☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
November 3, 2019.
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(§ Non-accelerated filer ☐
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Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
In thousands, except per share amounts | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||
E-commerce net revenues | $ | 746,716 | $ | 690,045 | $ | 2,079,838 | $ | 1,901,348 | ||||||||
Retail net revenues | 610,267 | 609,291 | 1,755,319 | 1,711,101 | ||||||||||||
Net revenues | 1,356,983 | 1,299,336 | 3,835,157 | 3,612,449 | ||||||||||||
Cost of goods sold | 861,999 | 832,269 | 2,444,067 | 2,326,911 | ||||||||||||
Gross profit | 494,984 | 467,067 | 1,391,090 | 1,285,538 | ||||||||||||
Selling, general and administrative expenses | 400,600 | 356,254 | 1,155,990 | 1,030,667 | ||||||||||||
Operating income | 94,384 | 110,813 | 235,100 | 254,871 | ||||||||||||
Interest (income) expense, net | 2,288 | 594 | 5,073 | 974 | ||||||||||||
Earnings before income taxes | 92,096 | 110,219 | 230,027 | 253,897 | ||||||||||||
Income taxes | 10,631 | 38,906 | 51,681 | 90,112 | ||||||||||||
Net earnings | $ | 81,465 | $ | 71,313 | $ | 178,346 | $ | 163,785 | ||||||||
Basic earnings per share | $ | 1.01 | $ | 0.84 | $ | 2.17 | $ | 1.90 | ||||||||
Diluted earnings per share | $ | 1.00 | $ | 0.84 | $ | 2.15 | $ | 1.89 | ||||||||
Shares used in calculation of earnings per share: | ||||||||||||||||
Basic | 80,475 | 84,940 | 82,070 | 86,111 | ||||||||||||
Diluted | 81,641 | 85,384 | 82,951 | 86,582 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
In thousands, except per share amounts | November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | ||||||||||||
Net revenues | $ | 1,442,472 | $ | 1,356,983 | $ | 4,054,418 | $ | 3,835,157 | ||||||||
Cost of goods sold | 924,300 | 861,999 | 2,608,054 | 2,444,067 | ||||||||||||
Gross profit | 518,172 | 494,984 | 1,446,364 | 1,391,090 | ||||||||||||
Selling, general and administrative expenses | 416,281 | 400,600 | 1,184,176 | 1,155,990 | ||||||||||||
Operating income | 101,891 | 94,384 | 262,188 | 235,100 | ||||||||||||
Interest (income) expense, net | 2,564 | 2,288 | 7,486 | 5,073 | ||||||||||||
Earnings before income taxes | 99,327 | 92,096 | 254,702 | 230,027 | ||||||||||||
Income taxes | 24,614 | 10,631 | 64,685 | 51,681 | ||||||||||||
Net earnings | $ | 74,713 | $ | 81,465 | $ | 190,017 | $ | 178,346 | ||||||||
Basic earnings per share | $ | 0.96 | $ | 1.01 | $ | 2.43 | $ | 2.17 | ||||||||
Diluted earnings per share | $ | 0.94 | $ | 1.00 | $ | 2.39 | $ | 2.15 | ||||||||
Shares used in calculation of earnings per share: | ||||||||||||||||
Basic | 77,897 | 80,475 | 78,356 | 82,070 | ||||||||||||
Diluted | 79,191 | 81,641 | 79,465 | 82,951 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
In thousands | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||
Net earnings | $ | 81,465 | $ | 71,313 | $ | 178,346 | $ | 163,785 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments | (1,830 | ) | 40 | (5,968 | ) | 1,864 | ||||||||||
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $(23), $133, $378 and $(52) | (65 | ) | 373 | 1,064 | (138 | ) | ||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax (tax benefit) of $43, $45, $19 and $48 | (120 | ) | (128 | ) | (71 | ) | (137 | ) | ||||||||
Comprehensive income | $ | 79,450 | $ | 71,598 | $ | 173,371 | $ | 165,374 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
In thousands | November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | ||||||||||||
Net earnings | $ | 74,713 | $ | 81,465 | $ | 190,017 | $ | 178,346 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments | 1,783 | (1,830 | ) | (2,477 | ) | (5,968 | ) | |||||||||
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $97, $(23), $163 and $378 | 5 | (65 | ) | 77 | 1,064 | |||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax of $187, $43, $221 and $19 | (8 | ) | (120 | ) | (235 | ) | (71 | ) | ||||||||
Comprehensive income | $ | 76,493 | $ | 79,450 | $ | 187,382 | $ | 173,371 | ||||||||
In thousands, except per share amounts | October 28, 2018 | January 28, 2018 | October 29, 2017 | |||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 164,414 | $ | 390,136 | $ | 90,779 | ||||||
Accounts receivable, net | 113,582 | 90,119 | 92,282 | |||||||||
Merchandise inventories, net | 1,197,554 | 1,061,593 | 1,176,941 | |||||||||
Prepaid catalog expenses | — | 20,517 | 19,051 | |||||||||
Prepaid expenses | 94,071 | 62,204 | 69,267 | |||||||||
Other current assets | 21,805 | 11,876 | 12,141 | |||||||||
Total current assets | 1,591,426 | 1,636,445 | 1,460,461 | |||||||||
Property and equipment, net | 931,361 | 932,283 | 931,131 | |||||||||
Deferred income taxes, net | 45,999 | 67,306 | 131,793 | |||||||||
Goodwill | 85,649 | 18,838 | 18,769 | |||||||||
Other long-term assets, net | 64,324 | 130,877 | 38,230 | |||||||||
Total assets | $ | 2,718,759 | $ | 2,785,749 | $ | 2,580,384 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 487,733 | $ | 457,144 | $ | 468,566 | ||||||
Accrued expenses | 132,398 | 134,207 | 101,434 | |||||||||
Gift card and other deferred revenue | 275,567 | 300,607 | 299,031 | |||||||||
Borrowings under revolving line of credit | 60,000 | — | 170,000 | |||||||||
Income taxes payable | 9,903 | 56,783 | 48,865 | |||||||||
Other current liabilities | 71,119 | 59,082 | 49,655 | |||||||||
Total current liabilities | 1,036,720 | 1,007,823 | 1,137,551 | |||||||||
Deferred rent and lease incentives | 205,143 | 202,134 | 195,220 | |||||||||
Long-term debt | 299,571 | 299,422 | — | |||||||||
Other long-term liabilities | 85,388 | 72,804 | 75,439 | |||||||||
Total liabilities | 1,626,822 | 1,582,183 | 1,408,210 | |||||||||
Commitments and contingencies – See Note F | ||||||||||||
Stockholders’ equity | ||||||||||||
Preferred stock: $.01 par value; 7,500 shares authorized; none issued | — | — | — | |||||||||
Common stock: $.01 par value; 253,125 shares authorized; 80,282, 83,726 and 84,478 shares issued and outstanding at October 28, 2018, January 28, 2018 and October 29, 2017, respectively | 803 | 837 | 845 | |||||||||
Additionalpaid-in capital | 570,924 | 562,814 | 557,198 | |||||||||
Retained earnings | 532,172 | 647,422 | 623,170 | |||||||||
Accumulated other comprehensive loss | (11,757 | ) | (6,782 | ) | (8,314 | ) | ||||||
Treasury stock, at cost: 2, 11 and 11 shares as of October 28, 2018, January 28, 2018 and October 29, 2017, respectively | (205 | ) | (725 | ) | (725 | ) | ||||||
Total stockholders’ equity | 1,091,937 | 1,203,566 | 1,172,174 | |||||||||
Total liabilities and stockholders’ equity | $ | 2,718,759 | $ | 2,785,749 | $ | 2,580,384 |
In thousands, except per share amounts | November 3, 2019 | February 3, 2019 | October 28, 2018 | |||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 155,025 | $ | 338,954 | $ | 164,414 | ||||||
Accounts receivable, net | 110,131 | 107,102 | 113,582 | |||||||||
Merchandise inventories, net | 1,258,541 | 1,124,992 | 1,197,554 | |||||||||
Prepaid expenses | 115,288 | 101,356 | 94,071 | |||||||||
Other current assets | 20,260 | 21,939 | 21,805 | |||||||||
Total current assets | 1,659,245 | 1,694,343 | 1,591,426 | |||||||||
Property and equipment, net | 915,740 | 929,635 | 931,361 | |||||||||
Operating lease right-of-use assets | 1,194,061 | — | — | |||||||||
Deferred income taxes, net | 41,763 | 44,055 | 45,999 | |||||||||
Goodwill | 85,355 | 85,382 | 85,649 | |||||||||
Other long-term assets, net | 67,660 | 59,429 | 64,324 | |||||||||
Total assets | $ | 3,963,824 | $ | 2,812,844 | $ | 2,718,759 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 444,279 | $ | 526,702 | $ | 487,733 | ||||||
Accrued expenses | 140,789 | 163,559 | 132,398 | |||||||||
Gift card and other deferred revenue | 296,157 | 290,445 | 275,567 | |||||||||
Borrowings under revolving line of credit | 100,000 | — | 60,000 | |||||||||
Income taxes payable | 13,182 | 21,461 | 9,903 | |||||||||
Operating lease liabilities | 225,530 | — | — | |||||||||
Other current liabilities | 68,973 | 72,645 | 71,119 | |||||||||
Total current liabilities | 1,288,910 | 1,074,812 | 1,036,720 | |||||||||
Deferred rent and lease incentives | 29,388 | 201,374 | 205,143 | |||||||||
Long-term debt | 299,769 | 299,620 | 299,571 | |||||||||
Long-term operating lease liabilities | 1,127,403 | — | — | |||||||||
Other long-term liabilities | 86,461 | 81,324 | 85,388 | |||||||||
Total liabilities | 2,831,931 | 1,657,130 | 1,626,822 | |||||||||
Commitments and contingencies – See Note F | ||||||||||||
Stockholders’ equity | ||||||||||||
Preferred stock: $.01 par value; 7,500 shares authorized; NaN issued | — | — | — | |||||||||
Common stock: $.01 par value; 253,125 shares authorized; 77,612, 78,813 and 80,282 shares issued and outstanding at November 3, 2019, February 3, 2019 and October 28, 2018, respectively | 777 | 789 | 803 | |||||||||
Additional paid-in capital | 594,991 | 581,900 | 570,924 | |||||||||
Retained earnings | 550,774 | 584,333 | 532,172 | |||||||||
Accumulated other comprehensive loss | (13,708 | ) | (11,073 | ) | (11,757 | ) | ||||||
Treasury stock, at cost: 14, 2 and 2 shares as of November 3, 2019, February 3, 2019 and October 28, 2018, respectively | (941 | ) | (235 | ) | (205 | ) | ||||||
Total stockholders’ equity | 1,131,893 | 1,155,714 | 1,091,937 | |||||||||
Total liabilities and stockholders’ equity | $ | 3,963,824 | $ | 2,812,844 | $ | 2,718,759 | ||||||
STOCKHOLDERS’ EQUITY
Thirty-nine Weeks Ended | ||||||||
In thousands | October 28, 2018 | October 29, 2017 | ||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 178,346 | $ | 163,785 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 141,167 | 135,473 | ||||||
Loss on disposal/impairment of assets | 5,290 | 1,299 | ||||||
Amortization of deferred lease incentives | (19,728 | ) | (18,987 | ) | ||||
Deferred income taxes | 12,170 | (11,884 | ) | |||||
Tax benefit related to stock-based awards | 10,361 | 15,439 | ||||||
Stock-based compensation expense | 40,953 | 30,164 | ||||||
Other | (389 | ) | (416 | ) | ||||
Changes in: | ||||||||
Accounts receivable | (21,851 | ) | (2,341 | ) | ||||
Merchandise inventories | (143,723 | ) | (197,757 | ) | ||||
Prepaid catalog expenses | — | 447 | ||||||
Prepaid expenses and other assets | (50,171 | ) | (19,814 | ) | ||||
Accounts payable | 8,689 | 7,728 | ||||||
Accrued expenses and other liabilities | 19,002 | (28,775 | ) | |||||
Gift card and other deferred revenue | 24,048 | (4,108 | ) | |||||
Deferred rent and lease incentives | 23,695 | 17,000 | ||||||
Income taxes payable | (48,358 | ) | 25,677 | |||||
Net cash provided by operating activities | 179,501 | 112,930 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (128,326 | ) | (135,821 | ) | ||||
Other | 1,804 | 458 | ||||||
Net cash used in investing activities | (126,522 | ) | (135,363 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchases of common stock | (220,221 | ) | (154,321 | ) | ||||
Payment of dividends | (105,654 | ) | (101,928 | ) | ||||
Borrowings under revolving line of credit | 60,000 | 170,000 | ||||||
Tax withholdings related to stock-based awards | (13,906 | ) | (14,836 | ) | ||||
Other | — | (20 | ) | |||||
Net cash used in financing activities | (279,781 | ) | (101,105 | ) | ||||
Effect of exchange rates on cash and cash equivalents | 1,080 | 604 | ||||||
Net decrease in cash and cash equivalents | (225,722 | ) | (122,934 | ) | ||||
Cash and cash equivalents at beginning of period | 390,136 | 213,713 | ||||||
Cash and cash equivalents at end of period | $ | 164,414 | $ | 90,779 |
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||
In thousands | Shares | Amount | ||||||||||||||||||||||||||
Balance at February 3, 2019 | 78,813 | $ | 789 | $ | 581,900 | $ | 584,333 | $ | (11,073 | ) | $ | (235 | ) | $ | 1,155,714 | |||||||||||||
Net earnings | — | — | — | 52,656 | — | — | 52,656 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (3,009 | ) | — | (3,009 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 204 | — | 204 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (67 | ) | — | (67 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 571 | 5 | (25,298 | ) | — | — | (113 | ) | (25,406 | ) | ||||||||||||||||||
Repurchases of common stock | (576 | ) | (6 | ) | (2,874 | ) | (30,010 | ) | — | (958 | ) | (33,848 | ) | |||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (332 | ) | — | — | 332 | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 18,376 | — | — | — | 18,376 | |||||||||||||||||||||
Dividends declared | — | — | — | (39,549 | ) | — | — | (39,549 | ) | |||||||||||||||||||
Adoption of accounting pronouncements 2 | — | — | — | (3,303 | ) | — | — | (3,303 | ) | |||||||||||||||||||
Balance at May 5, 2019 | 78,808 | $ | 788 | $ | 571,772 | $ | 564,127 | $ | (13,945 | ) | $ | (974 | ) | $ | 1,121,768 | |||||||||||||
Net earnings | — | — | — | 62,648 | — | — | 62,648 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (1,251 | ) | — | (1,251 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | (132 | ) | — | (132 | ) | |||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (160 | ) | — | (160 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 31 | 1 | (482 | ) | — | — | — | (481 | ) | |||||||||||||||||||
Repurchases of common stock | (636 | ) | (6 | ) | (3,170 | ) | (35,107 | ) | — | — | (38,283 | ) | ||||||||||||||||
Stock-based compensation expense | — | — | 16,708 | — | — | — | 16,708 | |||||||||||||||||||||
Dividends declared | — | — | — | (39,214 | ) | — | — | (39,214 | ) | |||||||||||||||||||
Balance at August 4, 2019 | 78,203 | $ | 783 | $ | 584,828 | $ | 552,454 | $ | (15,488 | ) | $ | (974 | ) | $ | 1,121,603 | |||||||||||||
Net earnings | — | — | — | 74,713 | — | — | 74,713 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 1,783 | — | 1,783 | |||||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 5 | — | 5 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (8 | ) | — | (8 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 19 | — | (715 | ) | — | — | (21 | ) | (736 | ) | ||||||||||||||||||
Repurchases of common stock | (610 | ) | (6 | ) | (3,068 | ) | (37,509 | ) | — | — | (40,583 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (54 | ) | — | — | 54 | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 14,000 | — | — | — | 14,000 | |||||||||||||||||||||
Dividends declared | — | — | — | (38,884 | ) | — | — | (38,884 | ) | |||||||||||||||||||
Balance at November 3, 2019 | 77,612 | $ | 777 | $ | 594,991 | $ | 550,774 | $ | (13,708 | ) | $ | (941 | ) | $ | 1,131,893 | |||||||||||||
1 | Amounts are shown net of shares withheld for employee taxes. |
2 | Relates to our adoption of ASU 2016-02, Leases, in fiscal 2019. See Note A. |
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||
In thousands | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 28, 2018 | 83,726 | $ | 837 | $ | 562,814 | $ | 647,422 | $ | (6,782 | ) | $ | (725 | ) | $ | 1,203,566 | |||||||||||||
Net earnings | — | — | — | 45,168 | — | — | 45,168 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (1,145 | ) | — | (1,145 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 1,123 | — | 1,123 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | 49 | — | 49 | |||||||||||||||||||||
Conversion/release of stock-based awards 1 | 228 | 3 | (7,213 | ) | — | — | (226 | ) | (7,436 | ) | ||||||||||||||||||
Repurchases of common stock | (732 | ) | (7 | ) | (3,437 | ) | (34,269 | ) | — | — | (37,713 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (290 | ) | (358 | ) | — | 648 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 12,811 | — | — | — | 12,811 | |||||||||||||||||||||
Dividends declared | — | — | — | (36,877 | ) | — | — | (36,877 | ) | |||||||||||||||||||
Adoption of accounting pronouncements 2 | — | — | — | 17,688 | — | — | 17,688 | |||||||||||||||||||||
Balance at April 29, 2018 | 83,222 | $ | 833 | $ | 564,685 | $ | 638,774 | $ | (6,755 | ) | $ | (303 | ) | $ | 1,197,234 | |||||||||||||
Net earnings | — | — | — | 51,713 | — | — | 51,713 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (2,993 | ) | — | (2,993 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 6 | — | 6 | |||||||||||||||||||||
Conversion/release of stock-based awards 1 | 175 | 2 | (4,869 | ) | — | — | (32 | ) | (4,899 | ) | ||||||||||||||||||
Repurchases of common stock | (2,409 | ) | (25 | ) | (11,431 | ) | (125,649 | ) | — | — | (137,105 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (72 | ) | (5 | ) | — | 77 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 13,497 | — | — | — | 13,497 | |||||||||||||||||||||
Dividends declared | — | — | — | (36,465 | ) | — | — | (36,465 | ) | |||||||||||||||||||
Balance at July 29, 2018 | 80,988 | $ | 810 | $ | 561,810 | $ | 528,368 | $ | (9,742 | ) | $ | (258 | ) | $ | 1,080,988 | |||||||||||||
Net earnings | — | — | — | 81,465 | — | — | 81,465 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (1,830 | ) | — | (1,830 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | (65 | ) | — | (65 | ) | |||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (120 | ) | — | (120 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 37 | — | (1,571 | ) | — | — | — | (1,571 | ) | |||||||||||||||||||
Repurchases of common stock | (743 | ) | (7 | ) | (3,604 | ) | (41,792 | ) | — | — | (45,403 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (53 | ) | — | — | 53 | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 14,342 | — | — | — | 14,342 | |||||||||||||||||||||
Dividends declared | — | — | — | (35,869 | ) | — | — | (35,869 | ) | |||||||||||||||||||
Balance at October 28, 2018 | 80,282 | $ | 803 | $ | 570,924 | $ | 532,172 | $ | (11,757 | ) | $ | (205 | ) | $ | 1,091,937 | |||||||||||||
1 | Amounts are shown net of shares withheld for employee taxes. |
2 | Primarily relates to our adoption of ASU 2014-09, Revenue from Contracts with Customers, in fiscal 2018. |
Thirty-nine Weeks Ended | ||||||||
In thousands | November 3, 2019 | October 28, 2018 | ||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 190,017 | $ | 178,346 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 140,495 | 141,167 | ||||||
L oss on disposal/impairment of assets | 682 | 5,290 | ||||||
Amortization of deferred lease incentives | (5,985 | ) | (19,728 | ) | ||||
Non-cash lease expense | 160,138 | — | ||||||
Deferred income taxes | (10,937 | ) | 12,170 | |||||
Tax benefit related to stock-based awards | 13,648 | 10,361 | ||||||
Stock-based compensation expense | 49,516 | 40,953 | ||||||
Other | 14 | (389 | ) | |||||
Changes in: | ||||||||
Accounts receivable | (2,842 | ) | (21,851 | ) | ||||
Merchandise inventories | (133,637 | ) | (143,723 | ) | ||||
Prepaid expenses and other assets | (24,157 | ) | (50,171 | ) | ||||
Accounts payable | (92,101 | ) | 8,689 | |||||
Accrued expenses and other liabilities | (24,148 | ) | 19,002 | |||||
Gift card and other deferred revenue | 5,848 | 24,048 | ||||||
Deferred rent and lease incentives | — | 23,695 | ||||||
Operating lease liabilities | (168,308 | ) | — | |||||
Income taxes payable | (8,293 | ) | (48,358 | ) | ||||
Net cash provided by operating activities | 89,950 | 179,501 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (121,154 | ) | (128,326 | ) | ||||
Other | 470 | 1,804 | ||||||
Net cash used in investing activities | (120,684 | ) | (126,522 | ) | ||||
Cash flows from financing activities: | ||||||||
Payment of dividends | (113,159 | ) | (105,654 | ) | ||||
Repurchases of common stock | (112,714 | ) | (220,221 | ) | ||||
Borrowings under revolving line of credit | 100,000 | 60,000 | ||||||
Tax withholdings related to stock-based awards | (26,623 | ) | (13,906 | ) | ||||
Net cash used in financing activities | (152,496 | ) | (279,781 | ) | ||||
Effect of exchange rates on cash and cash equivalents | (699 | ) | 1,080 | |||||
Net decrease in cash and cash equivalents | (183,929 | ) | (225,722 | ) | ||||
Cash and cash equivalents at beginning of period | 338,954 | 390,136 | ||||||
Cash and cash equivalents at end of period | $ | 155,025 | $ | 164,414 | ||||
February 3, 2019.
Reclassifications
Certain amounts reported in our Condensed Consolidated Balance Sheets as of January 28, 2018 and October 29, 2017 and our Condensed Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 29, 2017 have been reclassified in order to conform to the current period presentation. These reclassifications impacted prepaid catalog expenses, prepaid expenses, goodwill, other long-term assets, accounts payable, accrued expenses, gift card and other deferred revenue and other current liabilities. There was no change to total current assets, total assets, total current liabilities, or cash flows as a result of these reclassifications.
February 3, 2019.
In February 2016, the FASB issued ASU2016-02,Leases,which will requirerequires lessees to recognize aaan operating lease liability for virtually all of their leases (other than short-term leases).leases. This ASU, as amended, iswas effective for us beginning in the first quarter of fiscal 2019. The adoption of this ASU resulted in an increase in total long-term assets and total liabilities of approximately $1.2 billion, which includes an increase in liabilities for lease obligations of approximately $1.4 billion, a decrease in deferred rent and deferred lease incentives of approximately $0.2 billion, and an increase inplanalso recorded an approximate $3.3 million, net of tax, reduction to the opening balance of retained earnings resulting from the impairment of certain long-lived assets upon adoption of this ASU. We have elected to apply the provisions of this ASU at the adoption date, instead of to the earliest comparative period presented in the financial statements, withstatements. We have elected the package of practical expedients upon adoption, which permits us not to reassess whether existing contracts are or contain leases, the lease classification of existing leases, or initial direct costs for existing leases. We have also elected not to separate lease and cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We are currently assessing the impacton our Consolidated Financial Statements, but expect that it will result in a substantial increase in our long-term assets and liabilities, however, we dodid not expect it to materially impact our Condensed Consolidated Statement of Earnings.
20, 2021.
Stock-Settled
A stock-settled stock appreciation right is an award that allows the recipient to receive common stock equal to the appreciation in the fair market value of our common stock between the grant date and the conversion date for the number of shares converted.
Units
| ||||
| ||||
| ||||
| ||||
|
Restricted Stock Units
The following table summarizes our
Shares | ||||
Balance at February 3, 2019 | 3,012,923 | |||
Granted | 1,036,010 | |||
| ||||
Granted, with vesting subject to performance conditions | 238,786 | |||
Released 1 | ( | ) | ||
Cancelled | ( | ) | ||
| ||||
Balance at November 3, 2019 | 2,954,974 | |||
Vested plus expected to vest at | 3,115,488 | |||
In thousands, except per share amounts | Net Earnings | Weighted Average Shares | Earnings Per Share | |||||||||
Thirteen weeks ended October 28, 2018 | ||||||||||||
Basic | $ | 81,465 | 80,475 | $ | 1.01 | |||||||
Effect of dilutive stock-based awards | 1,166 | |||||||||||
Diluted | $ | 81,465 | 81,641 | $ | 1.00 | |||||||
Thirteen weeks ended October 29, 2017 | ||||||||||||
Basic | $ | 71,313 | 84,940 | $ | 0.84 | |||||||
Effect of dilutive stock-based awards | 444 | |||||||||||
Diluted | $ | 71,313 | 85,384 | $ | 0.84 | |||||||
Thirty-nine weeks ended October 28, 2018 | ||||||||||||
Basic | $ | 178,346 | 82,070 | $ | 2.17 | |||||||
Effect of dilutive stock-based awards | 881 | |||||||||||
Diluted | $ | 178,346 | 82,951 | $ | 2.15 | |||||||
Thirty-nine weeks ended October 29, 2017 | ||||||||||||
Basic | $ | 163,785 | 86,111 | $ | 1.90 | |||||||
Effect of dilutive stock-based awards | 471 | |||||||||||
Diluted | $ | 163,785 | 86,582 | $ | 1.89 |
In thousands, except per share amounts | Net Earnings | Weighted Average Shares | Earnings Per Share | |||||||||
Thirteen weeks ended November 3, 2019 | ||||||||||||
Basic | $ | 74,713 | 77,897 | $ | 0.96 | |||||||
Effect of dilutive stock-based awards | 1,294 | |||||||||||
Diluted | $ | 74,713 | 79,191 | $ | 0.94 | |||||||
Thirteen weeks ended October 28, 2018 | ||||||||||||
Basic | $ | 81,465 | 80,475 | $ | 1.01 | |||||||
Effect of dilutive stock-based awards | 1,166 | |||||||||||
Diluted | $ | 81,465 | 81,641 | $ | 1.00 | |||||||
Thirty-nine weeks ended November 3, 2019 | ||||||||||||
Basic | $ | 190,017 | 78,356 | $ | 2.43 | |||||||
Effect of dilutive stock-based awards | 1,109 | |||||||||||
Diluted | $ | 190,017 | 79,465 | $ | 2.39 | |||||||
Thirty-nine weeks ended October 28, 2018 | ||||||||||||
Basic | $ | 178,346 | 82,070 | $ | 2.17 | |||||||
Effect of dilutive stock-based awards | 881 | |||||||||||
Diluted | $ | 178,346 | 82,951 | $ | 2.15 | |||||||
REP
Theseinto a single reportable segments are strategic business units that offer similar productssegment.
We use operating income to evaluate segment profitability. Operating income is defined as earnings (loss) before net interest income (expense) and income taxes. Unallocated costs before interest and income taxes include corporate employee-related costs, occupancy expenses (including depreciation expense), administrative costs and third-party service costs, primarily in our corporate administrative and systems departments. Unallocated assets include corporate cash and cash equivalents, prepaid expenses, the net book value of corporate facilities and related information systems, deferred income taxes and other corporate long-lived assets.
Income taxes are calculated at an entity level and are not allocated to our reportable segments.
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
In thousands | November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | ||||||||||||
Pottery Barn | $ | 556,985 | $ | 533,469 | $ | 1,573,958 | $ | 1,530,300 | ||||||||
West Elm | 390,341 | 339,099 | 1,057,398 | 913,662 | ||||||||||||
Williams Sonoma | 205,493 | 203,936 | 591,761 | 600,092 | ||||||||||||
Pottery Barn Kids and Teen | 228,051 | 227,331 | 632,950 | 621,534 | ||||||||||||
Other 1 | 61,602 | 53,148 | 198,351 | 169,569 | ||||||||||||
Total 2 | $ | 1,442,472 | $ | 1,356,983 | $ | 4,054,418 | $ | 3,835,157 | ||||||||
Segment Information
In thousands | E-commerce | Retail | Unallocated | Total | ||||||||||||
Thirteen weeks ended October 28, 2018 | ||||||||||||||||
Net revenues1 | $ | 746,716 | $ | 610,267 | $ | — | $ | 1,356,983 | ||||||||
Depreciation and amortization expense | 9,877 | 21,574 | 15,907 | 47,358 | ||||||||||||
Operating income (loss)2 | 152,204 | 45,052 | (102,872 | ) | 94,384 | |||||||||||
Capital expenditures | 12,068 | 20,038 | 16,199 | 48,305 | ||||||||||||
Thirteen weeks ended October 29, 2017 | ||||||||||||||||
Net revenues1 | $ | 690,045 | $ | 609,291 | $ | — | $ | 1,299,336 | ||||||||
Depreciation and amortization expense | 6,870 | 22,555 | 16,000 | 45,425 | ||||||||||||
Operating income (loss)2 | 142,865 | 42,804 | (74,856 | ) | 110,813 | |||||||||||
Capital expenditures | 13,184 | 22,066 | 17,844 | 53,094 | ||||||||||||
Thirty-nine weeks ended October 28, 2018 | ||||||||||||||||
Net revenues1 | $ | 2,079,838 | $ | 1,755,319 | $ | — | $ | 3,835,157 | ||||||||
Depreciation and amortization expense | 26,874 | 67,067 | 47,226 | 141,167 | ||||||||||||
Operating income (loss)2 | 432,245 | 101,035 | (298,180 | ) | 235,100 | |||||||||||
Assets3 | 874,259 | 1,156,075 | 688,425 | 2,718,759 | ||||||||||||
Capital expenditures | 26,820 | 55,728 | 45,778 | 128,326 | ||||||||||||
Thirty-nine weeks ended October 29, 2017 | ||||||||||||||||
Net revenues1 | $ | 1,901,348 | $ | 1,711,101 | $ | — | $ | 3,612,449 | ||||||||
Depreciation and amortization expense | 20,625 | 67,282 | 47,566 | 135,473 | ||||||||||||
Operating income (loss)2 | 410,008 | 99,110 | (254,247 | ) | 254,871 | |||||||||||
Assets3 | 732,842 | 1,156,117 | 691,425 | 2,580,384 | ||||||||||||
Capital expenditures | 24,173 | 61,851 | 49,797 | 135,821 |
1 |
|
2 | Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately |
|
|
In thousands | November 3, 2019 | October 28, 2018 | ||||||
U.S. | $ | 2,140,505 | $ | 1,076,367 | ||||
International | 164,074 | 50,966 | ||||||
Total | $ | 2,304,579 | $ | 1,127,333 | ||||
During the thirteen weeks ended October 29, 2017, we repurchased 1,301,373 shares of our common stock at an average cost of $46.84 per share for a total cost of approximately $60,960,000. During the thirty-nine weeks ended October 29, 2017, we repurchased 3,226,297 shares of our common stock at an average cost of $47.83 per share for a total cost of approximately $154,321,000. As of October 29, 2017, we held treasury stock in the amount of $725,000.
In thousands | October 28, 2018 | October 29, 2017 | ||||||
Contracts designated as cash flow hedges | $ | 13,300 | $ | 23,000 | ||||
Contracts not designated as cash flow hedges | $ | 5,200 | $ | 48,000 |
In thousands | November 3, 2019 | October 28, 2018 | ||||||
Contracts designated as cash flow hedges | $ | 19,700 | $ | 13,300 | ||||
Contracts not designated as cash flow hedges | $ | — | $ | 5,200 |
The effect of derivative instruments in our Condensed Consolidated Financial Statements during the thirteen and thirty-nine weeks ended November 3, 2019 and October 28, 2018, and October 29, 2017,
In thousands | Thirteen Weeks Ended October 28, 2018 | Thirteen Weeks Ended October 29, 2017 | Thirty-nine Weeks Ended October 28, 2018 | Thirty-nine Weeks Ended October 29, 2017 | ||||||||||||
Net gain (loss) recognized in OCI | $ | (88 | ) | $ | 506 | $ | 1,442 | $ | (190 | ) | ||||||
Net gain (loss) reclassified from OCI into cost of goods sold | $ | 163 | $ | 173 | $ | 90 | $ | 185 | ||||||||
Net foreign exchange gain (loss) recognized in selling, general and administrative expenses: | ||||||||||||||||
Instruments designated as cash flow hedges1 | $ | 16 | $ | 20 | $ | 49 | $ | 75 | ||||||||
Instruments not designated orde-designated | $ | 105 | $ | 1,752 | $ | 4,048 | $ | (1,096 | ) |
|
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | |||||||||||||||||||||||||||||
In thousands | Cost of goods sold | Selling, general and administrative expenses | Cost of goods sold | Selling, general and administrative expenses | Cost of goods sold | Selling, general and administrative expenses | Cost of goods sold | Selling, general and administrative expenses | ||||||||||||||||||||||||
Line items presented in the Condensed Consolidated Statement of Earnings in which the effects of derivatives are recorded | $ | 924,300 | $ | 416,281 | $ | 861,999 | $ | 400,600 | $ | 2,608,054 | $ | 1,184,176 | $ | 2,444,067 | $ | 1,155,990 | ||||||||||||||||
Gain (loss) recognized in income | ||||||||||||||||||||||||||||||||
Derivatives designated as cash flow hedges | $ | 204 | $ | — | $ | 163 | $ | 16 | $ | 499 | $ | — | $ | 90 | $ | 49 | ||||||||||||||||
Derivatives not designated as hedging instruments | $ | — | $ | 6 | $ | — | $ | 105 | $ | — | $ | 24 | $ | — | $ | 4,048 |
In thousands | October 28, 2018 | October 29, 2017 | ||||||
Derivatives designated as cash flow hedges: | ||||||||
Other current assets | $ | 504 | $ | 161 | ||||
Other long-term assets | $ | — | $ | 25 | ||||
Other current liabilities | $ | — | $ | (131 | ) | |||
Other long-term liabilities | $ | — | $ | (11 | ) | |||
Derivatives not designated as hedging instruments: | ||||||||
Other current assets | $ | 118 | $ | 209 |
In thousands | November 3, 2019 | October 28, 2018 | ||||||
Derivatives designated as cash flow hedges: | ||||||||
Other current assets | $ | 132 | $ | 504 | ||||
Derivatives not designated as hedging instruments: | ||||||||
Other current assets | $ | — | $ | 118 |
NOTE
Property and Equipment
commensurate with the risk.
In thousands | Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income (Loss) | |||||||||
Balance at January 28, 2018 | $ | (6,227 | ) | $ | (555 | ) | $ | (6,782 | ) | |||
Foreign currency translation adjustments | (1,145 | ) | — | (1,145 | ) | |||||||
Change in fair value of derivative financial instruments | — | 1,123 | 1,123 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | 49 | 49 | |||||||||
Other comprehensive income (loss) | (1,145 | ) | 1,172 | 27 | ||||||||
Balance at April 29, 2018 | (7,372 | ) | 617 | (6,755 | ) | |||||||
Foreign currency translation adjustments | (2,993 | ) | — | (2,993 | ) | |||||||
Change in fair value of derivative financial instruments | — | 6 | 6 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | — | — | |||||||||
Other comprehensive income (loss) | (2,993 | ) | 6 | (2,987 | ) | |||||||
Balance at July 29, 2018 | (10,365 | ) | 623 | (9,742 | ) | |||||||
Foreign currency translation adjustments | (1,830 | ) | — | (1,830 | ) | |||||||
Change in fair value of derivative financial instruments | — | (65 | ) | (65 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | (120 | ) | (120 | ) | |||||||
Other comprehensive income (loss) | (1,830 | ) | (185 | ) | (2,015 | ) | ||||||
Balance at October 28, 2018 | $ | (12,195 | ) | $ | 438 | $ | (11,757 | ) | ||||
Balance at January 29, 2017 | $ | (9,957 | ) | $ | 54 | $ | (9,903 | ) | ||||
Foreign currency translation adjustments | (1,566 | ) | — | (1,566 | ) | |||||||
Change in fair value of derivative financial instruments | — | 655 | 655 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | (16 | ) | (16 | ) | |||||||
Other comprehensive income (loss) | (1,566 | ) | 639 | (927 | ) | |||||||
Balance at April 30, 2017 | (11,523 | ) | 693 | (10,830 | ) | |||||||
Foreign currency translation adjustments | 3,390 | — | 3,390 | |||||||||
Change in fair value of derivative financial instruments | — | (1,166 | ) | (1,166 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | 7 | 7 | |||||||||
Other comprehensive income (loss) | 3,390 | (1,159 | ) | 2,231 | ||||||||
Balance at July 30, 2017 | (8,133 | ) | (466 | ) | (8,599 | ) | ||||||
Foreign currency translation adjustments | 40 | — | 40 | |||||||||
Change in fair value of derivative financial instruments | — | 373 | 373 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | (128 | ) | (128 | ) | |||||||
Other comprehensive income (loss) | 40 | 245 | 285 | |||||||||
Balance at October 29, 2017 | $ | (8,093 | ) | $ | (221 | ) | $ | (8,314 | ) |
|
In thousands | Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income (Loss) | |||||||||
Balance at February 3, 2019 | $ | (11,259 | ) | $ | 186 | $ | (11,073 | ) | ||||
Foreign currency translation adjustments | (3,009 | ) | — | (3,009 | ) | |||||||
Change in fair value of derivative financial instruments | — | 204 | 204 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments | — | (67 | ) | (67 | ) | |||||||
Other comprehensive income (loss) | (3,009 | ) | 137 | (2,872 | ) | |||||||
Balance at May 5, 2019 | (14,268 | ) | 323 | (13,945 | ) | |||||||
Foreign currency translation adjustments | (1,251 | ) | — | (1,251 | ) | |||||||
Change in fair value of derivative financial instruments | — | (132 | ) | (132 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments | — | (160 | ) | (160 | ) | |||||||
Other comprehensive income (loss) | (1,251 | ) | (292 | ) | (1,543 | ) | ||||||
Balance at August 4, 2019 | (15,519 | ) | 31 | (15,488 | ) | |||||||
Foreign currency translation adjustments | 1,783 | — | 1,783 | |||||||||
Change in fair value of derivative financial instruments | — | 5 | 5 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments | — | (8 | ) | (8 | ) | |||||||
Other comprehensive income (loss) | 1,783 | (3 | ) | 1,780 | ||||||||
Balance at November 3, 2019 | $ | (13,736 | ) | $ | 28 | $ | (13,708 | ) | ||||
Balance at January 28, 2018 | $ | (6,227 | ) | $ | (555 | ) | $ | (6,782 | ) | |||
Foreign currency translation adjustments | (1,145 | ) | — | (1,145 | ) | |||||||
Change in fair value of derivative financial instruments | — | 1,123 | 1,123 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments | — | 49 | 49 | |||||||||
Other comprehensive income (loss) | (1,145 | ) | 1,172 | 27 | ||||||||
Balance at April 29, 2018 | (7,372 | ) | 617 | (6,755 | ) | |||||||
Foreign currency translation adjustments | (2,993 | ) | — | (2,993 | ) | |||||||
Change in fair value of derivative financial instruments | — | 6 | 6 | |||||||||
Other comprehensive income (loss) | (2,993 | ) | 6 | (2,987 | ) | |||||||
Balance at July 29, 2018 | (10,365 | ) | 623 | (9,742 | ) | |||||||
Foreign currency translation adjustments | (1,830 | ) | — | (1,830 | ) | |||||||
Change in fair value of derivative financial instruments | — | (65 | ) | (65 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments | — | (120 | ) | (120 | ) | |||||||
Other comprehensive income (loss) | (1,830 | ) | (185 | ) | (2,015 | ) | ||||||
Balance at October 28, 2018 | $ | (12,195 | ) | $ | 438 | $ | (11,757 | ) |
In thousands | ||||
Working capital and other assets | $ | 718,000 | ||
Property and equipment, net | 2,049,000 | |||
Intangible assets | 18,300,000 | |||
Liabilities | (7,160,000 | ) | ||
Total identifiable net assets acquired | $ | 13,907,000 | ||
Goodwill | 66,905,000 | |||
Total purchase consideration | $ | 80,812,000 |
During the second quarter of fiscal 2018, we finalized the valuation of intangible
Working capital and other assets | $ | 718,000 | ||
Property and equipment, net | 2,049,000 | |||
Intangible assets | 18,300,000 | |||
Liabilities | (6,886,000 | ) | ||
Total identifiable net assets acquired | $ | 14,181,000 | ||
Goodwill | 66,631,000 | |||
Total purchase consideration | $ | 80,812,000 |
Adoption
the arrangement. Lease commencement is determined to be when the lessor provides us access to, and the right to control, the identified asset.
calculation of lease liabilities. Our variable lease payments include: rent payments that are based on a percentage of sales; contingent payments until the reclassification from selling, generalresolution of the contingency is reasonably certain; and administrative expenses into net revenuesrent increases based on a future index.
an amount equal to the reclassification of breakage income relatedlease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and
an acceleration
the recording
The following summarizes the impact of adopting ASU2014-09 on our Condensed Consolidated Statement of Earningslease costs for the thirteen and thirty-nine weeks ended October 28, 2018.
Thirteen Weeks Ended October 28, 2018 | Thirty-nine Weeks Ended October 28, 2018 | |||||||||||||||||||||||
In thousands | As Reported | ASU 2014-09 Adjustment1 | As Adjusted | As Reported | ASU 2014-09 Adjustment1 | As Adjusted | ||||||||||||||||||
Net revenue | $ | 1,356,983 | $ | (17,390 | ) | $ | 1,339,593 | $ | 3,835,157 | $ | (59,322 | ) | $ | 3,775,835 | ||||||||||
Cost of goods sold | 861,999 | (2,775 | ) | 859,224 | 2,444,067 | (11,176 | ) | 2,432,891 | ||||||||||||||||
Gross profit | 494,984 | (14,615 | ) | 480,369 | 1,391,090 | (48,146 | ) | 1,342,944 | ||||||||||||||||
Selling, general and administrative expenses | 400,600 | (10,334 | ) | 390,266 | 1,155,990 | (33,504 | ) | 1,122,486 | ||||||||||||||||
Operating income | $ | 94,384 | $ | (4,281 | ) | $ | 90,103 | $ | 235,100 | $ | (14,642 | ) | $ | 220,458 |
|
Other than the presentation of our sales returns liability and a right of return asset, which resulted in a reclassification of liabilities into other current assets of approximately $9,567,000, all other impacts to our Condensed Consolidated Balance Sheet from the adoption of this ASUshort-term lease costs were not material either individually or into us for the aggregate as of October 28, 2018. The adoption of this ASU had no net impact to our Condensed Consolidated Statement of Cash Flows for thethirteen and thirty-nine weeks ended November 3 ,2019.
In thousands | Thirteen weeks ended November 3, 2019 | Thirty-nine weeks ended November 3, 2019 | ||||||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 71,136 | $ | 212,530 | ||||
Net additions to right-of-use assets | 38,311 | 120,704 |
Weighted average remaining lease term (years) | 7.43 | |||
Weighted average incremental borrowing rate | 3.72 | % |
In thousands | ||||
Remaining fiscal 2019 | $ | 66,826 | ||
Fiscal 2020 | 273,977 | |||
Fiscal 2021 | 240,772 | |||
Fiscal 2022 | 207,974 | |||
Fiscal 2023 | 174,827 | |||
Fiscal 2024 | 151,029 | |||
Fiscal 2025 and thereafter | 453,319 | |||
Total lease payments | 1,568,724 | |||
Less interest | (215,791 | ) | ||
Total operating lease liabilities | 1,352,933 | |||
Less current operating lease liabilities | (225,530 | ) | ||
Total non-current operating lease liabilities | $ | 1,127,403 |
In thousands | ||||
Fiscal 2019 | $ | 292,387 | ||
Fiscal 2020 | 262,429 | |||
Fiscal 2021 | 225,755 | |||
Fiscal 2022 | 190,263 | |||
Fiscal 2023 | 160,308 | |||
Thereafter | 559,802 | |||
Total | $ | 1,690,944 |
All explanations of changes in operational results are discussed in order of their magnitude.
quarterQuarter of Fiscal 20182019 Financial Results
these increased costs.
In the third quarter of fiscal 2018,2019, we also made progress across our strategic initiatives of driving growth through cross-brand initiatives and improving the customer experience through technology innovation and operational improvements.
In digital leadership, wecustomer acquisition as total membership continued to leveragegrow during the powerquarter. Our cross-brand
In product innovation we expandedWest Coast distribution center in Fontana, California is now fully operational, facilitating growth for our partnership with the Harry Potter franchise and coordinated the releases of our One Home collection to all three Pottery Barn brands. We also introduced Design Crew Basics, a proprietary collection of low price, high quality essentials for the home. In addition, our incremental growth initiatives, such as PB Apartment and Modern Baby, continued to attract new customers. In Williams Sonoma, our customers continued to respond to unique innovations only available through our brand, and West Elm brand on the West Coast.
Under our strategic priority of retail transformation, we continued to execute on our remodel strategy while selectively investing in new stores. In our global business we continued to expand our presence with the introduction of Pottery Barn Kids in three newshop-in-shop locations as well ase-commerce in the United Kingdom. We also entered into a new franchise partnership in India for entry in early 2020.
We also remain committed to operational excellence. During the third quarter, we continued to drive efficiency improvements and cost reductions throughout the supply chain. Production shipments from our domestic manufacturing facility increased during the quarter, and we further reduced company-wide damages. We made progress on our multi-year transition to One Inventory, which will allow us tore-engineer inventory flow processes, better allocate inventory cross-channel, optimize inventory levels, improve our distribution center efficiency and bring down costs in the supply chain. And, despite tightness in the labor market, we are aheadinnovation is reflected in our seasonal hiring compared to last year, helped by the recent increase in hourly wage and incentive pay inbusiness results. Our value proposition of high quality,
multi-brand, digital-first operating model is a strong combination.
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
In thousands | October 28, 2018 | % Total | October 29, 2017 | % Total | October 28, 2018 | % Total | October 29, 2017 | % Total | ||||||||||||||||||||||||
E-commerce net revenues | $ | 746,716 | 55.0 | % | $ | 690,045 | 53.1 | % | $ | 2,079,838 | 54.2 | % | $ | 1,901,348 | 52.6 | % | ||||||||||||||||
Retail net revenues | 610,267 | 45.0 | % | 609,291 | 46.9 | % | 1,755,319 | 45.8 | % | 1,711,101 | 47.4 | % | ||||||||||||||||||||
Net revenues | $ | 1,356,983 | 100.0 | % | $ | 1,299,336 | 100.0 | % | $ | 3,835,157 | 100.0 | % | $ | 3,612,449 | 100.0 | % |
Net revenues foryear-to-date fiscal 2018 increased by $222,708,000, or 6.2%, compared toyear-to-date fiscal 2017, with comparable brand revenue growth of 4.4%. The increase in net revenues was driven by a 9.4% increase in oure-commerce net revenues with growth across all brands and a 2.6% increase in our retail net revenues primarily driven by West Elm and Pottery Barn, with particular strength in furniture.Barn. Net revenue growth also included a double-digit net revenue9.2% increase in international revenue across both our company-owned international operations, as well as the favorable impactand franchise operations.
company-owned and franchise operations.
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Comparable brand revenue growth (decline) | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||
Pottery Barn | 1.4 | % | (0.3 | %) | 2.0 | % | (0.2 | %) | ||||||||
West Elm | 8.3 | % | 11.5 | % | 8.9 | % | 9.4 | % | ||||||||
Williams Sonoma | 2.1 | % | 2.3 | % | 3.1 | % | 2.5 | % | ||||||||
Pottery Barn Kids and Teen1 | 0.0 | % | 0.9 | % | 3.4 | % | (3.0 | %) | ||||||||
Total | 3.1 | % | 3.3 | % | 4.4 | % | 2.1 | % |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||
Comparable brand revenue growth (decline) | November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | ||||||||||||
Pottery Barn | 3.4 | % | 1.4 | % | 3.1 | % | 2.0 | % | ||||||||
West Elm | 14.1 | % | 8.3 | % | 14.5 | % | 8.9 | % | ||||||||
Williams Sonoma | (2.1 | %) | 2.1 | % | (1.6 | %) | 3.1 | % | ||||||||
Pottery Barn Kids and Teen | 4.0 | % | 0.0 | % | 3.1 | % | 3.4 | % | ||||||||
Total 1 | 5.5 | % | 3.1 | % | 5.2 | % | 4.4 | % |
1 |
|
Store Count | Average Leased Square Footage Per Store | |||||||||||||||||||||||||||
July 29, 2018 | Openings | Closings | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||||||||||||
Williams Sonoma | 226 | — | — | 226 | 233 | 6,800 | 6,700 | |||||||||||||||||||||
Pottery Barn | 205 | — | — | 205 | 202 | 13,900 | 13,900 | |||||||||||||||||||||
West Elm | 109 | 3 | — | 112 | 105 | 13,200 | 13,100 | |||||||||||||||||||||
Pottery Barn Kids | 84 | — | (2 | ) | 82 | 88 | 7,500 | 7,400 | ||||||||||||||||||||
Rejuvenation | 8 | — | — | 8 | 8 | 8,800 | 8,800 | |||||||||||||||||||||
Total | 632 | 3 | (2 | ) | 633 | 636 | 10,300 | 10,200 | ||||||||||||||||||||
Store selling square footage atperiod-end |
| 4,084,000 | 4,031,000 | |||||||||||||||||||||||||
Store leased square footage atperiod-end |
| 6,551,000 | 6,468,000 |
Store Count | Average Leased Square Footage Per Store | |||||||||||||||||||||||||||
August 4, 2019 | Openings | Closings | November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | ||||||||||||||||||||||
Williams Sonoma | 218 | — | — | 218 | 226 | 6,900 | 6,800 | |||||||||||||||||||||
Pottery Barn | 205 | — | — | 205 | 205 | 14,400 | 13,900 | |||||||||||||||||||||
West Elm | 112 | 2 | — | 114 | 112 | 13,100 | 13,200 | |||||||||||||||||||||
Pottery Barn Kids | 78 | 1 | — | 79 | 82 | 7,500 | 7,500 | |||||||||||||||||||||
Rejuvenation | 10 | — | — | 10 | 8 | 8,500 | 8,800 | |||||||||||||||||||||
Total | 623 | 3 | — | 626 | 633 | 10,600 | 10,300 | |||||||||||||||||||||
Store selling square footage at period-end | 4,154,000 | 4,084,000 | ||||||||||||||||||||||||||
Store leased square footage at period-end | 6,622,000 | 6,551,000 |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
In thousands | October 28, 2018 | % Net Revenues | October 29, 2017 | % Net Revenues | October 28, 2018 | % Net Revenues | October 29, 2017 | % Net Revenues | ||||||||||||||||||||||||
Cost of goods sold1 | $ | 861,999 | 63.5 | % | $ | 832,269 | 64.1 | % | $ | 2,444,067 | 63.7 | % | $ | 2,326,911 | 64.4 | % |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
In thousands | November 3, 2019 | % Net Revenues | October 28, 2018 | % Net Revenues | November 3, 2019 | % Net Revenues | October 28, 2018 | % Net Revenues | ||||||||||||||||||||||||
Cost of goods sold 1 | $ | 924,300 | 64.1 | % | $ | 861,999 | 63.5 | % | $ | 2,608,054 | 64.3 | % | $ | 2,444,067 | 63.7 | % |
1 |
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Within our reportable segments, thee-commerce channel does not incurfreight-to-store or store occupancy expenses, and typically operates with lower markdowns and inventory shrinkage than the retail channel. However, thee-commerce channel incurs higher customer shipping, damage and replacement costs than the retail channel.
2018
In thee-commerce channel, costcosts.
In the retail channel, cost2018. Cost of goods sold as a percentage of net revenues increased in the third quarter of to 64.3% for
Year-to-Date Fiscal 2018 vs.Year-to-Date Fiscal 2017
Cost of goods sold increased by $117,156,000, or 5.0%, foryear-to-date fiscal 2018 compared toyear-to-date fiscal 2017. Cost of goods sold as a percentage of net revenues decreased to2019 from 63.7% for2018 from 64.4% foryear-to-date fiscal 2017.2018. This decreaseincrease was primarily driven by the leverage of occupancy costs and higher selling margins and includes the favorableincremental impact from the adoptionChina tariffs as well as increased shipping costs due to a larger mix of ASU2014-09 primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues.
In thee-commerce channel, cost of goods sold as a percentage of net revenues decreased foryear-to-date fiscal 2018 compared toyear-to-date fiscal 2017, primarily drivenfurniture sales, partially offset by higher selling margins.
In the retail channel, cost of goods sold as a percentage of net revenues decreased foryear-to-date fiscal 2018 compared toyear-to-date fiscal 2017, primarily driven by higher selling margins and the leverage of occupancy costs.
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
In thousands | October 28, 2018 | % Net Revenues | October 29, 2017 | % Net Revenues | October 28, 2018 | % Net Revenues | October 29, 2017 | % Net Revenues | ||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 400,600 | 29.5 | % | $ | 356,254 | 27.4 | % | $ | 1,155,990 | 30.1 | % | $ | 1,030,667 | 28.5 | % |
Thirteen Weeks Ended | Thirty-nine Weeks Ended | |||||||||||||||||||||||||||||||
In thousands | November 3, 2019 | % Net Revenues | October 28, 2018 | % Net Revenues | November 3, 2019 | % Net Revenues | October 28, 2018 | % Net Revenues | ||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 416,281 | 28.9 | % | $ | 400,600 | 29.5 | % | $ | 1,184,176 | 29.2 | % | $ | 1,155,990 | 30.1 | % |
We experience differing employment and advertising costs as a percentage of net revenues within the retail ande-commerce channels due to their distinct distribution and marketing strategies. Employment costs represent a greater percentage of net revenues within the retail channel as compared to thee-commerce channel. However, advertising expenses are higher within thee-commerce channel than in the retail channel.
2018
In thee-commerce channel, selling, general and administrative expenses as a percentage of net revenues increased in the third quarter of fiscal 20182019 compared to the third quarter of
In the retail channel, selling,2018. Selling, general and administrative expenses as a percentage of net revenues decreased in the third quarter of to 29.2% for
Year-to-Date Fiscal 2018 vs.Year-to-Date Fiscal 2017
Selling, general and administrative expenses increased by $125,323,000, or 12.2%, foryear-to-date fiscal 2018 compared toyear-to-date fiscal 2017. Selling, general and administrative expenses as a percentage of net revenues increased to 30.1% for2018 from 28.5% foryear-to-date fiscal 2017.2018. This increasedecrease as a percentage of net revenues was driven by an increase in general expenses primarilythe leverage of employment and advertising costs from higher sales and the reclassificationcontinued benefits of other income from selling, general and administrative expenses into net revenues due toour cost savings initiatives across the adoption of ASU2014-09, lower incentive compensation costs last year from a reduction in performance-related compensation that was not earned,business, as well as increased hourly wages from the reinvestmentour overall expense discipline.
In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased foryear-to-date fiscal 2018 compared toyear-to-date fiscal 2017, primarily driven by an increase in general expenses primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues and impairment and early lease termination charges related to underperforming retail stores.
As a result of the issuance of IRS Notice2018-26, we recorded a measurement period adjustmentrate in the first quarter of fiscal 2018 was primarily due to increase the transition tax by approximately $2,871,000. In the second quarter of fiscal 2018, we finalized our valuation of intangible assets acquired in connection with the acquisition of Outward. As a result, we recorded an increase to tax expense of approximately $1,757,000 representing an adjustment to there-measurement of our deferred tax liabilities. In the third quarter of fiscal 2018, we finalized our measurement of the income tax effect of U.S. Tax Reform for certain items, which resulted in an $11,677,000 tax benefitSAB 118 adjustments from theand a $2,909,000 tax benefit related to the transition tax.
We have historically elected not to provide for U.S. income taxes with respect to the undistributed earnings of our foreign subsidiaries as we intended to utilize those earnings in our foreign operations for an indefinite period of time. Under Internal Revenue Code section 965 of U.S. Tax Reform, we are deemed to have distributed all of the post-1986 accumulated earnings of our foreign subsidiaries to the U.S. as of December 31, 2017. In light of the transition tax under U.S. Tax Reform, we made a determination that any undistributed foreign earnings as of January 28, 2018 are no longer indefinitely reinvested, resulting in an accrual of approximately $2,507,000 of foreign withholding tax and additional U.S. income taxrecorded in the third quarter of fiscal 2018. We currently intend to utilize the undistributed earnings of our foreign subsidiaries subsequent to January 28, 2018 in our foreign operations and will only repatriate such earnings when it is tax effective to do so.
The effective tax rate was 22.5% foryear-to-date fiscal 2018 and 35.5% foryear-to-date fiscal 2017. The decrease in the effective tax rate was primarily due to the reduction of the U.S. corporate income tax rate from 35% to 21% as a result of U.S. Tax Reform, and the tax benefit from the remeasurement of our deferred tax assets.
In fiscal 2018, we are subject to several provisions of U.S. Tax Reform including a tax on global intangiblelow-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income (“FDII”). We are accounting for GILTI as a periodic expense when the tax arises.
The ultimate impact of U.S. Tax Reform may differ from our provisional amounts due to changes in interpretations and assumptions and/or additional regulatory guidance that may be issued. We expect to revise our U.S. Tax Reform impact estimates as we refine our analysis of the new rules and as new guidance is issued. We expect to finalize accounting for the impact of U.S. Tax Reform under SAB 118 once our 2017 corporate income tax returns are filed in the fourth quarter of fiscal 2018.
accounts payable due to the timing of payments.
borrowings under our revolver.
February 3, 2019.
Recent tariffs could result in increased prices and/or costs of goods or delays in product received from our vendors and could adversely affect our results of operations.
Recently, the U.S. administration has enacted certain tariffs and proposed additional tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials for domestic furniture manufacturing products imported into the U.S. While we expect there to be minimal financial impact on our fiscal 2018 results of operations, we may not be able to fully or substantially mitigate the impact of these tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials. The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by other countries, could adversely affect customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations.
Fiscal period | Total Number of Shares Purchased1 | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program1 | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||
July 30, 2018 – August 26, 2018 | 433,272 | $ | 58.70 | 433,272 | $ | 318,869,000 | ||||||||||
August 27, 2018 – September 23, 2018 | 124,278 | $ | 68.79 | 124,278 | $ | 310,320,000 | ||||||||||
September 24, 2018 – October 28, 2018 | 184,958 | $ | 61.75 | 184,958 | $ | 298,898,000 | ||||||||||
Total | 742,508 | $ | 61.15 | 742,508 | $ | 298,898,000 |
Fiscal period | Total Number of Shares Purchased 1 | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program 1 | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||
August 5, 2019 – September 1, 2019 | 193,942 | $ | 65.14 | 193,942 | $ | 639,050,000 | ||||||||||
September 2, 2019 – September 29, 2019 | 186,285 | $ | 66.37 | 186,285 | $ | 626,687,000 | ||||||||||
September 30, 2019 – November 3, 2019 | 230,122 | $ | 67.73 | 230,122 | $ | 611,101,000 | ||||||||||
Total | 610,349 | $ | 66.49 | 610,349 | $ | 611,101,000 |
1 | Excludes shares withheld for employee taxes upon vesting of stock-based awards. |
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| |||
Exhibit Number | Exhibit Description | |||
10.1* | ||||
10.2* | ||||
10.3* | ||||
31.1* | ||||
31.2* | ||||
32.1* | ||||
32.2* | ||||
101* | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended November 3, 2019, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags | |||
104* | Cover Page Interactive Data File (formatted as Inline XBRL | |||
* | Filed herewith. |
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WILLIAMS-SONOMA, INC. | ||
By: | /s/ Julie Whalen | |
Julie Whalen | ||
Duly Authorized Officer and Chief Financial Officer |
12, 2019