Williams-Sonoma Surges in Q4
By Staff -- Home Textiles Today, 3/27/2006
San Francisco — Fueled by strong same-store sales and interest earned on banked money, diversified home goods retailer Williams-Sonoma Inc. pushed fourth-quarter profits up by 6.2%, to $120.8 million from $113.7 million last year.
Sales improved by 12.1%, to $1.2 billion from $1.1 billion last year. Direct-to-customer sales, both by internet and catalog, continued to grow at a faster pace than sales in retail stores, growing by 14.1%, to $457.8 million, compared with a 10.8% increase in bricks and mortar, to $756.9 million.
Same-store sales improved by 5.8%, far ahead of a smaller gain of 1.5% last year. Comps were strongest in outlet stores, up 11.9%, and grew by 5.9% in the company's flagship Williams-Sonoma stores. Pottery Barn grew by 5.6%, and Pottery Barn Kids by 3.9%. The Hold Everything franchise still lagged behind; same-store sales fell by 3.2%, but still managed to improve on a deeper decline of 8.4% a year ago.
In addition to stronger comps, $2.1 million in interest income provided a lift to earnings. It was more than triple the $575,000 earned last year.
But acting as a drag, margins thinned during the all-important holiday quarter, narrowing by 120 basis points, or 1.2 percentage points, to 43.6% from 44.8% last year. Operating costs improved slightly, declining by 10 basis points, or a tenth of a percentage point, to 27.7% of sales from 27.8% the preceding year.
| Qtr. 1/29 (x000) | 2005 | 2004 | % change |
| Sales | $1,214,397 | $1,083,639 | 12.1 |
| Oper. income (EBIT) | 192,830 | 184,040 | 4.8 |
| Net income | 120,783a | 113,748a | 6.2 |
| Per share (diluted) | 1.02 | 0.95 | 7.4 |
| Average gross margin | 43.6% | 44.8% | – |
| SG&A expenses | 27.7% | 27.8% | – |
| 12 months | 2005 | 2004 | % change |
| Sales | $3,539,947 | $3,136,931 | 12.8 |
| Oper. income (EBIT) | 345,090 | 309,969 | 11.3 |
| Net income | 214,866b | 191,234b | 12.4 |
| Per share (diluted) | 1.81 | 1.60 | 13.1 |
| Average gross margin | 40.6% | 40.5% | – |
| SG&A expenses | 30.8% | 30.6% | – |
| a. Fourth-quarter results include a $13.5 million
pre-tax charge, or $0.07 per share, stemming from asset impairment and lease
termination costs associated with the shutdown of its Hold Everything stores,
and the consolidation of the brand into other Williams-Sonoma nameplates; and
$2.1 million in interest income, compared with $575,000 during the same period
last year. The Hold Everything charge reduced gross profit by $4.5 million,
reducing average gross margin; and added $9.0 million to operating costs,
increasing the expense ratio in both the fourth quarter and 12-month periods.
b. Twelve-month results include the $13.5 million charge tied to the Hold Everything restructuring; and $3.7 million in interest income, compared with $236,000 last year. |
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