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Williams-Sonoma reiterates financial guidance
Jun '09
Williams-Sonoma, Inc. announced operating results for the first quarter of fiscal year 2009 ended May 3, 2009 (“Q1 09”).

Net revenues in Q1 09 decreased 21.8% to $612 million versus $782 million in the first quarter of fiscal year 2008 ended May 4, 2008 (“Q1 08”). Comparable store sales in Q1 09 decreased 21.0% from Q1 08.

Howard Lester, Chairman and Chief Executive Officer, commented, “While the home furnishings sector continued to be under significant pressure in the first quarter, we focused on the aspects of the business we could control and delivered substantially better-than-expected earnings results. We saw our revenues stabilize within our range of guidance, and we were able to enhance profitability by reducing our advertising expense as a percentage of revenues and optimizing our promotional activity. We also successfully lowered our merchandise inventories, reduced our capital spending and once again improved our year-over-year cash position.”

Mr. Lester continued, “Looking forward to the second quarter and the balance of the year, we are continuing to gain confidence in our revenue forecasts as they trend in line with the guidance we provided at the beginning of the year.We are, however, cognizant of the ongoing volatility in the economy and the potential for promotional pressure as the industry reduces inventory levels.

As such, despite our better-than-expected performance in the first quarter, we are reiterating our financial guidance for the remaining quarters of the year, as we continue to focus on our five key initiatives: (1) capturing market share through innovative merchandising and a greater emphasis on opening price points; (2) delivering superior customer service; (3) continuing our catalog circulation optimization strategy; (4) driving efficiencies in our worldwide supply chain; and (5) maximizing profitability and cash flow.”

Retail net revenues in Q1 09 decreased 17.6% to $358 million versus $434 million in Q1 08. This decrease was driven by a 21.0% reduction in comparable store sales, partially offset by a 7.4% year-over-year increase in retail leased square footage (“LSF”), including 27 net new stores. All brands had declining net revenues during the quarter, led by Pottery Barn, Williams-Sonoma, and Pottery Barn Kids.

Direct-to-customer net revenues in Q1 09 decreased 27.0% to $254 million versus $348 million in Q1 08. All brands had declining net revenues during the quarter, led primarily by Pottery Barn and Pottery Barn Kids. Internet revenues in Q1 09 decreased 22.8% to $194 million versus $252 million in Q1 08.

Gross margin expressed as a percentage of net revenues in Q1 09 was 30.1% versus 35.3% of net revenues in Q1 08. Excluding the 20 basis point impact of accelerated depreciation related to an early lease termination in Q1 08, non-GAAP gross margin expressed as a percentage of net revenues was35.5%. This 540 basis point decrease was primarily driven by the deleverage of fixed occupancy expenses resulting from declining sales and an increase in cost of merchandise (including the impact of increased markdowns).

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