Exhibit 99.1

WILLIAMS-SONOMA, INC.

3250 Van Ness Avenue

San Francisco, CA 94109

 

      CONTACT:
      Julie P. Whalen
      EVP, Chief Financial Officer
      (415) 616-8524
      Elise Wang
      Vice President, Investor Relations
      (415) 616-8571

PRESS RELEASE

Williams-Sonoma, Inc. announces fourth quarter and fiscal year 2017 results

Q4 net revenue growth of 6.2%, with comparable brand revenue growth of 5.4%

Q4 GAAP diluted EPS of $1.13; Q4 Non-GAAP diluted EPS of $1.68

Quarterly dividend increase of 10%; stock repurchase authorization increase to $500 million

San Francisco, CA, March 14, 2018 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the fourth fiscal quarter (“Q4 17”) and fiscal year 2017 (“FY 17”) ended January 28, 2018 versus the fourth fiscal quarter (“Q4 16”) and fiscal year 2016 (“FY 16”) ended January 29, 2017.

KEY HIGHLIGHTS

4th Quarter 2017

 

   

Net revenue growth of 6.2% to $1.680 billion

   

Comparable brand revenue growth of 5.4%, an acceleration of 210bps from the prior quarter

   

Positive comparable brand revenue growth in all brands, including Pottery Barn and Williams Sonoma at 4.1% and 4.3%, respectively

   

E-commerce revenue growth accelerates to 8.4% and 52.2% of total company net revenues

   

Non-GAAP diluted EPS outperforms guidance at $1.68, an 8.4% increase compared to Q4 16

Fiscal Year 2017

 

   

Net revenue growth of 4.1% to $5.292 billion

   

Comparable brand revenue growth of 3.2%, driven by a 450bps acceleration in Pottery Barn; eighth consecutive year of double-digit comp growth in West Elm; 190bps acceleration in Williams Sonoma

   

E-commerce net revenues increase 5.5% to $2.778 billion, or 52.5% of total company net revenues

   

Non-GAAP diluted EPS growth of 5.2% to $3.61

   

Above industry average ROIC of approximately 16% (see Exhibit 1 for definition)

   

Robust operating cash flow of $500 million

   

Cash returned to stockholders totals $331 million with $196 million in stock repurchases and $135 million in dividends

Fiscal Year 2018 Guidance

 

   

Full year EPS of $4.12 - $4.22, which reflects the impact of the 53rd week in fiscal year 2018 and the net benefits of the recently enacted Tax Cuts and Jobs Act (the “Tax Act”)

   

Board of Directors authorizes a $0.04, or 10% increase in our quarterly cash dividend to $0.43, and an increase in our stock repurchase authorization to $500 million


Laura Alber, President and Chief Executive Officer, commented, “We ended the year with a strong fourth quarter. Our product and operational initiatives drove broad-based comp growth in all our brands and a substantial acceleration in e-commerce and retail revenue growth from last year. For the full year, we made significant progress against our strategic priorities to strengthen our competitive advantages and drive accelerated growth. With revenue and EPS growth of 4.1% and 5.2%, respectively, we ended the year again demonstrating our ability to consistently deliver top line and bottom line growth with robust cash flow generation.”

Alber continued, “In 2018, we will continue to strategically invest in digital advertising, technology and our customer experience, while driving efficiencies and cost savings throughout our business. Looking ahead, we are confident in our strategies and proven track record to further extend our leadership in the home furnishings and housewares industry.”

4th QUARTER 2017 RESULTS

Net revenues increased 6.2% to $1.680 billion in Q4 17 from $1.582 billion in Q4 16.

Comparable brand revenue in Q4 17 increased 5.4% compared to a decrease of (0.9%) in Q4 16 as shown in the table below:

 

 

4th Quarter Comparable Brand Revenue Growth (Decline) by Concept*

 

      Q4 17                Q4 16       

Pottery Barn

     4.1%         (4.1%)   

West Elm

     12.3%         6.5%    

Williams Sonoma

     4.3%         1.4%    

Pottery Barn Kids

     0.9%         (4.9%)   

PBteen

     2.6%         (8.1%)   

Total

     5.4%               (0.9%)     

*  See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue.

 

  

E-commerce net revenues in Q4 17 increased 8.4% to $877 million from $809 million in Q4 16. E-commerce net revenues generated 52.2% of total company net revenues in Q4 17 and 51.1% of total company net revenues in Q4 16.

Retail net revenues in Q4 17 increased 3.9% to $803 million from $773 million in Q4 16.

Operating margin in Q4 17 was 11.8% compared to 13.6% in Q4 16. Excluding the impact of certain discrete items detailed in Exhibit 1, non-GAAP operating margin was 12.4% in Q4 17 versus 13.6% in Q4 16. See Exhibit 1.

 

   

Gross margin was 38.5% in Q4 17 versus 39.3% in Q4 16.

 

   

Selling, general and administrative (“SG&A”) expenses were $447 million, or 26.6% of net revenues in Q4 17, versus $406 million, or 25.7% of net revenues in Q4 16. Excluding certain discrete items, SG&A expenses were $438 million, or 26.1% of net revenues in Q4 17. See Exhibit 1.

The effective income tax rate in Q4 17 was 51.8% versus 33.0% in Q4 16. Excluding certain discrete items, the non-GAAP effective income tax rate was 31.6% in Q4 17 versus 36.5% in Q4 16. See Exhibit 1.

EPS in Q4 17 was $1.13 versus $1.63 in Q4 16. Excluding certain discrete items, non-GAAP EPS was $1.68 in Q4 17 versus $1.55 in Q4 16. See Exhibit 1.

 

2


FISCAL YEAR 2017 RESULTS

Net revenues increased 4.1% to $5.292 billion in FY 17 from $5.084 billion in FY 16.

Comparable brand revenue in FY 17 increased 3.2% on top of 0.7% in FY 16 as shown in the table below:

 

 

                                                                            

Fiscal Year Net Revenues and Comparable Brand Revenue Growth by Concept*

 

      Net Revenues (Millions)              Comparable Brand Revenue
Growth (Decline)
      FY 17               FY 16               FY 17               FY 16   

  Pottery Barn

   $2,066         $2,024         1.0%          (3.5%)  

  West Elm

   1,114         972         10.2%          12.8%   

  Williams Sonoma

   1,022         1,002         3.2%          1.3%   

  Pottery Barn Kids

   626         635         (1.8%)         (1.4%)  

  PBteen

   235         238         (1.4%)         (6.2%)  

  Other

   229               213               N/A                N/A   

  Total

   $5,292               $5,084               3.2%               0.7%  

* See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue.

 

E-commerce net revenues in FY 17 increased 5.5% to $2.778 billion from $2.634 billion in FY 16. E-commerce net revenues generated 52.5% of total company net revenues in FY 17 and 51.8% of total company net revenues in FY 16.

Retail net revenues in FY 17 increased 2.6% to $2.514 billion from $2.450 billion in FY 16.

Operating margin in FY 17 was 8.6% compared to 9.3% in FY 16. Excluding certain discrete items, non-GAAP operating margin was 8.9% in FY 17 versus 9.6% in FY 16. See Exhibit 1.

 

   

Gross margin was 36.5% in FY 17 versus 37.0% in FY 16.

 

   

SG&A expenses were $1.478 billion, or 27.9% of net revenues in FY 17, versus $1.411 billion, or 27.7% of net revenues in FY 16. Excluding certain discrete items, non-GAAP SG&A expenses were $1.463 billion, or 27.7% of net revenues in FY 17, versus $1.396 billion, or 27.5% of net revenues in FY 16. See Exhibit 1.

The effective income tax rate in FY 17 was 42.6% versus 35.3% in FY 16. Excluding certain discrete items, the non-GAAP effective income tax rate in FY 17 was 33.5% versus 36.9% in FY 16. See Exhibit 1.

EPS in FY 17 was $3.02 versus $3.41 in FY 16. Excluding certain discrete items, non-GAAP EPS was $3.61 in FY 17 versus $3.43 in FY 16. See Exhibit 1.

Merchandise inventories at the end of FY 17 increased 8.6% to $1.062 billion from $978 million at the end of FY 16.

TAX REFORM

On December 22, 2017, the Tax Act was enacted into law, significantly changing U.S. tax law. Among other changes, the Tax Act reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, and required a one-time transition tax on previously unrepatriated earnings of foreign subsidiaries. As a result, the company recorded a provisional income tax expense of $41.5 million during Q4 FY 17. The provisional amount includes $13 million related to the transition tax on deemed repatriated foreign earnings and $28 million due to the re-measurement of the company’s deferred tax balances at the lower tax rate. The company continues to analyze the Tax Act and the provisional amounts will be finalized in FY 18.

 

3


STOCK REPURCHASE PROGRAM AND DIVIDEND INCREASE

During FY 17, we repurchased 4.1 million shares of common stock at an average cost of $48.43 per share and a total cost of approximately $196 million. As of January 28, 2018, there was approximately $214 million remaining under our current stock repurchase program. As announced in a separate release today, our Board of Directors authorized a $0.04, or 10%, increase in our quarterly cash dividend to $0.43 per share, and increased the amount available for repurchases under our existing stock repurchase program to $500 million.

FISCAL YEAR 2018 FINANCIAL GUIDANCE

 

 

1st Quarter 2018 Financial Guidance*

 

Total Net Revenues (millions)

   $1,135 – $1,170  
Comparable Brand Revenue Growth    2% – 5%  

Non-GAAP Diluted EPS

   $0.55 – $0.60  
        
      

Fiscal Year 2018 Financial Guidance*

 

Total Net Revenues (millions)

   $5,475 – $5,635

Comparable Brand Revenue Growth

   2% – 5%

Non-GAAP Operating Margin

   8.2% – 9.0%

Non-GAAP Diluted EPS

   $4.12 – $4.22

Non-GAAP Income Tax Rate

   24.0% – 26.0%

Capital Spending (millions)

   $200 – $220

Depreciation and Amortization (millions)

   $185 – $195

* We have not provided a reconciliation of non-GAAP guidance measures to the corresponding GAAP measures on a forward-looking basis due to the potential variability of discrete items.

 

 

 

Store Opening and Closing Guidance by Retail Concept**

 

      FY 2017 ACTUAL       

FY 2018 GUIDANCE

      Total                New                Close                End  

  Williams Sonoma

     228             5             (15             218  

  Pottery Barn

     203             4             (3         204  

  West Elm

     106             9             (3         112  

  Pottery Barn Kids

     86                         (9         77  

  Rejuvenation

     8                   2                                   10  

  Total

     631                   20                   (30               621  

** Included in the FY 17 store count are 19 stores in Australia and two stores in the UK. FY 18 guidance includes one additional UK store.

 

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, March 14, 2018, at 2:00 P.M. (PT). The call, hosted by Laura Alber, President and Chief Executive Officer, will be open to the general public via live webcast and can be accessed at http://ir.williams-sonomainc.com/events. A replay of the webcast will be available at http://ir.williams-sonomainc.com/events.

 

4


SEC REGULATION G — NON-GAAP INFORMATION

This press release includes non-GAAP financial measures. Exhibit 1 provides reconciliations of these non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). We believe that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of current period performance on a comparable basis with prior periods. Our management uses these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for or superior to the GAAP financial measures presented in this press release and our financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements relating to: our ability to continue to improve performance and increase our competitive advantage; our focus on operational excellence; our abilty to improve customers’ experience; our optimism about the future; our ability to drive long-term profitable growth; our future financial guidance, including Q1 18 and FY 2018 guidance; our stock repurchase program; and our proposed store openings and closures.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include: accounting adjustments as we close our books for Q4 17 and as audited year-end financial statements are prepared; continuing changes in general economic conditions, and the impact on consumer confidence and consumer spending; new interpretations of or changes to current accounting rules; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; changes in consumer spending based on weather, political, competitive and other conditions beyond our control; delays in store openings; competition from companies with concepts or products similar to ours; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management; our ability to manage customer returns; successful catalog management, including timing, sizing and merchandising; uncertainties in e-marketing, infrastructure and regulation; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; challenges associated with our increasing global presence; dependence on external funding sources for operating capital; disruptions in the financial markets; our ability to control employment, occupancy and other operating costs; our ability to improve our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; and other risks and uncertainties described more fully in our public announcements, reports to stockholders and other documents filed with or furnished to the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 29, 2017 and all subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

ABOUT WILLIAMS-SONOMA, INC.

Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, representing eight distinct merchandise strategies – Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams Sonoma Home, Rejuvenation, and Mark and Graham – are marketed through e-commerce websites, direct mail catalogs and retail stores. Williams-Sonoma, Inc. currently operates in the U.S., Canada, Australia and the United Kingdom, offers international shipping to customers worldwide, and has unaffiliated franchisees that operate stores in the Middle East, the Philippines and South Korea, and stores and e-commerce websites in Mexico. In Q4 2017, Williams-Sonoma, Inc. acquired Outward, Inc., a leading 3-D imaging and augmented reality platform for the home furnishings and décor industry.

 

5


Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings

(unaudited)

 

     Thirteen Weeks Ended     Fifty-Two Weeks Ended  
     Jan. 28, 2018     Jan. 29, 2017     Jan. 28, 2018     Jan. 29, 2017  

In thousands, except per
share amounts

   $      % of
Revenues
    $      % of
Revenues
    $      % of
Revenues
    $      % of
Revenues
 

E-commerce net revenues

   $ 877,109        52.2   $ 808,942        51.1   $ 2,778,457        52.5   $ 2,633,602        51.8

Retail net revenues

     802,801        47.8       772,639        48.9       2,513,902        47.5       2,450,210        48.2  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Net revenues

     1,679,910        100.0       1,581,581        100.0       5,292,359        100.0       5,083,812        100.0  

Cost of goods sold

     1,033,737        61.5       959,550        60.7       3,360,648        63.5       3,200,502        63.0  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     646,173        38.5       622,031        39.3       1,931,711        36.5       1,883,310        37.0  

Selling, general and administrative expenses

     447,233        26.6       406,212        25.7       1,477,900        27.9       1,410,711        27.7  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     198,940        11.8       215,819        13.6       453,811        8.6       472,599        9.3  

Interest expense, net

     398        —         101        —         1,372        —         688        —    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Earnings before income taxes

     198,542        11.8       215,718        13.6       452,439        8.5       471,911        9.3  

Income taxes

     102,782        6.1       71,091        4.5       192,894        3.6       166,524        3.3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings

   $ 95,760        5.7   $ 144,627        9.1   $ 259,545        4.9   $ 305,387        6.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
Earnings per share (EPS):                     

Basic

   $ 1.14        $ 1.65        $ 3.03        $ 3.45     

Diluted

   $ 1.13        $ 1.63        $ 3.02        $ 3.41     
Shares used in calculation of EPS:                     

Basic

     84,037          87,669          85,592          88,594     

Diluted

     84,728          88,633          86,080          89,462     

 

6


Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

In thousands, except per share amounts

   Jan. 28, 2018     Jan. 29, 2017  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 390,136     $ 213,713  

Accounts receivable, net

     90,119       88,803  

Merchandise inventories, net

     1,061,593       977,505  

Prepaid catalog expenses

     24,028       23,625  

Prepaid expenses

     58,693       52,882  

Other assets

     11,876       10,652  
  

 

 

   

 

 

 

Total current assets

     1,636,445       1,367,180  
  

 

 

   

 

 

 

Property and equipment, net

     932,283       923,283  

Deferred income taxes, net

     67,306       135,238  

Other assets, net

     149,715       51,178  
  

 

 

   

 

 

 

Total assets

   $ 2,785,749     $ 2,476,879  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable

   $ 459,378     $ 453,710  

Accrued salaries, benefits and other liabilities

     135,884       130,187  

Customer deposits

     292,460       294,276  

Income taxes payable

     56,783       23,245  

Other liabilities

     63,318       59,838  
  

 

 

   

 

 

 

Total current liabilities

     1,007,823       961,256  
  

 

 

   

 

 

 

Deferred rent and lease incentives

     202,134       196,188  

Long-term debt

     299,422       —    

Other long-term obligations

     72,804       71,215  
  

 

 

   

 

 

 

Total liabilities

     1,582,183       1,228,659  
  

 

 

   

 

 

 

Stockholders’ equity

    

Preferred stock: $.01 par value; 7,500 shares authorized; none issued

     —         —    

Common stock: $.01 par value; 253,125 shares authorized; 83,726 and 87,325 shares issued and outstanding at January 28, 2018 and January 29, 2017, respectively

     837       873  

Additional paid-in capital

     562,814       556,928  

Retained earnings

     647,422       701,702  

Accumulated other comprehensive loss

     (6,782     (9,903

Treasury stock, at cost

     (725     (1,380
  

 

 

   

 

 

 

Total stockholders’ equity

     1,203,566       1,248,220  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,785,749     $ 2,476,879  
  

 

 

   

 

 

 

 

Retail Store Data

(unaudited)

 

 
      Oct. 29, 2017      Openings1       Closings     Jan. 28, 2018      Jan. 29, 2017  

Williams Sonoma

     233        2        (7     228        234  

Pottery Barn

     202        2        (1     203        201  

West Elm

     105        3        (2     106        98  

Pottery Barn Kids

     88               (2     86        89  

Rejuvenation

     8                     8        7  

Total

     636        7        (12     631        629  
                                             
  1 

Q4 17 openings include two Williams Sonoma, two Pottery Barn and one West Elm stores in Puerto Rico and Florida that were temporarily closed due to hurricanes in these areas.

 

 

7


Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Fifty-Two weeks ended January 28, 2018 and January 29, 2017

 

In thousands    Fiscal 2017     Fiscal 2016  

Cash flows from operating activities:

    

Net earnings

   $ 259,545     $ 305,387  

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

    

Depreciation and amortization

     183,077       173,195  

Loss on disposal/impairment of assets

     1,889       3,806  

Amortization of deferred lease incentives

     (25,372     (25,212

Deferred income taxes

     63,381       7,114  

Tax benefit related to stock-based awards

     —         3,230  

Excess tax benefit related to stock-based awards

     —         (4,894

Stock-based compensation expense

     42,988       51,116  

Other

     (135     (423

Changes in:

    

Accounts receivable

     149       (9,794

Merchandise inventories

     (80,235     4,493  

Prepaid catalog expenses

     (403     5,294  

Prepaid expenses and other assets

     (16,092     (6,367

Accounts payable

     2,382       3,169  

Accrued salaries, benefits and other liabilities

     9,157       25,876  

Customer deposits

     (2,394     (3,037

Deferred rent and lease incentives

     28,226       35,559  

Income taxes payable

     33,541       (43,803
  

 

 

   

 

 

 

Net cash provided by operating activities

     499,704       524,709  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (189,712     (197,414

Acquisition of Outward, Inc., net of cash received

     (80,528     —    

Other

     480       439  
  

 

 

   

 

 

 

Net cash used in investing activities

     (269,760     (196,975
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt

     300,000       —    

Repurchases of common stock

     (196,179     (151,272

Borrowings under revolving line of credit

     170,000       125,000  

Repayments of borrowings under revolving line of credit

     (170,000     (125,000

Payment of dividends

     (135,010     (133,539

Tax withholdings related to stock-based awards

     (18,130     (27,062

Excess tax benefit related to stock-based awards

     —         4,894  

Proceeds related to stock-based awards

     —         1,532  

Debt issuance costs

     (1,191     (359

Other

     (1,197     —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (51,707     (305,806
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     (1,814     (1,862

Net increase in cash and cash equivalents

     176,423       20,066  

Cash and cash equivalents at beginning of year

     213,713       193,647  
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 390,136     $ 213,713  
  

 

 

   

 

 

 

 

8


Exhibit 1

(unaudited)

 

4th Quarter and Fiscal Year GAAP to Non-GAAP Reconciliation*

(Dollars in thousands, except per share data)

 

Thirteen Weeks Ended January 28, 2018  
      GAAP Basis
(as reported)
    Acquisition of
Outward
1
   

Severance-

Related

Expenses2

    Tax  Reform3     Adoption of new
accounting rules 
4
    Non-GAAP Basis  

Selling, general and administrative expenses

   $ 447,233     $ (5,859   $ (2,907     —         —       $ 438,467  

% of Revenues

     26.6             26.1

Operating income

     198,940       6,209       2,907       —         —         208,056  

% of Revenues

     11.8             12.4

Earnings before income taxes

     198,542       6,209       2,907       —         —         207,658  

Income taxes

     102,782       1,842       862     $ (41,531   $ 1,686       65,641  

Tax rate

     51.8                                     31.6

Net earnings

   $ 95,760     $ 4,367     $ 2,045     $ 41,531     $ (1,686   $ 142,017  

Diluted EPS

   $ 1.13     $ 0.05     $ 0.02     $ 0.49     $ (0.02   $ 1.68  
                                                  
Thirteen Weeks Ended January 29, 2017  
      GAAP Basis
(as reported)
   

One-time

Favorable
Tax Adjustment
5

    Non-GAAP Basis  

Earnings before income taxes

   $ 215,718       —       $ 215,718  

Income taxes

     71,091     $ 7,681       78,772  

Tax rate

     33.0             36.5

Net earnings

   $ 144,627     $ (7,681   $ 136,946  

Diluted EPS

   $ 1.63     $ (0.08   $ 1.55  
                          
Fifty-Two Weeks Ended January 28, 2018  
      GAAP Basis
(as reported)
    Acquisition of
Outward
1
   

Severance-

Related
Expenses
2

    Tax  Reform3     Adoption of new
accounting rules 
4
    Non-GAAP Basis

Selling, general and administrative expenses

   $ 1,477,900     $ (5,859   $ (8,612     —         —       $ 1,463,429  

% of Revenues

     27.9             27.7

Operating income

     453,811       6,209       8,612       —         —         468,632  

% of Revenues

     8.6             8.9

Earnings before income taxes

     452,439       6,209       8,612       —         —         467,260  

Income taxes

     192,894       1,842       2,833     $ (41,531   $ 257       156,295  

Tax rate

     42.6                                     33.5

Net earnings

   $ 259,545     $ 4,367     $ 5,779     $ 41,531     $ (257   $ 310,965  

Diluted EPS

   $ 3.02     $ 0.05     $ 0.07     $ 0.48     $ 0.00     $ 3.61  
                                                  
Fifty-Two Weeks Ended January 29, 2017  
      GAAP Basis
(as reported)
   

Severance-

Related
Expenses
2

    One-time
Favorable Tax
Adjustment
5
    Non-GAAP Basis  

Selling, general and administrative expenses

   $ 1,410,711     $ (14,406     —       $ 1,396,305  

% of Revenues

     27.7         27.5

Operating income

     472,599       14,406       —         487,005  

% of Revenues

     9.3         9.6

Earnings before income taxes

     471,911       14,406       —         486,317  

Income taxes

     166,524       5,317     $ 7,681       179,522  

Tax rate

     35.3                     36.9

Net earnings

   $ 305,387     $ 9,089     $ (7,681   $ 306,795  

Diluted EPS

   $ 3.41     $ 0.10     $ (0.08   $ 3.43  
                                  

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

 

9


Exhibit 1 (continued)

 

Reconciliation of GAAP to Non-GAAP Operating Margin By Segment**

 

     E-commerce     Retail     Unallocated     Total  
In thousands   Q4 17     Q4 16     Q4 17     Q4 16     Q4 17     Q4 16     Q4 17     Q4 16  

Net revenues

    $877,109       $808,942       $802,801       $772,639       —         —         $1,679,910       $1,581,581  

GAAP Operating income (expense)

    189,483       191,845       125,498       121,507       $(116,041)       $(97,533)       198,940       215,819  

GAAP Operating margin

    21.6%       23.7%       15.6%       15.7%       (6.9%)       (6.2%)       11.8%       13.6%  
                                                                 

Acquisition of Outward, Inc.1

    3,309       —         —         —         2,900       —         6,209       —    

Severance-related expenses2

    —         —         —         —         2,907       —         2,907       —    

Non-GAAP Operating income (expense)

    $192,792       $191,845       $125,498       $121,507       $(110,234)       $(97,533)       $208,056       $215,819  

Non-GAAP Operating margin

    22.0%       23.7%       15.6%       15.7%       (6.6%)       (6.2%)       12.4%       13.6%  
                                                                 
               
     E-commerce     Retail     Unallocated     Total  
In thousands   FY17     FY 16     FY17     FY 16     FY17     FY 16     FY17     FY 16  

Net revenues

    $2,778,457       $2,633,602       $2,513,902       $2,450,210       —         —         $5,292,359       $5,083,812  

GAAP Operating income (expense)

    599,491       606,286       224,608       231,929       $(370,288)       $(365,616)       453,811       472,599  

GAAP Operating margin

    21.6%       23.0%       8.9%       9.5%       (7.0%)       (7.2%)       8.6%       9.3%  
                                                                 

Acquisition of Outward, Inc.1

    3,309       —         —         —         2,900       —         6,209       —    

Severance-related expenses2

    —         —         —         —         8,612       14,406       8,612       14,406  

Non-GAAP Operating income (expense)

    $602,800       $606,286       $224,608       $231,929       $(358,776)       $(351,210)       $468,632       $487,005  

Non-GAAP Operating margin

    21.7%       23.0%       8.9%       9.5%       (6.8%)       (6.9%)       8.9%       9.6%  
                                                                 

 

  ** See the Company’s 10-K and 10-Q filings for additional information on segment reporting and the definition of Operating Income (Expense) and Operating Margin.

SEC Regulation G – Non-GAAP Information – These tables include non-GAAP SG&A, operating income, operating margin, earnings before income taxes, income taxes, effective tax rate, net earnings and diluted EPS. We believe that these non-GAAP financial measures provide meaningful supplemental information for investors regarding the performance of our business and facilitate a meaningful evaluation of our quarterly actual results on a comparable basis with prior periods. Our management uses these non-GAAP financial measures in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

Notes to Exhibit 1:

 

  1 During Q4 17 we incurred approximately $6.2 million of expense related to the acquisition of Outward and its ongoing operations, of which approximately $5.9 million is related to SG&A and $0.3 million is related to gross margin. We have excluded the gross margin impact from our non-GAAP reconciliations due to its immateriality.
  2 During Q1 17 and Q4 17 we incurred approximately $5.7 million and $2.9 million, respectively, for severance-related reorganization expenses primarily in our corporate functions, which is recorded in selling, general and administrative expenses within the unallocated segment. During Q1 16 and Q3 16, we incurred severance-related reorganization expenses due to headcount reduction primarily in our corporate functions totaling approximately $14.4 million, which were recorded as selling, general and administrative expenses within the unallocated segment.
  3 During Q4 17 we incurred provisional income tax expense of approximately $41.5 million resulting from the enactment of the Tax Cuts and Jobs Act.
  4 During Q1 17 we recorded income tax expense of approximately $1.4 million and, during Q4 17, we recorded a tax benefit of approximately $1.7 million associated with the adoption of new accounting rules related to stock-based compensation.
  5 During Q4 16 we incurred a benefit of approximately $7.7 million from a one-time favorable tax adjustment.

Return on Invested Capital (“ROIC”)

We believe ROIC is a useful financial measure for investors in evaluating the efficient and effective use of capital, and is an important component of long-term shareholder return. We define ROIC as non-GAAP net operating profit after tax (NOPAT), divided by our average invested capital. NOPAT is defined as non-GAAP operating income, plus rent expense, less estimated taxes at the company’s effective tax rate. Average invested capital is defined as the two-year average of total assets less current liabilities, plus annual rental expense multiplied by 6, less cash in excess of $200 million.

ROIC is not a measure of financial performance under GAAP, and should be considered in addition to, and not as a substitute for other financial measures prepared in accordance with GAAP. Our method of determining ROIC may differ from other companies’ methods and therefore may not be comparable.

 

10

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