Williams-Sonoma (WSM) 8-K Williams-Sonoma, Inc. reports strong results for the second quarter of 2019

Exhibit 99.1

Williams-Sonoma, Inc. reports strong results for the second quarter of 2019

Comparable brand revenue growth accelerates to 6.5%

GAAP operating margin of 6.3%;Non-GAAP operating margin expansion of 10bps to 6.9%

GAAP diluted EPS of $0.79;Non-GAAP diluted EPS of $0.87, a 13% increase over Q2 18

Raises fiscal year 2019 topline and EPS guidance

San Francisco, CA, August 28, 2019 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the second fiscal quarter ended August 4, 2019 (“Q2 19”) versus the second fiscal quarter ended July 29, 2018 (“Q2 18”).

Laura Alber, President and Chief Executive Officer,commented, “We continue to deliver very strong results. In the second quarter, comp revenue growth accelerated to 6.5%, while operating margin expanded and EPS grew double digits. The growth strategy that we outlined at the beginning of the year is driving results and giving us the competitive advantage to continue to outperform. West Elm, our biggest growth opportunity, continues to accelerate, the Pottery Barn brands have returned to strength, and our cross-brand initiatives such as The Key andBusiness-to-Business are becoming more impactful levers of growth. We are also improving the customer experience through innovation and experimentation, and we are seeing the results of this work fuel brand level performance across our portfolio. In addition, our data-driven performance marketing is producing outsized returns on our digital media investments.”

Alber continued, “Our performanceyear-to-date demonstrates that our initiatives are successfully driving consistent profitable growth across the business and we are confident that we will build on our market share gains in the second half and longer-term. As a result, we are raising our full-year guidance for net revenues, comp revenue growth and EPS.”

SECOND QUARTER 2019

• Net revenue growth of 7.5% to $1.371 billion

• Comparable brand revenue growth of 6.5%, primarily driven by an acceleration in comparable growth for West Elm and Pottery Barn to 17.5% and 4.2%, respectively

• GAAP operating margin of 6.3%;non-GAAP operating margin expansion of 10bps to 6.9%

• GAAP diluted EPS of $0.79;non-GAAP diluted EPS $0.87, a 13% increase compared to Q2 18

GUIDANCE

• Raises fiscal year 2019 net revenues, comparable brand revenue growth and EPS guidance

• Reiterates long-term financial targets

Fiscal Year 2019*

• Total Net Revenues: $5.740 billion – $5.900 billion

• Comparable Brand Revenue Growth: 3% – 6%

• Non-GAAP Operating Margin:In-line with FY 18

• Non-GAAP Diluted EPS: $4.60 – $4.80

• Non-GAAP Income Tax Rate: 23% – 24%

• Depreciation and Amortization: $185 million – $195 million

• Net 25 store closures for a total store count of 600 by the end of FY 19

• Capital Spending: $200 million – $220 million

• Return to Shareholders: quarterly cash dividend of $0.48 per share and continued share buybacks under our multi-year share repurchase authorization of approximately $640 million.

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Long-Term Financial Targets*

• Total Net Revenues growth of mid to high single digits

• Non-GAAP Operating Income growthin-line with revenue growth, driving Operating Margin stability

• Above-industry average ROIC

*We have not provided a reconciliation ofnon-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential variability and limited visibility of excluded items.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, August 28, 2019, at 2:00 P.M. (PT). The call, hosted by Laura Alber, President and Chief Executive Officer, will be open to the general public via live webcast and can be accessed athttp://ir.williams-sonomainc.com/events. A replay of the webcast will be available athttp://ir.williams-sonomainc.com/events.

CONTACT INFORMATION

Julie Whalen EVP, Chief Financial Officer – (415) 616 8524

Elise Wang VP, Investor Relations – (415) 616 8571

SEC REGULATION G —NON-GAAP INFORMATION

This press release includesnon-GAAP financial measures. Exhibit 1 provides reconciliations of thesenon-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We have not provided a reconciliation ofnon-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential variability and limited visibility of excluded items; these excluded items include expenses related to the operations of Outward, Inc. and employment-related expense. We believe that thesenon-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. Our management uses thesenon-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. In addition, certain other items may be excluded fromnon-GAAP financial measures when the company believes this provides greater clarity to management and investors. Thesenon-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to the GAAP financial measures presented in this press release and our financial statements and other publicly filed reports.Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements relating to: our ability to capture significant opportunities in the home furnishings industry; increase our market share; our ability to continue to improve performance; our focus on operational excellence; our ability to improve customers’ experience; our optimism about the future; our ability to maximize growth and maintain high profitability; our FY 2019 and long-term financial guidance; our stock repurchase program and dividend expectations; and our proposed store openings and closures.

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The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include: continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; new interpretations of or changes to current accounting rules; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; changes in consumer spending based on weather, political, competitive and other conditions beyond our control; delays in store openings; competition from companies with concepts or products similar to ours; 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; our ability to manage customer returns; successful catalog management, including timing, sizing and merchandising; uncertainties ine-marketing, infrastructure and regulation; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; challenges associated with our increasing global presence; dependence on external funding sources for operating capital; disruptions in the financial markets; our ability to control employment, occupancy and other operating costs; our ability to improve 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; the impact of current and potential future tariffs and our ability to mitigate impacts; and other risks and uncertainties described more fully in our public announcements, reports to stockholders and other documents filed with or furnished to the SEC, including our Annual Report on Form10-K for the fiscal year ended February 3, 2019 and all subsequent quarterly reports on Form10-Q and current reports on Form8-K. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

ABOUT WILLIAMS-SONOMA, INC.

Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, Pottery Barn Teen, Williams Sonoma Home, Rejuvenation, and Mark and Graham — are marketed throughe-commerce websites, direct-mail catalogs and retail stores. These brands are also part of The Key Rewards, ourfree-to-join loyalty program that offers members exclusive benefits across the Williams-Sonoma family of brands. We operate in the U.S., Puerto Rico, Canada, Australia and the United Kingdom, offer international shipping to customers worldwide, and have unaffiliated franchisees that operate stores in the Middle East, the Philippines, Mexico and South Korea, as well ase-commerce websites in certain locations. In 2017, we acquired Outward, Inc., a3-D imaging and augmented reality platform for the home furnishings and décor industry.

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Condensed Consolidated Statements of Earnings (unaudited)

	Thirteen Weeks Ended										Twenty-six Weeks Ended
	August 4, 2019					July 29, 2018					August 4, 2019					July 29, 2018
In thousands, except per share amounts	$		% of Revenues			$		% of Revenues			$		% of Revenues			$		% of Revenues
Net revenues	$	1,370,814		100	%	$	1,275,174		100	%	$	2,611,946		100	%	$	2,478,174		100	%
Cost of goods sold		886,953		64.7			811,232		63.6			1,683,754		64.5			1,582,068		63.8
Gross profit		483,861		35.3			463,942		36.4			928,192		35.5			896,106		36.2
Selling, general and administrative expenses		397,696		29.0			389,776		30.6			767,895		29.4			755,390		30.5
Operating income		86,165		6.3			74,166		5.8			160,297		6.1			140,716		5.7
Interest expense, net		2,669		0.2			1,584		0.1			4,922		0.2			2,785		0.1
Earnings before income taxes		83,496		6.1			72,582		5.7			155,375		5.9			137,931		5.6
Income taxes		20,848		1.5			20,869		1.6			40,071		1.5			41,050		1.7
Net earnings	$	62,648		4.6	%	$	51,713		4.1	%	$	115,304		4.4	%	$	96,881		3.9	%
Earnings per share (EPS):
Basic	$	0.80				$	0.63				$	1.47				$	1.17
Diluted	$	0.79				$	0.62				$	1.45				$	1.16
Shares used in calculation of EPS:
Basic		78,488					82,342					78,586					82,867
Diluted		79,470					83,167					79,633					83,519

2^nd Quarter Net Revenues and Comparable Brand Revenue Growth (Decline) by Concept*

	Net Revenues (Millions)				Comparable Brand Revenue Growth (Decline)
	Q2 19		Q2 18		Q2 19			Q2 18
Pottery Barn	$	525	$	506		4.2	%		2.0	%
West Elm		358		301		17.5			9.5
Williams Sonoma		191		195		(1.1)			1.6
Pottery Barn Kids and Teen		228		214		3.7			5.7
Other		69		59		N/A			N/A
Total	$	1,371	$	1,275		6.5	%		4.6	%

*See the Company’s10-K filing for the definition of comparable brand revenue, which is calculated on a13-week to13-week basis for Q2 2019.

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Condensed Consolidated Balance Sheets

(unaudited)

In thousands, except per share amounts	August 4, 2019			February 3, 2019			July 29, 2018
Assets
Current assets
Cash and cash equivalents	$	120,467		$	338,954		$	174,580
Accounts receivable, net		111,114			107,102			106,322
Merchandise inventories, net		1,187,728			1,124,992			1,099,888
Prepaid expenses		117,017			101,356			74,811
Other current assets		21,693			21,939			21,891
Total current assets		1,558,019			1,694,343			1,477,492
Property and equipment, net		913,059			929,635			919,689
Operating leaseright-of-use assets		1,208,528			—			—
Deferred income taxes, net		38,803			44,055			60,960
Goodwill		85,348			85,382			85,673
Other long-term assets, net		65,924			59,429			64,163
Total assets	$	3,869,681		$	2,812,844		$	2,607,977
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	404,337		$	526,702		$	466,903
Accrued expenses		127,137			163,559			112,381
Gift card and other deferred revenue		283,108			290,445			263,546
Borrowings under revolving line of credit		60,000			—			—
Income taxes payable		13,065			21,461			35,529
Operating lease liabilities		222,978			—			—
Other current liabilities		76,254			72,645			69,589
Total current liabilities		1,186,879			1,074,812			947,948
Deferred rent and lease incentives		28,618			201,374			207,190
Long-term debt		299,719			299,620			299,521
Long-term operating lease liabilities		1,148,031			—			—
Other long-term liabilities		84,831			81,324			72,330
Total liabilities		2,748,078			1,657,130			1,526,989
Stockholders’ equity
Preferred stock: $.01 par value; 7,500 shares authorized; none issued		—			—			—
Common stock: $.01 par value; 253,125 shares authorized; 78,203, 78,813 and 80,988 shares issued and outstanding at August 4, 2019, February 3, 2019 and July 29, 2018, respectively		783			789			810
Additionalpaid-in capital		584,828			581,900			561,810
Retained earnings		552,454			584,333			528,368
Accumulated other comprehensive loss		(15,488	)		(11,073	)		(9,742	)
Treasury stock, at cost		(974	)		(235	)		(258	)
Total stockholders’ equity		1,121,603			1,155,714			1,080,988
Total liabilities and stockholders’ equity	$	3,869,681		$	2,812,844		$	2,607,977

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Condensed Consolidated Statements of Cash Flows

(unaudited)

	Twenty-six Weeks Ended
In thousands	August 4, 2019			July 29, 2018
Cash flows from operating activities:
Net earnings	$	115,304		$	96,881
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		93,744			93,809
(Gain) loss on disposal/impairment of assets		(6	)		4,466
Amortization of deferred lease incentives		(4,228	)		(13,210	)
Non-cash lease expense		105,437			—
Deferred income taxes		(8,428	)		(4,415	)
Tax benefit related to stock-based awards		14,110			9,711
Stock-based compensation expense		35,401			26,526
Other		92			166
Changes in:
Accounts receivable		(4,430	)		(13,567	)
Merchandise inventories		(63,576	)		(45,159	)
Prepaid expenses and other assets		(24,506	)		(29,217	)
Accounts payable		(127,511	)		(1,735	)
Accrued expenses and other liabilities		(30,677	)		(12,209	)
Gift card and other deferred revenue		(7,173	)		11,927
Deferred rent and lease incentives		—			18,861
Operating lease liabilities		(111,782	)		—
Income taxes payable		(8,407	)		(22,712	)
Net cash (used in) provided by operating activities		(26,636	)		120,123
Cash flows from investing activities:
Purchases of property and equipment		(77,189	)		(80,021	)
Other		470			513
Net cash used in investing activities		(76,719	)		(79,508	)
Cash flows from financing activities:
Payment of dividends		(75,453	)		(70,331	)
Repurchases of common stock		(72,131	)		(174,818	)
Borrowings under revolving line of credit		60,000			—
Tax withholdings related to stock-based awards		(25,887	)		(12,335	)
Net cash used in financing activities		(113,471	)		(257,484	)
Effect of exchange rates on cash and cash equivalents		(1,661	)		1,313
Net decrease in cash and cash equivalents		(218,487	)		(215,556	)
Cash and cash equivalents at beginning of period		338,954			390,136
Cash and cash equivalents at end of period	$	120,467		$	174,580

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Retail Store Data

(unaudited)

	May 5, 2019		Openings		Closings			August 4, 2019		July 29, 2018
Williams Sonoma		219		—		(1	)		218		226
Pottery Barn		205		2		(2	)		205		205
West Elm		113		—		(1	)		112		109
Pottery Barn Kids		78		—		—			78		84
Rejuvenation		10		—		—			10		8
Total		625		2		(4	)		623		632

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Exhibit 1

GAAP toNon-GAAP Reconciliation

(unaudited)

(Dollars in thousands, except per share data)

	Thirteen Weeks Ended						Thirteen Weeks Ended						Twenty-six Weeks Ended						Twenty-six Weeks Ended
	August 4, 2019						July 29, 2018						August 4, 2019						July 29, 2018
	$			% of revenues			$			% of revenues			$			% of revenues			$			% of revenues
Gross profit	$	483,861			35.3	%	$	463,942			36.4	%	$	928,192			35.5	%	$	896,106			36.2	%
Outward-related1		879						269						1,414						851
Employment-related expense2		—						—						30						—
Impairment and early termination charges3		—						719						—						719
Non-GAAP gross profit	$	484,740			35.4	%	$	464,930			36.5	%	$	929,636			35.6	%	$	897,676			36.2	%
	$			% of revenues			$			% of revenues			$			% of revenues			$			% of revenues
Selling, general and administrative expenses	$	397,696			29.0	%	$	389,776			30.6	%	$	767,895			29.4	%	$	755,390			30.5	%
Outward-related1		(6,351	)					(4,720	)					(12,228	)					(11,064	)
Employment-related expense2		(623	)					(1,874	)					(7,119	)					(3,576	)
Impairment and early termination charges3		—						(4,578	)					—						(4,578	)
Non-GAAP selling, general and administrative expenses	$	390,722			28.5	%	$	378,604			29.7	%	$	748,548			28.7	%	$	736,172			29.7	%
	$			% of revenues			$			% of revenues			$			% of revenues			$			% of revenues
Operating income	$	86,165			6.3	%	$	74,166			5.8	%	$	160,297			6.1	%	$	140,716			5.7	%
Outward-related1		7,230						4,989						13,642						11,915
Employment-related expense2		623						1,874						7,149						3,576
Impairment and early termination charges3		—						5,297						—						5,297
Non-GAAP operating income	$	94,018			6.9	%	$	86,326			6.8	%	$	181,088			6.9	%	$	161,504			6.5	%
	$			Tax rate			$			Tax rate			$			Tax rate			$			Tax rate
Income taxes	$	20,848			25.0	%	$	20,869			28.8	%	$	40,071			25.8	%	$	41,050			29.8	%
Outward-related1		1,536						1,055						2,964						2,522
Employment-related expense2		(493	)					468						(782	)					870
Impairment and early termination charges3		—						1,289						—						1,289
Tax legislation4		—						(2,888	)					—						(6,186	)
Impact of equity accounting rules5		—						—						—						(1,146	)
Non-GAAP income taxes	$	21,891			24.0	%	$	20,793			24.5	%	$	42,253			24.0	%	$	38,399			24.2	%
	$						$						$						$
Diluted EPS	$	0.79					$	0.62					$	1.45					$	1.16
Outward-related1		0.07						0.05						0.13						0.11
Employment-related expense2		0.01						0.02						0.10						0.03
Impairment and early termination charges3		—						0.05						—						0.05
Tax legislation4		—						0.03						—						0.07
Impact of equity accounting rules5		—						—						—						0.01
Non-GAAP diluted EPS*	$	0.87					$	0.77					$	1.68					$	1.44

* Per share amounts may not sum due to rounding to the nearest cent per diluted share

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SEC Regulation G –Non-GAAP Information

These tables includenon-GAAP gross profit, gross margin, selling, general and administrative expense, operating income, operating margin, income taxes, effective tax rate and diluted EPS. We believe that thesenon-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of our quarterly actual results on a comparable basis with prior periods. Our management uses thesenon-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Thesenon-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Notes to Exhibit 1:

1 During Q2 andyear-to-date 2019, we incurred approximately $7.2 million and $13.6 million, respectively, of expense, which includes acquisition-related compensation expense and amortization of intangible assets, as well as the operations of Outward, Inc., of which $6.4 million and $12.2 million, respectively, were recorded within selling, general and administrative expenses. During Q2 andyear-to-date 2018, we incurred approximately $5.0 million and $11.9 million, respectively, of expense, of which $4.7 million and $11.1 million, respectively, were recorded within selling, general and administrative expenses.

2 During Q2 andyear-to-date 2019, we incurred approximately $0.6 million and $7.1 million, respectively, of employment-related expense, recorded within selling, general and administrative expenses. In Q1 19, the expense was primarily associated with severance-related reorganization expenses. During Q2 andyear-to-date 2018, we incurred approximately $1.9 million and $3.6 million, respectively, of employment-related expense, recorded within selling, general and administrative expenses.

3 During Q2 18, we incurred approximately $5.3 million of expense, primarily associated with impairment and early lease termination charges.

4 During Q2 andyear-to-date 2018, we recorded income tax expense of approximately $2.9 million and $6.2 million, respectively, associated with tax legislation changes.

5 During Q1 18, we recorded income tax expense of approximately $1.1 million associated with the adoption of accounting rules related to stock-based compensation.

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