WSM - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, welcome to the Williams-Sonoma, Inc.

Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. This call is being recorded. I would now like to turn the call over to Elise Wang, Vice President of Investor Relations, to discuss non-GAAP financial measures and forward-looking statements. ahead. go Please

Elise Wang

materially trends, most in company results risks uncertainties of for SEC that growth circumstances forward-looking could information to obligation to President Chief turn subject the the any undertakes press results may to press release. Alber, afternoon. on measures reflect over uncertainties. with of Securities be Good filings, Please release our company's XXXX, call today. should of Laura XXXX no more considered measures, and GAAP explanation of why current relate be XX-K indicated non-GAAP X of risks and condition, differ on the financial Thank such A prospects the of financial measures. or press plans Executive This meaning most release Exhibit and actual to initiatives, conjunction and are reconciliation after our to of will address which today revise the and refer events our to I these forward-looking company and our update non-GAAP earlier are guidance that in based from including otherwise, certain financial useful, the Litigation the cause the arise recent will forward-looking you. contains the operations, measures This discussed also of now statements. the statements discussion and call The that Officer. or business in financial and and date non-GAAP call. to the results Reform within beyond, we Unless may statements this conference Act Private comparable to issued call directly the

Laura Alber

XX%, the our call our Good about expectations afternoon, Carbullido, are me and On demand Financial today's see to to company's today again, net Technology XX%, across Yasar with Whalen, improved sequentially talk our E-commerce the strength and us. performance all of a quarter importantly, comp Elise. to comp over we on our driven record all our store by positioning were Officer; a want outstanding our joining to quarter, Marketing you Telis accelerated of net to pleased distinctive and throughout comp to XX% of the more margins Anwar, X.X%. In results everyone. the negative a Chief net delivered negative these outperformed Chief is Officer; third Officer. XX% to Chief I compared call, And record Julie versus last Thanks, third XX.X% reaching prospects. year's sales, at Also quarter operating and expanding for X%. nearly Even comp. retail comp you Thank growth sales we up encouraging more levels, with profitably with demand brands. long-term more

driven delivered sales Barn this double-digit and continue all Pottery outperformed. a year-to-date. brands comps of again comp to our XXX% to of PB $XXX XX.X%, apartment Growth nearly divisions. in All momentum, by marketplace, net more reach a than growing initiatives, million quarter in build including

growth accelerated grew Our net comp Pottery at Teen with XX.X%, all in Kids a business and areas. of

online has of business, GEAR another delivered saw percentage Williams-Sonoma also quarter delivering our finish represents our brands, our that a and this We record business strong to had tail other with Solutions, opportunity. always The brand a the a is compared back-to-school net a a longer big and season. The to in with comp this a Study-at-Home XX.X%. smaller

also channel stores better-than-expected and e-commerce and strategies see strong West growth major as categories retail to decorative driven net the by comp in in tech in pleased categories our shift. as QX XX.X%, finally, sales in of Williams-Sonoma traditional driving performing our pickup initiatives to significant a are We're optimization saw the we all mix estate dominant Our brand. accessories. real well Elm our our in brand, in And

is As of the to strong start quarter, across brands. our a all holiday off we fourth enter

sales We in by and merchandise. and DTC's to dates in than And in marketing reductions up for are we improving launch moving seeing occupancy. to ready our holiday this years are products earlier see meet prior, demand despite prepared our and in store holiday retail teams continue strength

we Our and chain our holiday. shipping our Despite best elevated diligently ensure model customer unique team supply to capacity experience can leveraging business also working COVID-XX, this is to the do scale are and due to industry-wide teams demand. meet everything this to constraints

vendor in-country team sourcing our global partnering expand and been long-standing relationships. has our presence with capacity, leveraging Our vendors to

team year believe we we transportation secured diversify our volumes for parcel elevated expect the to and this carrier worked holiday. aggressively this early capacity we have successfully and further drive to Our quickly network, shipping

We be ship maximizing capabilities supply from store buy supplement online our and in-store will also as pickup such capacity. chain omni-channel our fulfillment to

services our company's our to holiday. post DTC profitable growth deliver omni up our results fulfill These demonstrate expect pandemic. to ability We of volume this expected to long-term XX% total

Our quality company's the of at lives to home. is people's mission enhance

of have our what is sustainable serve We customers our and customers. chain, a our our most our in doing marketing, this that experience. because across points, doing. with high-touch of value vertical is great These products positioning advantage. And that our the one scale aesthetics forefront, at omnichannel we the digital-first and matter inspiring areas wide high-quality, price and at are include our investing Loves with business brands the a built else market supply to and mission well convenience competitive in is distinctive No of this, range combined designed,

our partners, value. employees, At our Inc., programs our we we are take our shareholders. people, managing brands, across our and we increasing taken extends for and performance, a Our Williams-Sonoma, our good from seen values than how care mission leaders a lifetime, social, design financial through our are care health shareholders. by crises impactful be previously more returns of not people environmental industry important responsibly, ESG resources our we caring our while on ever. our to by have also vendor to year these and are of leading in with marked our to scale our customers And proud our in and how and In

there believe we As will we at for future. our growth the business today, deliver significant key are X accomplishments look that

our a First, customers we've over year-to-date, in compared rate of years. channels been a acquiring at XX% previous digital new significant acceleration to

been seen new effectiveness increase have of in digital it customers. we increase, generally notable a This this the stores future. strong driver our the growth. store -- despite the shows past, current have in overall key While in This traffic, particularly less of particularly business acquiring new the notable is strategy customer as historically marketing foreshadow

is that we attracting customers while customers building. are resonating deliberately generations. with these has have more retention that of towards even And and our all should and younger mean brands are that promotions content these away post shifting pandemic. This higher we brand Second, inspiring of its from encouraging, marketing finally,

accessible cohort for This, X last competitive a value from design, sustainably driven and not of the our to new appealing course, of been nearly year-to-date, this who younger products. years, made of And our Over highly a has new engaging majority sales growth. and have strengths affinity proposition generations, customer coincidence represent our content strong has are customers. the XX% millennials as

further are also sustainability our younger to indicators, customer, increase to industry X industry growth. decisions the positive importance trends value few our trends of in the purchasing We and rapid the one a industry shift proposition we that the is and positioned Not These growth addition, longer-term years working. market relevant consolidation, population include are the In to to and remote take support work compelling, e-commerce, come. mobility. consumer multiyear only internal generational to these the shift believe best and our investments of and retailers, in strategies share

channel shift the growth and We our prioritize will mix. continue in to e-commerce push natural

expand white of space brands brand. and the support into cross opportunities also will within product We aggressively and and businesses our new growth

Williams-Sonoma, that example, in market billion business $X opportunity. BXB our our alone. X market a the and will with large be next business-to-business of highly within billion For fragmented U.S. The size Inc. business-to-business $XX We years. next is believe

average allows in-house supply that to chain, of which X for launch a simplify Our the competitive traction Since brands, advantage digits capabilities sustainable is BXB major unique the development experience and customers. residential, we hospitality product our repeat and have and XXXX, verticals. customer with care us this health business size education, in and areas, all in commercial, we both double in growing have wins project purchases gained order

contract number XX% Our accounts of versus are last year. up

last We year. aggressively which this pursuing are to over track double-digit this sales to drive are growth on in opportunity $XXX compared growth represents strong and year, million

growth driver underappreciated believe is opportunity. our key is that we global Another

our strategy $XXX grow Our growth proven in further presence markets, model, in next billion expansion forward home And us, more distinctive the is through of has and to that To positioning, and our and reiterate, market. with for the our the look expansion business for this In low become profitably home. date furnishings a we estimated growing current relevant. profitable viability investment, franchise only and is our summary, to to can our supporting our vision launch own global will we capital we with India in year.

We a serve of is our share. to high-touch, gain products. have high-quality, we offer range been both we ensure value And stores market of impactful of business customers they models, and for most best our competitors vendors, shift the vast e-commerce designed from that associates a runway provides We aesthetics points. price because brands we e-commerce our in long and and person sophisticated that that marketplace sustainable different. And our wide in have We favors platform. that always virtually undifferentiated carry our with third-party the across unlike importantly, the the And and those and majority and are to market. service

confident and stakeholders sales our We drive And growth attractive and the with business pandemic. evolve our on have for the increasing even that growth strategies, profitability to opportunities. execute to we team accelerating and platform will into we post world-class successfully an are more the during continue

Julie, turn the call our I want to over team. thank to I Before

environment determination. of have for our We challenging team this now, energy, source and more unwavering creativity an operating and been been than X has in months

remarkable And over to for like and financial Julie the deeply beyond. our results of to appreciative are their pass for We and that, QX I'd performance. our QX, with call discuss outlook to

Julie Whalen

Laura, and you, Thank good everyone. afternoon,

And been strong It pleased this, proposition We to relevant, us platform gain share are market growth that and execution increasingly is from clear continuing and enabled investing our report financial and are and profitably. traction. strategies to our expand over a value culture quarter strong record discipline, the profitability. time, team and in with and growth combined our mission have to are another more world-class we agility our has capture of of

proud communities our and associates, customers, continue financial our care our of allowed our during that so has unprecedented our are take strength our shareholders us time. to to ongoing We this stakeholders,

billion, from $X.XXX have driven to third quarter accelerating materially of net have seen the strong with Net revenues than to grew year-over-year our performance Turning a results. higher-margin promotions. been by This shifting at we and away as was XX.X%. comp financial all growth XX.X% we to brands

Our orders expectations. our almost demand but comp, which yet continue sales quarter, includes in filled was outpace the XX% again as higher to at not placed,

of growth a XX.X%, XX.X%. record on a grew Rejuvenation double our delivered was retail strong accelerated comp digits and and of in business Barn revenues. and in brands top strong to accelerated improvement net Mark XX.X%. a a growth. to by Graham, XX.X% delivered of year, another Our of of driven Pottery quarter improved brands, Kids down this our net comp and last material at double-digit West comp net Barn the XX.X% emerging XX.X% delivered comp a sequentially comp another of Pottery e-commerce All Williams-Sonoma quarter.

of income leverage merchandise and Occupancy leverage, expanded with this, marketing This by third that merchandise margins to selling margins rate. ever quarter. costs, plus SG&A occupancy leveraged gross shipping, revenues we was higher partially driven revenues of which third XXX year-over-year optimize this occupancy double in conversion, reduced margin leverage by XXX from leverage, shipping our and points. earnings combined compared And driven of employment XXX other points X.X% performance, or equation well content-led last operating basis of those our in sales in per that and sales points with of driven almost the X% our an occupancy to which year higher growth XXX%, promotional includes share of store These of last basis the XX% by third-party the compared at the we continue year-over-year, was our quarter to more SG&A products. income merchandise further initiatives expansion pleased us shipping costs high-quality, highest leverage e-commerce to profitability, shift that sustainable or quarter include our top $X and million and $X.XX. overall Higher significant traffic grew costs these on a occupancy even than from stores. throughout operating points shipping by Gross to activity which year occupancy and payroll This focuses million to to basis year. substantial fewer another XXX% basis margins costs, XX.X% to This financial value diluted margin margin in results rent of as revenues shippers. in approximately $X.XX, to year. to our quarter basis drove And XX.X% and shift driven margins, $XXX net or resulted XXX reduction this at points was variable XXX of XX.X% down as record was leverage strategy This allowed digital line as in surcharges merchandise $XXX $XXX strong impact that margin see statement. as resulted reduced from last expansion, higher million from Moving of advertising XX.X%. the high million lower and our on or led operating returns ongoing leverage. expanded spend to higher with primarily were net by higher leverage offset to We deliver discipline. the as of our resulted

associates our hourly of heightened as wages employment COVID with and from protocols equipment, safety continuing testing providing higher to achieve proud as cleaning our well such to care for personal are levels store protective profitability, distribution take associates our and bonuses of while We pandemic frequent as these center increased costs for associates.

sheet, well million of as of compared of the positive year-to-date. balance $XXX strength with our during the $XXX the we year. quarter resilience enter million our of cash balance This strong the generating flow ended cash this pandemic, $XXX a million as last On we cash reflects to business balance as operating almost XXXX

nearly form position Our of to to strong expenditures dividend in operations $XXX future continued to allowed capital and million shareholders. our business, quarterly return liquidity $XXX in growth our of us payments nearly fund million to the the of the support invest in

trajectory revolver, a alone, increase quarter. and borrowings confidence with the our of $XXX million as maximizing quarterly dividend XX% Additionally, we previously our share our $XXX next for this long-term reinstated program, shareholders. to effective quarter, to in the committed full our our and short-term payment in announced, under also fourth dividend our business, our profitability also These repurchase in decisions commitment we repaid growth repurchasing million of quarter and returns our reflect this

year-over-year sheet, inventories XX.X% the quarter. a merchandise balance of a the in decline versus were down billion XX.X% $X.XXX second Moving for decrease

high next COVID ongoing in not in closely expect our when quarter fully orders, back through As means given in to partners year. second points demand we expand the with future Laura we manage of the basis of and customer. the do have available be said, we What that the to back working to have from and to that But capacity. expect been this the delivered is our QX sales fill elevated to inventory XXX until demand disruptions stock vendor is we quarters

they if continued are even have have delivered orders to that their customers We pleased want our delays. slight

It to clear unfortunately, COVID our the uncertainty outlook to is fiscal that is rates for across the latest significant rest globally surge there and this the of year. the infection pandemic. in country related Turning from still,

will across you gross brands continues all levels I weeks year-over-year. earnings our fourth we can margins tell But X to momentum be quarter. XXXX. our expand for business with strong and perspective, not to business From merchandise The providing result, a be in guidance planned expect As directionally, sales specific is a continuing. into margin we the lower of promotions, to continue fiscal

we from a leases the red occupancy We QX higher into offset stores unprofitable peak during levels expect the the of will the have driven by season. continue in will of year-to-date will and holiday cost and that This closure be costs renegotiated negotiations. anticipated shipping leverage savings as peak abatement already effect well that given come final be also selling partially sales e-commerce to as to surcharges continue, headwind that by elevated the

SG&A, time, of period can In to continue remain incremental we employment to in cost to that customers we with discipline ensure pandemic costs additional resilient incur we At as terms nonessential expect strong our exercise associated spend of and well people same during as during the the chain this uncertainty. costs. areas of keeping all will safe supply

allocation, on our balance to drive margin the expansion result, date increased of program, in reinstated With our due that the confident capital to we and drive robust in on trends the in our regards growth. strong we operating year. to have a e-commerce continuation addition the digital versus through to initiatives long-term to capital year, As quarterly and investments dividend likely to increased the high-returning substantial focus last of remain year ability performance share our buyback

total back line year expect relatively in historical to levels. this our be CapEx We with

an growth further line shift operating which As counts our of drive customer growing to continuing growth fundamental expect growth important growth in the to more successful And ability post margin to increasingly to strategies line we our with far clear as as and that remain outlook, with sustainability, margin this ability has deliver almost deliver strong heading business well prepandemic in through pandemic continue into drive as combined the for with before top become base, were accelerated our these reinforces loyalty expansion. expansion. our strategies, pandemic, longer-term It results, confident new comps consumer, operating and online XX% working, while accelerated. was to we our customer XXXX comp strong and top the leadership March to strong our

significant we our highly of investments is our e-commerce the years XX As many model. process retailers margin further significant e-commerce in has business. that we enables you online over business, scaling their a have speaks we significant earnings profitable alone, averaged operating drive platform as the made last the know, who have advantage with years, already many over power scale the a still digital-first that, leverage e-commerce This in throughout our which us XX%. of Unlike are to an to business, over competitive

As and will unprofitable of the occupancy drive as we close favorable shift we business, leases continue structurally renegotiate material and prioritize leverage channel to mix our growth e-commerce we stores. more

We have renewal up each in X and where brand those makes next of years, lease stores be deal looking half for are of our only leases and coming at keep economics and they where the the enhancing. sense the we'll

plan, to Stores be currently, stores is people XX advantage year. a close to merchandise competitive see Our to this continue person. as in like approximately

future with a However, fewer, we better, profitable more are anticipating stores.

also but deliver will to We planning our margin are product line, enable relevant value for less building content-lead to be which only not by into expansion continuing us by promotional. more merchandise also marketing, more

power love to pricing product expect gives others years. don't undifferentiated. and strong the line their This important that we next brands globally several as increase Our are over us have products very is because costs

confidence for in-house points, offer In be advantages, us convenience increases deliver our leverage. engaging SG&A operating come be that wide and profitable and to proven with in to demonstrate results come content best And is their and the of sustainably long-term continue aesthetics growth summary, the confidence quality, that third some we'll to of we continue quarter post These the omnichannel that long-term and for driving brands our us margin They competitive margin come combined model. to they growth be strategies we come the power to that earnings products to us now and needs, long-term pandemic. with that's able our driver made strong to unwavering leverage value would us to execution, to have to this for price give that both digital to will our none high for important SG&A they their call throughout serve and strong range us operating speaks shift and our gives sales thank returns us a Customers our inspiring Another drive to our like of distinctive for position our the our some now And of are there shareholders, lines, this Without post year our expansion stakeholders, possible. would the market. commitment pandemic. and further in like while to expansion may design for I all our also I open would questions. and associates. and growth.

Operator

we'll Instructions]. [Operator Oliver Wintermantel, ISI. to go And first, Evercore

Oliver Wintermantel

a Congratulations had this performance I on this Julie. question, quarter, again.

expect that? to are You you staying but the of the to because that third for high fourth quarter plan increase in e-commerce, mentioned of Do versus shift how And the also to costs the shipping quarter? actually rates then do offset shippers. you

Laura Alber

We charges job will peak that But in as take can that come to selling unbelievable an carriers because the we the capacity help season. I higher prices. up as of that coming charges holiday there's supply care the what that do use constraints chain we alternative have done during has say well with our of come in or is

everything with gross costs. it. should And the certainly margin can shipping so course, offset, along mitigate of they leverage. expansion the won't of to see they occupancy full a help the be then, regardless And still margin are expansion, it but doing We merchandise

Oliver Wintermantel

the you it. maybe of some how much in Could the U.S.? production Asia, relation for from of know shipments into you I update your how from, may, to your Got much are coming brought or is produced from that, back And and if Asia? I COGS sales coming And in the now your U.S. us

Laura Alber

that. we've think ever don't I disclosed

in Southeast Asian been other past we've other of that is I moving said out goods to we've locations. China think what the locations,

still by that to goal our by about do produced was on year, had end of China and in down so we're XX% that. get target amount we the And the this to

Operator

Sachs. Goldman up Kate Next McShane, is

Katharine McShane

the just demand it comp reported. the we comp that what demand over and look would time? what difference you way to quarter Or between the comp here, that now comp A could if big what in I to a quarter wondered time? And a like was over there contribute the question quantify last So was the are part big the demand was gap versus in a if in QX? the Was comp acceleration to it And what comp, the you QX? your quarter? up, was contributor it saw unlock or if of from to acceleration the will, the in what QX comp you the just during that made not, what meaningful for third QX

Laura Alber

The selling. mean comp across brands. is driven are strength by the all I the products

Our quarter, perspective. fire the differential and on had from performance quarter, -- that an When in you we basis back think between to net, about last is this XXX I it's XXX. demand look point

as possible. as into we're while longer customer stock seen relationships and So going have it's [indiscernible] -- a quickly little vendors, given aggressively we quarter. delays. this them our leapfrog working to it's seeing as partnership let customers, But we mostly our know expected, we long little line, on of as But each have haven't the our to a has in to of next performance great take obviously, of accelerating bit back than very get going go QX year. be been we that the on we're come through as by our with products as from with in, teams we demands top vendors a The been these incredible

that future demand come this between news to we and great the quarters. that's in net delta effectively expect so And

Katharine McShane

QX? a that delays potential things for of furniture there mix question are is, back, in order the surcharges some addition in pulled higher headwind pushed these see of quarter? to again, is with in get the would fourth as to mix Just could follow-up kind My in maybe be QX? that the would higher to see any you in more be And you furniture

Laura Alber

we It's the we this as QX, comp when we're is more Usually, total not as nonfurniture of a up do more Laura. demand have talking and percent a comes William-Sonoma. gifting, -- in bit

and fill that a bunch of furniture a of in, coming However, have net you're right that. lot we'll in hopefully, we

not customers business it And shouldn't affect just be is. So into us. the serve are get Furniture thrilled matter be great very product And and a our what should profitable quarter -- them. a is to to headwind. it for that able we it doesn't and

Operator

go Instructions]. Gordon [Operator Haskett. next Grom, We'll Chuck to

Chuck Grom

on My the and Great is quarter the here. question opportunity. margins outlook the and

and got X dollars buckets, ad reduced promotions, big really more efficient spend. You've lower occupancy

isn't the visibility rank when and in excited? How really about categories you you What couple of the next more What really quarter, those but So you you do this fourth most would has opportunities? ahead, years. on? think think most you have

Julie Whalen

I think that's I thing the excited the fundamental it's -- the the industry. I I think is online, mean board. most quite in that's Well, we're going about mean, honestly, and business across this trend that shift our across a

e-commerce years, business X that thrive. and e-commerce, combine last going allow And XX combined they've go many to to shifts op to so those e-commerce, fact as from happen, XX%. if and back our margins as And look with our that that you averaged the again, that continues have you we in to is the new at above customers

our in with we are that about alone our margins feeling fact back just good that margin So op marketing strategy, you and continue. to promotions expansion Then we and on merchandise forward. very going to our building layer drive expect the will content-lead significant that pull

profitability If that up that and coming that to we're and all the over renewal renegotiating, the we sure years that X want, have leases they're next layer we're on a close or stores for the going occupancy these from may have you keep they higher leverage if which levels to we're bar. make going ones the great that set they're the we we've unprofitable,

rest leverages to of leverage the shift then, occupancy so will continue. e-commerce, beautifully. with And SG&A And that again, just the

to going significantly this So is be going we business opportunity to and think forward shifted to the that think the that's fact to we've profitably a in e-commerce, it's don't inflection point change. we able huge drive

Chuck Grom

helpful. then follow-up. just just I And quick That's do one

One of of that the you're of the sustainability pushbacks on the today. the story seeing is some trends just

years, you're of of curious trends them driving guess the I'm demand in the over strong you'd power rank how order I couple next staying seeing? So that are the

Laura Alber

Sure. running actually comp. in remind we're everybody This close very what to Laura. we pandemic, about we front I business, are pre and great saw bullish us. our XX% to that is opportunity a we want had in of And

XX% even And trend. pandemic the industry that going the knew stay that brick-and-mortar. in But the to retail from with was our so Previous same. wasn't done we consolidation from clearly were to favor benefited trends we've the stores, away and in pandemic, bigger pre stay-at-home

that's the as And to by are successful. can't but accessible are products. the that and us people such of be in-house customers be big designed have saying, have are shift It's come competitive people to a more we who big own an knew design consumers unique with wide values of either/or, as is we and so brands, you way, variety online, and who one with as but up powerful not that are a products our know, I and we distinctive our would a loved and will points. of buy advantage big younger we players to And really as positioning. us are And consumers, then the to we pick and across that online also, that and other would And resonate consumers have difference share. very and that keep market we elsewhere. customers power, people our lot our a by sustainable that of going you price people between a esthetics a There's our lot the be. lot because And serve purchasing future

been a our real with that more financial volume our we're about is to to optimistic are able us. hold so and and investing to are we've that the leverageable these platform lot So step-up other of course, then, for XX% e-commerce substantive. talked about And long invest. investments a who've consumers we've in very of that And to retailers without from only us huge pieces business had shopping took profile, XX%

the that company. business stores the of excited So We digital-first ourselves we things a to XX%, I'm e-commerce, ever. for see profitable and are profile our great upwards with us fully the than financial about. in XX% see is big time Those more stores,

Operator

Next from is Stanley Morgan Gutman. Simeon

Simeon Gutman

two Laura, this ask this -- and I'll parts. in ask I'll

mentioned, you just post the acquiring you now tick? should can a of I about by should comp from think, to the you management, actual what is up an look is does inventory perspective, catching customers, supply demand maybe learning -- versus then, stronger pandemic. all, the forward. nonevent? it's product operating that whether talk And management about we it going narrowed but movement Julie, talked you at that? X mean and that Can makes of or demand First, you that First this chain you markdown point you're help slow Or

Laura Alber

you you That said, was slowed, the thing demand has last what say? did

Simeon Gutman

slows that mean a the with the So if be X narrowed see we say, and it actual more catching few to it demand? the just chain let's between little? point, by nonevent. Or could if you going comp the narrow does can a demand up spread comp, by supply demand to forward, the a that attribute But points the it

Laura Alber

Okay. I understand. you. Thank

Okay.

toughest the strongest. it's make times always you So that

and what investing in doing realizing our the the to to to been you And we've you're most customers really go going at look of I people. is things the that and back what power invest and think, in. matter have

it's associates. people on through made people, do those we And we early brought and and we operating it's care to of decisions furlough take our for decision them. -- been are never But experience You amazing you. other how that that supporting other. home so different paying go places relationship an as each we this, now, them many And not -- into and made such decision. powerful a you close it's with that's for so malls know. principle that as there's with the in there's and keep stores things than because anything our really that I've they of And our -- seen store

chasing going products getting best can quote And is first of In trying and first management, just would time. of flexibility have to called in what it with down. to the inventory just us the in customer the now And doing back -- happen we the we're the who look, when terms stock. team I'm also, what's date came impressed we

you that feel a in waiting the it I about if doesn't you out on if So considered push certain difference out and see very how push different over, as whether between and for know There's the again. delivering and big sofa in times a delay over beginning it I'm customer, you, lost it's they time.

And our much always It's me, So that's can this has first the happens and at. them. we're up. comp look the between To And into never stores -- time we -- gap catch been since I'm we talking, have and then as as low. delays big of those I'll spike was we what just, kind closed building that quote had you we times now. course, the this of net slowed question. the and inventory because huge seen take something last

accelerate continue you inventory see to continue this because to better to we longer can back have be you in build to the sales, As stock.

-- to coming amount. the So a on this the be this will, in go thing demand certainly a -- may could net But cut the benefit that is will P&L, future.

for previously the the hate That's and As stock it the will give We'd we're go business, it future in when have in trying get in rather much the going for more the come to But sales as way inventory on demand. us we stock. we're high back what very it. customer. we because the net the to will that's operate in

Operator

Brian is Nagel, up Next Oppenheimer.

Brian Nagel

off, Nice nice on really First congrats quarter. a work.

to in you look, gross shift content So the strategy expansion, marketing of to a about promotions. with away to question the want the I ask, talked regard from margin more

in one has the here, a accelerating family to Williams-Sonoma to Are same the the been strategically, is, clearly this confident mean, the strategy may will there here for margins of the here more a they the content-driven just have benefit to of potentially you yield is better back within what pre questions couple trends pandemic? that even normalize while pre results companies that So turned of of demand strategy quarter? through then crisis. type as of And of I pandemic, way demand that. was demand kind size

Laura Alber

Felix the on phone. I have

the start me current be Let Felix. we question, it, to that and the anything, was to We're then if our I'll learned have over situation. pass most -- to we adaptable it

that's all to off -- more that people new much needed cook busy that takes you think to XX% when decided than hear the stating we like new at try really and relevancy. inspiring. exciting things, feet, with pandemic and you your it things about I was at They needed this family something We're the is content home offer. your screen to hear about next we

using brands testing are But multiple things test so in new even something things. them to find our and better next different that's may We we else brands year. roll we're And then always different out.

And take any a so given with huge don't we risk strategy.

our our we've And at as time, pulling have value. working been so we've down promotions, been also on really same been we -- the

hear opening scripts Pottery in a So about is apartment past, if in value the me price Elm is getting that West of you'll to brand. That you value, key customers as sure go a that, in. Pottery to our part strategy Barn. the everyday point back make we're course, Barn talking of exactly And strategy, new growing

Julie, We've to ago. with. about the about continue they to we -- It's less It's ahead you markdown want the from not do promotions, to substantially where going value. year now price push You increases. can numbers? a less were give want go we're inventory. So markdown cleared

Julie Whalen

XX%. down It's

Our [indiscernible]. clearance in

Laura Alber

do add And [indiscernible]? Phil, you want anything to to

Felix Carbullido

Sure. Yes.

it's question. great think I a

look is the growth new haven't who messaging LED our I active seen of returned cutting at through. content couple terms see have year in business And to points double-digit over a XX-month when and growth So in a purchase. customers customers that I at in the continued proof the our we growth is, we in -- make customers. of a in look

the to encouraging. new for customers before. incredibly we new rates And trends really new of rates in the for amongst the I'm means see are in three all retention like about Number what haven't we talking and seen cohorts. of -- it purchasing. growth then So And customers terms higher future higher growth, cross-brand

believe those are time. strong their indicators we So over of value

points So those the of some the at is I resonating? proof look when are message

Operator

is Thomas, question next Brad KeyBanc Capital Our Markets.

Bradley Thomas

me the topic that number margins, highs for some support record here. I And results to other seem that was it we models low increases the just far think factoring getting for on new and my margins the on help transportation like raw the and congratulations we about record for to was here of we hoping maybe of changes of ourselves. and our I are dynamics activity and -- side of hoping great about the ahead seeing, as might maybe a ledger of to as materials you're Could keep let costs? too in labor the you in follow-up there how And structural going could breakout we some maybe this fine-tune of from think you add drivers us those some talk some forward. clearance us XXXX. some of about does

Laura Alber

said right materials be those engineer we to margins I that continue design through headwinds product, transportation expect aggressive the still Obviously, costs any do before, gross a been of will that supply spoke for regardless that and team we price as Yes. a can in you've then strength on headwinds has because the of we mean, to. us I gives those obviously, we strong out. or mentioned price those an through could what of at laid the like. thinking done point chain Transportation, very we've raw working some to But job. that have phenomenal as that But you headwind. think, earlier, team create a the be has

through of to acted navigating Sort carriers. alternative They aggressively come this. with quickly, up

cost to that we're through so how can mitigate go see the And on forward. managing that we

significant seen, to that, leverage tailwind the be that's those, to going helpful, along this op by expansion to provides, shifting So margin with drive quarter, as along occupancy even think margins, we the merchandise that the very forward. in going get your you've substantial to with to flow-through we with point, and e-commerce able the be again,

Operator

Yih Adrian up next.

Adrian Yih

obvious. I done, through. to well content-lead -- the Very It's promotions, actually marketing will add congratulations. is I coming really wanted and Laura, very the my

from sort how next comes A comp? customers So Laura, could customers, of you, the it lot new But buying of of or into wanted that? new you big have on we more the is to I same year product as lines, kind of products. question ask do customers comp -- go of

should that is the of but Can mean wholesale will but think on discounted now? that us -- Julie, the it this, ones us we next to high-single-digit I year. XX% some again size the see a I metrics interested point, of your the Is I top time? me one, and of And that a then, is about really line, may, some on long-term stores comment. BXB if [indiscernible] here last one EPS? What we price e-commerce, was how metrics open how So if forgive me that it over transaction? the give give one And and target, you on unfolding of in retail mid- that

ROIC So it should And the still of improving penetration e-commerce aspect truly we the think is cash about you to when being flow. XX%? as that move

So I agree in that regard. totally

Laura Alber

for Great. you Thank question the on BXB.

going this to have we missed it So million over you in guys to give the might year. do you decided the time for $XXX script, first numbers we're the be

new for milestone our And was And so by improvements driven growth on first we're $XXX each BXB, customers. also with execution sizable. sales passed on time. see Average pipeline continued a been We first to volume single improving program million even month. are the industry in diversify verticals. push key and it's our internal acquiring really really is our And double-digit order strategies rate, build various seeing stronger strength. consistent we're in our quarter in our continuing we and to a at business size And across

strategic of deportment. our initiatives, expanding terms In we're contract aggressively

awareness, to platform. engagement quarter interior we such partnered an us. virtual our is classes, which And to events have design well a We're part We magazine this as example, been So [indiscernible] our to be to for converting fun. featuring with contract cooking brand and brands. interviews a marketing take for digital BXB live this transitioned build products offering of really in our have And as in takeover expanding virtual as series all sell-out Instagram of also grad. with

we're interesting about for virtual the thinking future. for big events, in are that business way a these very charging We opportunity

moving hotel not, then recovery, signs rebounding positive pipeline it the heavily industry, So to there believe and show impacted is occupancy the -- industry industry a the rates, not, renovations it were continues COVID again. and the lows. forward [indiscernible] -- from lot continue and I'm for believe of And a or the or we're from seeing

how internal It's seeing that these built we it we're good pipeline big So so big retail, orders. depending indicators that we on run foundation the is stronger, is get is, that's it handle we've on and only a what how the it. and to going can it's discount

hotels So a of -- well, to suppliers can and different can't which XX as I do us to furnish to these or as do. them lot and come can we size people -- just mentioned these people to usually, And we the made for projects, have earlier, whole and go thing. do they made-to-order the can products

in why winning. we're great I that's team, our think, think sales So I that's, addition to

on although Julie comment giving not to we're comps over that you on the we're -- about for EPS, giving it the hand that. I'll latter But that. for future not means what the So and

Julie Whalen

reason year, EPS. at would be nonanswer strong that. coming math EPS. we're mean, perspective. clearly, then a we margin reason we leaning margin If growth the line where any margin and disclosed the clearly, here, be leverage e-commerce expansion there merch would occupancy your from in a And you what revenue The operating fall would of it's could you that. expect to from and that. expense then be is down that next like disconnected. with this in end of factor the in as to So the kind can do in would in side, op the factor you occur EPS it expansion interest you sort since the on the when up and -- There's And that probably you higher a shift no of be to to mathematical cause also continuing. come and But factor translate anything, things I haven't towards think, we'll assumptions obviously, can time, down I of we but Make kind bottom translation line it's from you the

it's hopefully it So, sorry, kind nonanswer, does. a but of

Adrian Yih

helpful. all color. helpful No, that's all no, It's

Operator

go [Operator to Capital Loop Markets. Anthony Instructions]. next We'll Chukumba,

Anthony Chukumba

quick question. Just a had

from seeing surcharges shipping would you aware perspective? sort seasonal you that's to mentioned than are know understand. deliveries. you fourth Joel, be I cost Or need the mentioning there surcharges want you for fourth higher Is a So And quarter are sure normally I to are I quarter? a make surcharges these in just but of thing, that just you of

Julie Whalen

definitely it be will No, higher. Yes.

for quarter the I release that EPS they're passing think sure cost. people retailers, indicated they all last along the saw where

not phenomenal as really acted chain alone. I I we're and know, of and team the you They've over, as great culture. is, has think aggressively our quickly over So say done supply and But our company difference a sort that's job.

on make to team done have as be standpoint job, moved to best it mitigate from it immediately we pricing the a to can, and we a both all from standpoint, capacity they try so phenomenal able And a possible. that and coupled with tech to

spot. going And going doesn't certainly, to much we're so have others, compared we're these or surcharges. better mean not it But to to in a costs incremental be

Laura Alber

partner. And truth is great with the But UPS a of lot good and a more supply covered cost is a ours, chain. the there's in they've been partner

Operator

Guggenheim Forbes Stephen for next Securities is question Our

Steven Forbes

behavior, the any that with as out base portfolio we And if business brand activity, expand to curious I less it's whether how change, towards behind more I'm and has wanted change relative XX-month active there? Any growth this of can has about right, content engaged right, maybe Whether you right, behavioral customer to share in specifically maybe follow-up gains. focus your the on right? XXXX, customer market migrated, really As promotional seen cohorts, conviction you right, opting and the on the just and sort any context right? or have led on during 'XX? think cohort ongoing

Laura Alber

Fil let take I'll that.

Felix Carbullido

you a the active -- with Thank Sure. for record number start guess of Yes. high I'll question. customers. I it's

coming base that's and customers by both DXC driven channel. -- in, new So and the especially the customer existing in

rates. look including are social at e-mail I message those and at I open we're giving I I say, So our high resonating." that we've "Okay, engagement, numbers engagement, metrics, seen. about record that the that is think number look clearly well,

clearly is through. cutting message the So

we of know, makeup the see in mean, our customers, we're than mentioned, Laura of terms In rate at greater biggest the a before. seen we've the It's huge starting generation. we generation as And ever customer -- I a millennials that's our all base have more to that into lifetime.

that on our lastly, now further as all majority and move gives think, getting customers now then I loyalty for the formation. us the into those promise of they customers our of Key, new members So household program. customers, XXXX cross-brand And of our are

higher have rates and repeat So members. rates seen than we've non-Key retention members Key higher

all well growth active that suited answer is your next our for that question? base of year. customer So Does for means

Steven Forbes

And you -- I did. think in we've got and don't that on today can Is some mentioned. members that know the time, as key it Yes, provide don't update I you given an something well?

Felix Carbullido

had which program, I'm is our The we And you as our for say new know, more year-to-date, loyalty ever in to million we most members, drive Sure. now have us company. customers I cross-brand Key, Yes, of customers way have we cost-efficient incremental are to than over XX mentioned, as sales. proud our that, it's enrolled. And and now very

efficient for So an customers is incremental of than acquiring with And way new ones. existing all much opportunity that we us. know drive to clearly, more sales

forward. So confidence going again, us gives advertising in efficiency

Operator

Shapiro, Retail Tracker. Marni Our is next question

Marni Shapiro

Congratulations.

point Coat. your talking do guys about the So on and brands to internally. world. post-COVID lot you've your move about of I'm tired I'm it you are and everything to a differentiation talked past going Laura, that

and quite for are things millennials on products sustainability also, think, that, and in. interested company You've Z some and your Gen time very now, focused I organic

that in of part think, business think your better can keep marketing positioning So home this has do how sustainability and position future? for everybody great you of discovered you to you even about is guys business, as XXXX the kind a the and

Laura Alber

the worker here. we're and lead continue out going finishes, for material much us, October. expand so sustainability we're set disclosure for Thank materials our to card. cottonwood -- put going this our in will in to year's for business and And programs going our reduction. to And and our alternatives We're ESG build we'll production. our continue we and going going and to environmental on and year, lead CDP successful to disclose green climate impact And build polyester. in that measure scope commitments. of the We're And pilots. energy. customers. It's important X we'll and across to to ethical areas, going commitments We're footprint to recycled target you out We're well-being, are we're our to leadership to these scale develop science-based next important for pursue waste lower we're and around to so continue a strategic report going and circular in and in progress. and and track lead We responsibly circularity, off to like to our our our all And build and question.

our to representation. our example, on made we public and year, and inclusion ethnicity in data responsibility For our first diversity plan corporate action report, gender our this commitment equity with ever

are good pillars by We and people, to mantra are our committed and our of purpose. design planet

Marni Shapiro

years. going next over very it's couple of think important I the great. to It's be

Laura Alber

Thank you, Marty.

Operator

Basham, Seth Next up is Wedbush.

Seth Basham

take really you next level operating is still you expect get they're a months? from a should I trailing mentioned a expansion margin rise My XX-month vaccine, we that margins Julie, at we I mean you think question clarifying say. as the virus, XX Should Congrats that pandemic. to post one. to After for get well. Yes. operating after whatever expect we

Laura Alber

an I ongoing we're do from because doing the to continue. as operating leverage, mentioned, the occupancy that going expectation is margin is that expect especially to of expansion and expansion continue all will and things e-commerce, perspective Yes. all We top margin thrive, our emerge line the

year. we to so above do where on And it this expect landing we're expand

Seth Basham

we mitigate in some secondly, you're more of you're shipping as doing dynamics fees of are that time, some the costs think that then terms And higher you about of just customers incurring? charging Fantastic. shipping the to what one

Laura Alber

same It's we our have. We haven't changed the model. that model shipping

Operator

questions to remarks. gentlemen, have all like you the conference today. the any back that we for additional time closing I'd and for Thank is Laura to or hand

Laura Alber

Sure. wonderful sincerely wish I with just and Thank safe your probably a but Thanksgiving or you us and I maybe you friends today, all friends really, your family, for assume. your joining

soon you to be and So we'll it. to forward talking look

Operator

Once does Thank everyone, that conference. for conclude you your again, participation. today's all

disconnect. may You now

Williams-Sonoma (WSM) 19 Nov 202020 Q3 Earnings call transcript