WSM - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentleman. Welcome to the Williams-Sonoma First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode.

We will conduct a question-and-answer session after the presentation. This call is being recorded. to of call non-GAAP Investor and statements. like Wang, to financial now forward-looking President Vice Relations would turn over the Elise measures I to discuss Please ahead. go

Elise Wang

afternoon. we issued today. in Good Thank be earlier call press that the considered you. release conjunction This with should

useful ASU non-GAAP are press measures measures Our using today to be why directly GAAP in financial certain January the non-GAAP Exhibit the our to our may the reconciliation retrospective explanation financial XXXX of of guidance discussed release. based results most discussion new A X and the and measures method. of relate on will measures. non-GAAP financial X, modified the revenue XXXX-XX adopted We recognition standard effective comparable

a the provided results guidance, As our forward standards. a using XXXX are looking result,

Officer. call may to Executive Company or press that will no refer to any for The initiatives, of see events arise trends, the could reflect This cause President risks and XXXX, and turn materially risks call. obligation For the that uncertainties operations, within Reform and results the statements. of revise our XX-K XXXX Please to prospects and including circumstances X our are and Exhibit to results Laura contains now over or subject the statements of Company's also to additional forward-looking Act conference release beyond, undertakes forward-looking most in these filings, uncertainties. Company of details, address Litigation and after I call recent guidance, from Securities statements actual current update the forward-looking press please SEC differ and conditions, of this business the more Private the to Alber, the Chief of date meaning financial plans which on release. information such growth

Laura Alber

good you everyone. Thank and afternoon

Chief Whalen, call Carbullido, Officer; Marketing Financial Anwar, our Yasir our are Officer; the Chief Technology On and Felix me Julie with Officer. Chief our

our with model, saw continued to almost accompanying Based quarter. of strength results guidance our outpacing strong guidance we achieved on strong raising fourth the our robust year, a ecommerce speak revenue against our We These of of we metrics EPS strength. heritage, and and power all first to in quarter, results start Following distinctive our the world multichannel brand revenues all our are full class revenue. across competitive total XX% $X.XX. to service million the which by customer the portfolio by are $XX year range

strategic accomplishments first guidance and end an exceeded of results in against quarter X.X% provide our by And me and X.X% this of let range strong all demand The of driven brand growth, overview Barn priorities. particularly performance customer our our delivered and QX the respectively, broad our brands. our with based the at another Now, discuss revenue of across ecommerce. high and some growth comp quarter strong Pottery

And achieved an Our X% our continue digits. our comp Barn Rejuvenation of drove and while emerging outstanding substantially of comp Elm double comp our another year-over-year Williams-Sonoma X.X%. West was of to growth. grow to Mark deliver children’s Pottery up revenues quarter and digit In improved and brands comp business Graham double X.X%,

high the of our the range. for Our also end surpassed of $X.XX guidance EPS quarter

experience Venmo that leadership, to convenient, with accurate through we and and Starting excellence. homes inspires transformation in all furnish key our strategic as Now, put conversion priorities. across at has the do, focus To ecommerce digital talk and everything more with Leveraging content center like checkout driven of the PayPal online the execution customer leadership, options, in product we and content storytelling, mobile to our product of improvements hence updating inventory. and brands wallet their make compelling us. our are and customers we measurable on shopping are retail and our more two differentiators, heritage in cap innovation, confidence which I’d about We’ve convenience. always shop and we’ve continue enhancing the strong to digital we operational added

We customers next SMS self more delivery enrollment our engagement QX, our hubs. control all awareness shopping customers. visibility In are at of status marketing loyal launching customer delivery distribution has and in-home efforts we analytics, edge our service the to feature for view hold This data and already frequent stages more care customer Combined brand and our with online launched capability a and customer enables give the to also their rewards seen with new introduced launch our further more we’ve three-fold Cross able order phase, increase in-store, program, leading visibility we personalize royalty reduced as The on we’ll calls enroll to Key, scheduling center be the new process. the notification pace in as the brand well this at reinvest brand, Web other phase of customers activities. site. of Since of and experience. manage of which in improve and now our directly over any of efficiently times

which the roadmap brands, to platform, we’ll we up in the and our acquired our following next XD Sonoma integration Pottery strong brands. With and imaging Pottery QX, and online our Kids Barn ahead for store Outward, a over West to be recently years. augmented Looking pick is rolling Williams customer regards have two developed in buy in Barn Elm response reality

investments introduce allow in the of deep home This providing leveraging currently our decorating visualization retail. we us our to all product the with our will In of room needs, We platforms content catalog to transition these to are already impact on digital completed. associates the months and reached higher our support in our online realistic and of new as last experiences. tools XXXX. already their new since channels refine coming mix highest to drive us parallel, including Combined, loading digital assets experiences. design and marketing XX% short-term revenue our over support photo In QX, gains we the of are process are our more growth. best-in-class assets levels we ecommerce with traffic In in will planning payback standard from services advertising, ROI customers long-term in rich customer enable growth to mailing same to customer and from year. further digital seeing design our initiatives our continuing core We're and deliver

of we marketing investments touch digital content ecosystem continue and funnel inspiration opportunity see in across to on the focus various incremental to top personalized digital and across delivering plan We make vehicles, more points. that

PB the and momentum of house last channels, building adjustable from West of on second late round year. in launched April, As far as testing new success its campaign Elm proud

platforms. We digital and From to also initial began customer on engagement key search advertising in has testing advertising banner advertising, been positive. feedback augmented reality

and Looking brands. aggressive ahead across growth be in impact to brands continue the to high rest of year, to the we identifying of customer momentum tactics the in accelerate platforms will our all across

marketing to I discuss suited history that of advertising drive digital are performance channels. product Our today’s metrics to strategic we in our now confident platforms, perfectly to priority ecommerce this driven and customer would and is like will continued our growth innovation. advantage

quality great products to shown in Our customers us come inspiring ways. for

superior ahead first trends, and to us ethically core sustainably to compelling of diversification, team quality our to that allowed the brand Pulitzer increase In supply stay a our the in has continue We quarter, enabled sourced Lilly units one traffic. integrated also been concept expand vertically exclusive in new ecommerce offerings and growing saw while to driving products in chain made. collaboration, Our in-house which of produce of part significant response we has This are tremendous design our and successful and aesthetic us collaborations releases well to converting brand. focused younger as across of collaboration our reaching coordinator first and our customer partnerships. customer, is the categories as has home while

to continue to Our new PB and brand. double-digits attracting the growing customers Apartment strongly, perform collections

Our Williams-Sonoma Soap, Smeg. of and product launches Phillips such and Swilling, success vendor brand key as saw partners, exclusive

piece customer partnered categories, attracted new West and most accessories. creative our casual including our multiple Dahlgren things new we their forward year the media this with for of children’s to collaboration This distinctively categories. In we've a design Williams-Sonoma Elm customers and rest de upon We we I Giada that craftsmanship. personality and stores, one category, and see loyal the of to Elm’s across with combines Kids cross celebrity social decorative Xst West with And of opportunity aesthetic and lead modern chef, between and brand’s furnishings Elm, made. brand and We this We sustainably year. its to aesthetics marks which stores. Barn look new high-quality success expand QX, expertise throughout and Laurentiis in is Gabby continue collection product Barn the home collaboration modern on modern, kids and In launch and West done this forays collection seating book market the signature introductions Pottery baby product industry Pottery built think also expanding plus the the XX and the of Kids. significant our

quarter. we Looking more exciting you pipeline of to and have introductions collaborations innovative ahead sharing and forward next across brands an to QX, with look we product our

growth continue to efforts sauce the and our sales QX, and year, our e-commerce. acquisitions, and critical customer from a experience. we across is service driving enhance all brand secret our offer, the they and We with in store speaks continue loyalty of the retail in retail our us. to both accelerated inspire experience revenue Third differentiator transformation, is of and all which believe retail new comp the establishing people our stores believe last In retail to they

cross We’re driving momentum in our -- is store home. service sales our customer’s crew, in design and design also brand gaining increasing which in

are optimization, investing fleet outperformance remodels foot while and in high In we same at those of in unproductive making store significant print, relocations, the driving time, terms are which stores. progress impact in our reducing store

trending relocation our example, Sun to the Fort Pottery prior is Market from store Barn currently River relocation. Lauderdale growth its recent to double-digit store compared most For

in total growth of and stores to six in in another expansion locations in contributed sales the traffic Williams-Sonoma more the increased the brand and to locations, the XX Williams-Sonoma We of Home continue also We which quarter. added double-digit first quarter William-Sonoma stores. bringing those

which Lastly, was reduce as QX, fell of to committed customer result to significantly service our lower growth excellence we sales cost. inventory X.X%, our In improve operational growth. and initiatives, inventory than our are a further all to

As frequent inventory production you operations. our reduced will flow. more software, In levels we priority inventory customer and DC. are We’ve cost, and new efficient top manufacturing driver efficient in our vendors a inventory brands, we back To XX% lead which other management our shipping quicker well our out working with in of implemented fulfillment regional our processing order experience for position our inventory times orders, types by improved across provide know, more in-time inventory our a in centers market satisfaction and and and a planning order inventory further as key of of improve a and packaging supply overseas more distribution all also of reduce is and customers. facilities our and for of consolidation each to aged chain,

and well hub efficiency. drive as drive regionalization company progress, customer returns reduction a XX% cost still improvements wide. is as to continue further replacements, the excellence opportunity and Our to further there damages and for and us improve Despite total significant this experience in

and manage We will our transition to regional our all which inventory, inventory inventory to networks. productivity while one across of down through inventory across our allow the initiatives, improving will including distribution channels level, and us throughput our continue take improve to in-stocks

We also escalation increasing of the several number customers, on most and move while deliveries years. calls and one to reducing the strategy speed of of to order breakthroughs of center. last one and consider damages to our visibility focus inventory returns be to We care the will further the

key Now, business, long growth one our global is over the let’s which term. our turn of to initiatives

strong We are revenue improved the Australia, business and quarter profitability Canada another deliver being in and company-owned of growth quarter. to in with double-digit particularly UK our operations e-commerce in pleased our

Lewis Westfield wholesale location center. expansion our premier company-owned the London Elm in the location the with store John and shopping our continued the in department in retail a West of opening UK We third

second Asia long We locations brand are first size the in Middle that in driving another of franchise Across of and multichannel eight to we existing of year. quarter. half focused particularly South Barn expansion in the for prepare our the Mexico, market East, our on and awareness launch We strategy the as Korea Pottery into the committed added retail remain term global larger Europe. markets, Kids partners

started summary, the to have XXXX. fiscal global underscores to-date businesses success potential Our these our of in markets. large we’re pleased In

our is growth, the to satisfaction to business. Customers as firmly remain In increase we we superior and to line inspiration our growth drive center efficiencies customer service are transform counts both their continues delivering customer focused to declining driving to we top houses EPS into everything addition throughout continue our our do continue and improve, of and and inventory at on homes.

We you on and are ahead, growth look our quarter. progress to we next our prospects optimistic about very updating forward

to I that of associates. Before discuss are our their the to products thank to industry. are we that to want to results, commitment opportunity the with superior I unrivaled in take call over and truly all passion services and turn It continue our Julie financial is this delivering able

Julie Whalen

Laura you, and Thank good afternoon everyone.

a last revenue strong brands, on to quarter and both to with top a pleased of return with We single growth, outperformed line digit start the the year bottom across strong comps performance. are We all double and operational to execute financial the digit high once These and demonstrate our our discipline. above while and growth expectations. financial operating year above against ecommerce strong maintain again operational at EPS same margin ability time, growth results initiatives, our and

Before merchandize timing I re-class to and standard the include into results associated primarily timing would implementation of financial to with the of for our requires breakage impact I our quarter income. of card recognition net us to shipped everyone detail, new more our revenues that the This first to from review certain revenue other income the revenue accelerate a customers, our remind our gift recognition. to XXXX SG&A accounting like standard in from performance accelerate

QX our benefit XX approximately points in approximate gross net a million to XX or retail margin accounting. points including of an this retail; comparable improvement; basis million basis with From XX unallocated. leverage $X.XX points rate of points margin in in and XXX points basis and revenue points in of basis perspective, corporate XXX in change basis of SG&A benefit and deleverage include result, growth; including basis XXX brand earnings As year-over-year basis points of points points of operating basis XX $X.X and of results $XX.X XXXX ecommerce XX of XX associated of this revenue a a amounts deleverage; growth, ecommerce in improvement, basis and revenues in

I Now, our first results review like would quarter detail. more in to

During X.X%, across comparable net was over all improvement were last of the brand significant of billion a X.X%, XXX and $X.XXX first with revenue growth for was brands. points Growth quarter, strong revenues year-over-year accelerations an growth basis year-over-year year.

was four Our comp X.X Barn was delivered the revenue of strategic accelerating comp to and seen of improvement Elm of the X% Both a an to demonstrates performance value-added last Williams XXXX. quarter revenues Barn and compared service Rejuvenation brands and performing comp as comp the Sonoma including profitable with Mark of growth year. delivered our the over initiatives children's as a X.X% net XX.X% all to X.X our across revenue as a total company a strong effective of continued delivering store By quarterly high experience, high in an focus customer revenue another on ecommerce. QX X.X%. retail acceleration Combined, respectively. and to increased with comp in of newer brand as was we another seeing international top best in business last our comps. to continued our brand brand, retail channel, year, performance on saw double net success and resulting execution accelerate well net remodels. XX.X% substantial since sequentially well Pottery retail our their in grow transformation PBteen the revenues XX.X% the last Pottery by X.X% which In Pottery drove ongoing business, continued the In our This our all their This sequentially X.X%, growth. digits, The design continued and brand. demand in record accelerated in momentum Kids reflects and comp significant and the quarter X.X West the we’ve comp from last growth revenues revenue are performance. initiatives our grew to Barn elevate revenues up delivered both versus comp retail businesses, various last strongest year strong of year, years. and channel, of And year, businesses our comp in-home which and our resulting Graham of E-commerce double-digit

basis year-over-year the well The the provide strategic other Moving XX.X% of the XX.X% pricing, we demand to costs impacted as higher higher and were saw was to of cost ship. margins, chain the as XX contract, into to margin of quarter from supply by by last gross $XXX for from of new year. efficiencies. from occupancy value expensive and associated points, shipping from improvement the furniture point year-over-year more down statement, Shipping of includes gross million overall implementation quarter, which of first by standard. which in more during the XX resulting primarily This the was previous points is compared the the with costs. basis which approximate to through benefit income discussed new offset XX re-class an leverage revenue selling income competitive well we standard, more rates leveraged lower revenues our was margin driven higher net new revenues basis customers for our decision a benefit recognition as quarters as our Occupancy product UPS or partially XX% adoption

the basis for points year. first occupancy year to and last This XX.X% of chain us costs. associated was these versus XX which than this more deleverage allowed quarter strong adoption of XX.X% quarter our another other due new see overall to the are supply SG&A advertising We efficiencies, pleased by increase leverage offset offset to accounting the revenues we line employment and outperformance SG&A and net partially the of income with discipline. strong due financial standard. on out the This into to re-class was top saw of was leverage

XX year, for As our was increase million, last an income year. of a the over XX.X% and operating over $XX over which points the result, last was delivered quarter the X.X%, first margin basis operating we of

change XX as ship our are income selling year-over-year retail a higher employment versus basis by as higher net in we X.X% line revenue. income offset merchandize relatively XXXX. lower first allocated was This X.X% channel, year-over-year was margin Jobs tax And timing and driven rate well we XX.X% year-over-year we accounting And last was committed of point point expenses the the recognition was year. standard. and to compared even from partially effective increase operating The revenue the quarter the lower are operating said channels driven selling improvement the dollar to XX benefit employment operating XX operating rate and in by lower Tax the by from the e-commerce the in of quarter. accounting tax Cut that primarily accelerated advertising X% re-classed year. last and reduced our first As and standard, primarily growth customers accounting primarily rate reflects basis federal XX.X% occupancy primarily was to of outperformance able The certain de-leverage we driven for the net due associated within as in was with line the channel offset in growth. by revenues was leverage revenues margin as basis from by The and revenue Act. excluding XX.X% the that well overall adoption income channel and margins. year. the with continued last rate corporate income XXXX represented growth pleased of to from lower new occupancy in top versus primarily e-commerce XX% tax By advertising employment was achieve point a X.X% to saw first the new in other our were we spend. as in The on costs, the This related adoption revenue retail margins, to optimization This that the the growth leverage, last of exceeded call, partially versus

year, First quarter XXXX or $X.XX, compared XX.X%. $X.XX $X.XX to were diluted earnings last per growing share

$XX the in first growth million repurchases the first X.X% and billion the million in share the $XX balance last share quarter through to we revenue sheet. and to versus inventories than the business Merchandize dividend. dividend Moving the year, the quarter, and year. Cash stockholders end $XXX in was at In repurchases $X.XX comprising $XX million growth. million million quarter returned of which invested last our at $XX million lower end significantly was on were of or $XX

our optimization we levels metrics key inventory continues mentioned, our us, inventory are and to for of area Laura and a to focus see working. to pleased be As that are initiatives improve customer reduce

to like our XXXX and would I second quarter year fiscal Now, guidance. discuss

guidance are we our to All $X.XX in revenues XXXX release of fiscal $X,XXX $X,XXX expect confident the a momentum on net million far raising other are our $X.XX press now share $X.XX to million our per therefore so $X,XXX we of the our We range and now of to and financial our previously a guidance previous expect of to from the to the remained diluted business, of range guidance. $X.XX to strength business provided. guidance. execution have from compared million. strong million earnings seen previous unchanged we range in grow our Based the to And $X,XXX within be across to range full-year

reminder As XXrd week. a a XXXX fiscal includes

share to revenue range the of For $X.XX. $X.XX the expect grow net brand we X%. in range revenues second comparable to range X% of quarter be per And the a of expect diluted billion billion to in growth of $X,XXX to earnings we XXXX, $X,XXX with to

impact revenue of SG&A we be our shift going basis gross reflects the of reporting on accounting, material of approximately margin will and estimate reminder, forward to the which benefit basis XX earnings. margin recognition points revenue XX and a an adoption of points guidance between As new XX growth, XXX to

capital highest our and in results, track strong leading year be maintaining and fiscal commitment discipline, the business fuel our to reiterating long-term to with strategy utilize We growth first provide including business to superior well up online, balanced I that would growth well proven strong invest are long us XXXX. those Thank areas portfolio brand for our plan our operating flow multi We and the combined able a our in excited and term we that dividends. now known the and are also excess allocation we about transacted seeing cash of will our strong model to to sustainable in with customer remain shareholders start of opportunities our give in These the and competitive our returns. channel In And operational experiences, we momentum excellence summary, like our business. form a advantages, our delivering of and to questions. confidence share the XXXX almost to record call to shareholders. our open commitment repurchases we’ll committed cash you. return already XX% to are financial for our deliver of growth

Operator

Thank you [Operator Instructions].

Our first from Kate McShane question with Citi. comes

Kate McShane

It’s see for your encouraging to the quarter. second guidance

low year acceleration. on Just comp does even imply at a at it the looking guidance, revenue a noticeable of your stack it two end

faster comp if the in that factors of going drive QX, wondering that a on which walk maybe QX would basis? could some that are you exist didn’t to revenue growth sequential Just in through exist

Laura Alber

are collaborations that seen innovative we product of and in across new an all pipeline sales but momentum also great in just have started. customer introductions And both getting We of exciting our have our programs numbers, brands. also

robust great pretty which a ecommerce relief second our have focus we’re real And customers. a quarter. for response from also plan the seeing content, testing on lot We and of a

And outs which optimize further the our also we’ve over a said, the the down including backward We which from our the take continue process. I total us levels and only stocks, see to to to we taking get in those are technology stocks levels. in better you down Usually, actually seen roll inventory not some, as and that investment long levels all simultaneous have then time. substantial then but backwards things climb, been to and then seeing we’ve down take of

So with lot the a happening The royalty Key my there in just also and mentioned of we’re that. good phase script, things is on getting of started I next

of benefit second So technology a combination and should that for quarter, operational think improvements matter. the I and that and products really further

Kate McShane

dimension comps to Could And could about regards the follow-up the I from with talk the what you’re change this that one and you’re is in that one many you just reallocation the if of list to you in saw. the you remodels. remodeling remodels, know year? how stores gave I question with getting commitment

Laura Alber

to we’ve where We brands, see as our lot seen response, largest one But each in store brand them and the -- this done of All really model in have have great been of strategies different brands Pottery successful. sustaining. we’ve particularly Barn the see enough is brands. we now Barn multi opportunity, our Pottery a of because the

pleased aggressive we’re so strong. markets those the it And given being doing are in we numbers… I makes and where about don’t believe And sense we’ve it are where that

Julie Whalen

to given today. before, we’ve but I mean I more, given do it results seen we continues We’ve outperform it think might the that as that

Operator

you. Thank

question next Sachs. Matt Our Fassler with come from Goldman will

Matt Fassler

questions, in merchandizing most think merchandizing the on? your would have culture if helping mature focused relates really organization, teams any this the comp two in you High the at but results that moment. the business What about to us up a here. lift the are business. Williams-Sonoma and marketing I’ve first a to and level you or very big This among sense it’s better is businesses, comp your the putting good two

Laura Alber

the exclusive further continue Yes, icons key to to say with value our party expanded continue reach. in we kitchen, I and to offer chefs continue dialogue would cookware, with our offering vendor substantially we products to partners, open that really branded we And increase professional brand the collaboration and since introduce line. differentiated strategies product our celebrity we've Williams-Sonoma grow

driving In driver strengthened of on brand And materially And Williams-Sonoma and about that, continues to of business, ecommerce content and the also strongly, spend it’s -- store. in We've our square additional spend personalization We've more level key how and we us per attracting digital. in retail. we really to a addition Home in in to excited directed added and we're and focused traffic, has to marketing messaging, and addition, growth. material our a perform we have deliver. has been stores it's improved of foot one our new customers driving of which dollar terms

So and continue we that backdrop. always and despite of strength And the of there to our grow is a multichannel we've retail house great the competitive brand see that had high-quality ability premier DNA wares. to

Matt Fassler

follow-up, that the you Any update as we've spent there as the from are you sending are that you’re fourth talking be real-estate. lot to renegotiations landlord leases that quite from quarter to willing renewal. a walk came on and done, you are go And essentially what lot community of here? then seeing call And market message my few to of the for up sites a about

Laura Alber

landlords we're Yes, I mean making progress with and some initiative. have great that we partnerships against

You saw us closing stores this quarter.

new continue be remain they’re long-term will do willing customer driving are stores that of our the flexible stores acquisition. to where competitive strategically or advantages focused. not and We one But to aren't landlords the and appropriate, critical where to our key

see that closing, for So at the our also in experience the time same you customers. us we’re investing

Operator

Thank Instructions]. you [Operator

Our comes Michael from Lasser next with UBS. question

Michael Lasser

pieces both just walk of can outperformance guidance Julie, previous moving guidance, lot and the classification your There today? also what from then any for the where the stands to first update is through of perspective the us a in you mechanically it guidance, terms the with quarter. changed revenue to from

Julie Whalen

so of and and to answer as XXXX from the in it it's Basically there the the line Obviously, took rolled is early year, way half that of beat the us. through. QX ahead a of lot on top we simple bottom

so this was that time. thought And prudent we at

see the look if came at you you back it. can do how up so outperformance, we And math and with that's

Michael Lasser

your the And first the so they of any ex SG&A, excluding gross of reclassification to saw your And margins between your the in the and you of the reclassification for in your assumptions going rest were the basically year? did geography where change quarter you came margin to be.

Julie Whalen

No.

XX come for guidance to flow in through. did should operating still talking we the margin, in coming leverage the between basis us SG&A. operating about rest reclassification QX the the in based XX margin that's and obviously on for because Excluding top margin margin that and accounting to of outperform for not we points as shift gross line no. the we’re assume our and We year, of be We would above about allowed

Operator

We will Benedict with Peter to continue on Baird.

Peter Benedict

as question, First some And you Can the the that looking expected months, benchmarks benefits should us execute just key milestones move us inventory. or that? be to next XX for? just XX we the over to one remind get you are months, give you

Laura Alber

way, initiative, total this it’s how biggest not first this teams at As we’ve will couple our multiyear, on I trained. mean for on also with look we this brand And see been working we’ve it’s going we said, of And we’re and each the inventory a but that but just our been in-stock. I be it’s about the years. quarter Barn it to in very one our report both, to we’re moving doing levels excited and you’ll is the do and breakthroughs. on how one getting And Pottery tools of in doing.

Peter Benedict

should earnings. persist we we as just And leveraging mean, but first And to remarks, trying out then that think the you that. eluded you. some the think quarter a just to the little year? you’re Laura, hit about just we more the that your backed asset, I as you on of how the stuff about about value is balance of that’s business can Thank today. the earnings, I business, talk look But strategic in something it outward run of within to the through know prepared bit think adjusted rate

Laura Alber

question him I’m to the pass outward. on to is and here, over Yasir going

Yasir Anwar

is select One things tactical mentioned that are are digitize which experience and mind the and world is in is in our outward my outward the the strength do Two, strategic, are seamless allow XD my lot our have business we industry be difficult. a our And space would And Laura customers assets. in decorating to given to we to think homes, so believe our come as in mind, I more there going of of in leaders long-term. visualization. then that going three is to we us to which strongly that.

it designing, XXX,XXX is that’s XXX in And because an the annuals can wave planning, to to I I about. a able. with comes kind benefit experience outward first think having and you that’s can experience its far place can the look XD a rooms, where the on. scaling we are digitize thing, for think you Laura If can foundational XX, which put do arrangement, doing of then very everybody with long-term augmented have talked even what their you is And planning market. how of in that in of thing, working products in customer can the the they great Then build room that’s And visualize at part out. X,XXX, they XXX, is where reality products pick the somebody lightning their X, want The key your them of all and home too basic we are, and that’s outward homes of fast, quickly themes you experience. terms make available not of work

June able you efficient launching well together facing our be what in provide watch customer customer very facing designer connect we experiences, would in the than And will even there. where is better experiences experiences. July, And two sure be make we as much to us we the to as experience which available we sales If what’s and would the did be will and will products market.

Laura Alber

and cost whole spoke photography through can is obviously they that rate, synergies And opportunities. a and to and improved to that that from drive return our product cost other development samples, -- various those sales. Yasir conversion and drive reductions a believe just house financial prospective, We creative area as all host we believe of such there lift opt

half back a prospective. the mentioned from non-GAAP You

that expect for account cost amortization that we has ongoing rate it. operations. with out to to The and with I clear back do have that do You transaction run the should has going to what’s about majority the is it it of of make the how forward. important to But think crystal their smallest piece of

Operator

We’ll with take Instructions] Greg [Operator Melich caller MoffettNathanson. next our

Greg Melich

I’ll on marketing. SG&A, particularly stick and advertising

SG&A the there’re out targeted side also the effectiveness top the like to you you sounds digital advertising. getting think mentioned I giving move of on more Laura mentioned helped line. is it and that Julie, more more on But lift --

seems there. really of catalogue is metrics it to spend So real I’d understand a more be the of less advertising much Because what’s seems and able get how help love than on that to top was in where Any changing like dynamic? hear terms digital leverage shift. it traditional, to be to line that the versus

So great. if you could be walk us through that’d

Julie Whalen

Most a been been now of the telling towards digital. while spend we’ve as has for you guys shifting more

total greater our than over our the be catalogue of to to spend And Company. optimize XX% So it’s continuing we’re for spend.

did continue savings. reinvestment The believe in that was you of as saw line. quarter And top on quarter. our forward. also this that this So part our difference We digital continue into invest outperformance we going big the will heavily the tax of

over through as will to it As what a our bottom. they’re But I allows working. great a to to advertising on all, us to at and how and including leverages the more reminder, top as we detail turn line, outperform outperforming are return the investments it to little walk Felix

Felix Carbullido

channels with of spend finding not Our is it's more not just customers more efficiencies. about us and And digital, engage where online. and media the about that’s spend in in mix

aggressive So space, finding strong in investments ROI. also while deliver our digital the we’re are efficiencies to

cross have and own as keyboards, Inc. team with own most hands efficient portfolio, our of we the media initiatives. brands our and if tactic in year, spend where each seven over sense learn I other our makes say would can Williams-Sonoma on in-sourced marketing last and efficient. to quickly company brands test spend. one employees of test XX% develop key with the manner And we’re roll of to for very showing on brand’s we campaigns and We a As a able our strategy brand now in secondly a

Operator

to JP Horvers We’ll continue with on Chris Morgan.

Chris Horvers

operating Can down trends in you X%, Last year, income? talk EBIT XQ. X% about in dollars declined

year-over-year sharply, you turned flat is up quarter, ex This up XX% it the accounting and change. NOI

at down XQ guidance, look changed does you're to again. what there? So operating in like expecting it turn Looking income the

the the you was first costs there help unique there drive in second quarter that in are So quarter? something hit to that or higher unique

Julie Whalen

So the it’s is in of little creates that leverage P&L. outperformance the bit truly both. first But quarter throughout the the

you revenue in leverage about channel, when leverage drive leverage deployment especially ecommerce as line, top that occupancy, you the you everything, just the advertising, you on So well.

us earnings helped roll the of on from So that line bottom all a through perspective.

tax from investment received is we difference the the the in second forward, Going savings that have we more quarter.

to be second we’re hourly our hour, $XX and the call in to we taking quarter. that that associates so mentioned up investing associates last going per And in our kicks

pressure quarter the the second first. put operating income it different for So and the does on more than operating margin

Chris Horvers

change a the into down a investment. then the first But quick the to back quarter. margins, the selling like on lap start And selling in the XX, gets follow-up price as shipping the it margins you going ex year this accounting looks of lot in easier comparison half

moderates lay timing think margin half? selling do and or margin can shipping investments? the And So those the out degradation of you you flattens back the out in

Julie Whalen

sure the did have points. I also on performed benefit of quarter. from how We want margins the but mean, all, we first we’re gross in So make XX we to I basis had clear accounting, this the

had leverage, play had investment have to we but of and some the moving to has, going merchandize plus XX to so points basis through that incredible occupancy came for From we that's XX it ex-accounting yes expect We we to have benefit, cost. forward, absolutely higher leverage leverage P&L. then as in shipping margins, chain lap to shipping shipping how off in when So this second out we’ll supply should they get cost ops higher that quarter did from year. the Shipping accounting we Obviously, last that rate Elm EPS in that I've we we mentioned some the started have expect QX have. cost of we that. continue and flat impact. as West we’ll we we've said supply pressure chain lap lap the And continue

So get some levers, we some it from depends. removal of obviously pressure should but those

Operator

line of Our with comes Simeon next the Gutman Stanley. question from Morgan

Simeon Gutman

I want about you to I improvements did I I because expect also but to too wanted that meaning shipping, the rate would beat, sense. is then flat would on. to I but well. improve. EBIT long-term guidance accelerate get the Julie to EBIT follow-up quarter, which to that guess in still And accelerate move And the margins that sales, then benefit, into there. through and improve, back term picture, you year the dollars as flow like the margin reinvesting makes to the you bigger our that, on you don’t goes try the about But as half occupancy mentioned know, ask with also you line mentioned roughly was that up sales. keep great guidance And goal overtime? out have do goal don’t the or is this you grow long

Julie Whalen

our it relatively we have operating income last the start will stabilize. line, of believe in revenue. to second goal dropped is down to is think perfect in line Well, outperform, bottom with overtime to the year. I Certainly, and the be dollars above example margins definite our this week ran straight quarter in And

that having But overtime. in in And income so the that short-term where is line target we we certainly, expect growth to the be with dollars where revenue is. believe that short-term, operating is

Operator

Haskett. Our with Chuck Grom Gordon comes question from next

Chuck Grom

new customer XX of a the then also across does acquisitions basis the the for banners? the When we at year, changes cadence Exhibit to X the about to terms margin you that like the just balance XQ SG&A. SBA XQ, our And swing rest out and if break if year? Just of in the think models to and out called your wondering you can gross seem for of think of good of XX about growth look you us over for points I the proxy

Felix Carbullido

is where we about is And are tell increase positive that that of brand. the we by excited our I what our direct most saw all brands. can they are where can customer across numbers the What we double-digit I channel board. you you disclose in in tell But don’t is

us more being strategy digital marketing our more confidence gives that in into so the And space. invested again

Julie Whalen

and And if it throughout SG&A but the as we two between I for due accounting adoption year will points of the gross to of your have XX XX that between XX will margin that margin, XX the numbers the for yes, SG&A, new standard basis I be understood as it one. rest on will it be far either gross correctly, specifically question, SG&A. and margin shift to of a I believe those for and gross say didn’t

Operator

with Thomas Markets. KeyBanc Brad to on Capital continue We’ll

Brad Thomas

elevated the the follow-up comparison. about the that performance maybe I an gains direct bit maybe more quarter in against Could drive to of business, on have want of and channel? in here and strongest are keeping this you direct momentum you a up easier number years. you within a the the share was confident It how ability talk to

Laura Alber

We by spoke outlook pipeline, of large to to way. in strong raising confident our the were in combined exciting to our quite the before, our in all to initiatives about initiatives the customer metrics. channels, very year and and pleased we and made are trends And We’ve ability of operational raise we’re excited the And full maintain you, we brands products in in business to We momentum strong year our last with we the feel as optimistic this to said a to both full we have number strong accelerate and very finish the the and the guidance. have against. have our about great I progress we all reflect of executing continuing in the When year, momentum start. with momentum.

Operator

Oppenheimer. to Brian Nagel on We’ll continue with

Brian Nagel

So regard while, follow question. with Julie including your shipping of we my prior But today. out this think, to for as costs, up question, a a is now a to headwind called a bit I for

simply, help you this your other pricing limit factors beyond these -- get How dynamics, overall headwind. Now impacts bigger that later that should lapping of will that should, could to certain pricing dynamics? you certain cost lap simply are alleviate year mentioned over-time on there that so the say, which business picture, just

Laura Alber

further lot a I improvements up passionate to that to get. damages. opportunities faster way. am in going And well made we’re you know really we will be I damage about the is inventory. that it as we to frankly, the we we I know there forward distribution to And number network of and to our we possible. And and continue furniture very we I know queue to we chain see can and how centers, I large have by our interesting in be be still doing with of that. have of And cheaper continue after as our And the that large think is this But competition. money and it’s as the cost. be the want delivery, in good we take operational take queue, this excited as and improvements to much with we’re close supply goal. our question, because There customer, reduce from very to big out one that’s can than as now so halve as our us cost that chunk allows return a the regional set you customers a going more that more we are about

see lot we us that factors improvement So the a give over other will of long-haul.

Operator

to today And Fernández Advisory Cristina from our with Telsey question Group. final goes

Cristina Fernández

landscape spent? other a during that wanted do dollars I more follow How of likes where based the to is up your versus used to than promotion shipping past. responding types think the tool It better the free such promotional on topic. And are as you shipping as the customer look competitive quarter, in pricing? you on the

Laura Alber

loves I shipping. mean, the customer always free

as tool more done as we’ve effective this think that we another But something quarter don’t I certainly, it’s fact promotions In just year-over-year. promotion use.

do to continue that. to going we’re so And

Julie Whalen

in seen what just over actually we of doing and streamlining I’d really total focusing we’re and that stock. say trends have promotional activity, reducing have where positive And and we terms on

not So free you much as is more as might shipping a few see material.

Operator

the go remarks. At this closing over and I’d to conference speakers like to our or for back ahead any additional turn time,

Laura Alber

to appreciate, interest and Well, Williams-Sonoma of you. forward your to again you all we next want in quarter. talking I thank support. And appreciate your all I to look we

Operator

again that your you participation, you. Ladies conclude disconnect. for again all and now does gentlemen, you Thank Thank today’s conference. may

Williams-Sonoma (WSM) 23 May 182018 Q1 Earnings call transcript