPS Excluding
Unusual Items $1.18 - $1.22 $1.96 - $2.00
-------------------------------- -------------- --------------
Impact of FAS 123R (Note 4) $0.042 $0.168
-------------------------------- -------------- --------------
Impact of FSP FAS 13-1
(Note 5) $0.005 $0.023
-------------------------------- -------------- --------------
Subtotal of 2006
Accounting
Pronouncements $0.047 $0.191
-------------------------------- -------------- --------------
Non-GAAP Diluted EPS Excluding
Unusual Items and 2006
Accounting Pronouncements
(Note 6) $1.23 - $1.27 $2.15 - $2.19
-------------------------------- -------------- --------------
Q1 2005 Q2 2005 Q3 2005 Q4 2005 FY 2005
Actual Actual Actual Actual Actual
------------------------------ ------- ------- ------- ------- -------
2005 Diluted EPS as Reported
Per GAAP $0.22 $0.26 $0.31 $1.02 $1.81
------------------------------ ------- ------- ------- ------- -------
Impact of Hold Everything
Charge (Note 1) - - - $0.07 $0.07
------------------------------ ------- ------- ------- ------- -------
2005 Diluted EPS As Reported
Excluding the Impact of the
Hold Everything Charge
(Note 6) $0.22 $0.26 $0.31 $1.09 $1.88
------------------------------ ------- ------- ------- ------- -------
Q1 2006 Q2 2006 Q3 2006
Actual Guidance (a) Guidance (a)
---------------------------------- ------- ------------- -------------
2006 % Increase / (Decrease) in
Diluted EPS Per GAAP (9.1%) (3.8%) - 3.8% 6.5% - 12.9%
---------------------------------- ------- ------------- -------------
---------------------------------- ------- ------------- -------------
2006 % Increase / (Decrease) in
Non-GAAP Diluted EPS Excluding
Unusual Items and 2006 Accounting
Pronouncements 18.2% 3.8% - 11.5% 22.6% - 29.0%
---------------------------------- ------- ------------- -------------
Q4 2006 FY 2006
Guidance (a) Guidance (a)
------------------------------- ------------- -------------
2006 % Increase / (Decrease) in
Diluted EPS Per GAAP 15.7% - 19.6% 8.8% - 11.0%
-------------------------------- ------------- -------------
-------------------------------- ------------- -------------
2006 % Increase / (Decrease) in
Non-GAAP Diluted EPS Excluding
Unusual Items and 2006
Accounting Pronouncements 12.8% - 16.5% 14.4% - 16.5%
-------------------------------- ------------- -------------
(a) Quarterly diluted earnings per share guidance amounts will vary
within the ranges above. Therefore, the respective high and low
guidance estimates for the quarters should not be added together
to derive an estimate for the fiscal year.
Note 1: Hold Everything Accounting Charge -- On January 12, 2006, we
announced our decision to transition the merchandising
strategies of our Hold Everything brand into our other
existing brands by the end of 2006. We also announced that we
expected to incur an accounting charge of $0.09 to $0.10 per
diluted share related to this decision, of which $0.07 was
incurred in the fourth quarter of fiscal year 2005. In fiscal
year 2006, we estimate that we will incur charges of $0.023
per diluted share, of which $0.015 per diluted share is
expected to be included in cost of goods sold -- negatively
impacting gross margin -- and $0.008 per diluted share in
selling, general and administrative expenses. See table above
for quarterly actuals and estimates.
Note 2: CEO Departure Charge -- On July 11, 2006, we announced the
departure of the company's CEO. Severance costs are estimated
at approximately $0.029 per diluted share, which will be fully
realized in the second quarter of fiscal year 2006 and
included in SG&A expenses.
Note 3: Unredeemed Gift Certificates -- During the second quarter of
2006, we completed an analysis of our historical gift
certificate and gift card redemption patterns, which included
an independent actuarial study. Based on this analysis, we
concluded that the likelihood of our gift certificates and
gift cards being redeemed beyond four years from the date of
issuance is remote. As a result, we have changed our estimate
of the elapsed time for recording income associated with
unredeemed gift certificates and gift cards to four years from
our prior estimate of seven years. This change in estimate is
expected to result in income recognition of $0.062 per diluted
share in the second quarter of fiscal year 2006 and will be
included in SG&A expenses.
Note 4: FAS 123R -- Accounting for Share Based Payments -- In fiscal
year 2006, we prospectively implemented FAS 123R, which we
estimate will have a negative diluted earnings per share
impact of $0.168. This compares to a pro forma fiscal year
2005 diluted earnings per share impact of $0.12. The year-
over-year increase is due to long-term equity retention grants
that were awarded to certain key executives in fiscal year
2005. See table above for quarterly estimates. These amounts
are reflected in SG&A expenses. This amount excludes the FAS
123R impact of the CEO departure of approximately $0.018 per
diluted share, which is reflected within Note 2 above.
Note 5: FSP FAS 13-1 -- Accounting for Rental Costs Incurred During a
Construction Period -- In fiscal year 2006, we also
prospectively implemented FSP FAS 13-1, which we estimate will
have a negative diluted earnings per share impact of $0.023.
See table above for quarterly estimates. These amounts are
reflected in cost of goods sold, negatively impacting gross
margin.
Note 6: SEC Regulation G -- Non-GAAP Information -- This table
includes three non-GAAP financial measures. The first
non-GAAP measure is the 2006 Diluted EPS Excluding Unusual
Items. The second non-GAAP measure is the Non-GAAP 2006
Diluted EPS Excluding Unusual Items and 2006 Accounting
Pronouncements. The third non-GAAP measure is the 2005 Diluted
Earnings Per Share as Reported Excluding the Impact of the
Hold Everything Charge. These non-GAAP financial measures have
been provided to facilitate a meaningful evaluation of our
quarterly and fiscal year 2006 diluted earnings per share
guidance on a comparable basis with our 2005 quarterly and
fiscal year results. These non-GAAP financial measures should
be considered as a supplement to, and not as a substitute for,
or superior to, the diluted earnings per share calculation in
accordance with GAAP.
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