8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 27, 2014

Williams-Sonoma, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-14077	94-2203880
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3250 Van Ness Avenue, San Francisco, California 94109

(Address of principal executive offices)

Registrant’s telephone number, including area code (415) 421-7900

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On August 27, 2014, Williams-Sonoma, Inc. (the “Company”) issued a press release announcing the Company’s financial results for its second fiscal quarter ended August 3, 2014. A copy of the Company’s press release is attached as Exhibit 99.1. The attached exhibit is provided under Item 2.02 of Form 8-K and is furnished to, but not filed with, the Securities and Exchange Commission.

Item 9.01. Financial Statements and Exhibits

(d)	List of Exhibits:
99.1	Press Release dated August 27, 2014 titled Williams-Sonoma, Inc. announces second quarter 2014 results; Net revenues grow 5.8%, operating margin expands to 8.2%; EPS increases to $0.53

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		WILLIAMS-SONOMA, INC.
Date: August 27, 2014	By:	/s/ Julie P. Whalen
		Julie P. Whalen
		Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description
99.1	Press Release dated August 27, 2014 titled Williams-Sonoma, Inc. announces second quarter 2014 results; Net revenues grow 5.8%, operating margin expands to 8.2%; EPS increases to $0.53

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EX-99.1

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

Gabrielle L. Rabinovitch

Vice President, Investor Relations

(415) 616-7727

PRESS RELEASE

Williams-Sonoma, Inc. announces second quarter 2014 results

Net revenues grow 5.8%, operating margin expands to 8.2%

EPS increases to $0.53

San Francisco, CA, August 27, 2014 – Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the second fiscal quarter ended August 3, 2014 (“Q2 14”) versus the second fiscal quarter ended August 4, 2013 (“Q2 13”).

2^nd QUARTER 2014 RESULTS

- Q2 14 net revenues grew 5.8% to $1.039 billion versus $982 million in Q2 13 with comparable brand revenue growth of 5.7%.

- Q2 14 operating income grew 9.3% to $85 million and operating margin increased to 8.2% versus 8.0% in Q2 13.

- Q2 14 diluted earnings per share (“EPS”) grew 8.2% to $0.53 from $0.49 in Q2 13.

- Cash returned to stockholders totaled $90 million, comprising $59 million in stock repurchases and $31 million in dividends.

Laura Alber, President and Chief Executive Officer, commented, “We are pleased to have delivered another quarter of solid performance, once again demonstrating the competitive advantages resulting from our multi-brand, multi-channel business model.”

Alber continued, “We enter the second half of 2014 well-positioned across our brands from a marketing, merchandise offering, store and online experience standpoint. We remain focused on disciplined execution against our growth initiatives and a balanced approach to capital allocation to continue to drive shareholder value.”

Comparable brand revenue growth in Q2 14 increased 5.7% on top of 8.4% in Q2 13 as shown in the table below:

2nd Quarter Comparable Brand Revenue Growth by Concept*
	Q2 14		Q2 13
Pottery Barn		4.4%	9.9%
Williams-Sonoma		3.4%	(0.4%)
Pottery Barn Kids		5.6%	8.2%
West Elm		16.7%	16.5%
PBteen		(1.0%)	16.3%
Total		5.7%	8.4%
*  See the Company’s 10-K and 10-Q filings for the definition of comparable brand revenue growth.

Direct-to-customer (“DTC”) net revenues in Q2 14 increased 9.4% to $523 million from $478 million in Q2 13, primarily driven by West Elm, Pottery Barn, Williams-Sonoma, and Pottery Barn Kids. DTC net revenues generated 50% of total company net revenues in Q2 14, compared to 49% in Q2 13.

Retail net revenues in Q2 14 increased 2.4% to $517 million from $505 million in Q2 13, primarily driven by West Elm and Pottery Barn, partially offset by a decrease in Williams-Sonoma.

Operating margin in Q2 14 increased to 8.2% compared to 8.0% in Q2 13:

- Gross margin was 36.8% versus 37.6% in Q2 13.

- Selling, general and administrative (“SG&A”) expenses were $297 million, or 28.6% of net revenues, versus $291 million, or 29.6% of net revenues, in Q2 13.

EPS in Q2 14 increased 8.2% to $0.53 from $0.49 in Q2 13.

Merchandise inventories at the end of Q2 14 increased 21.4% to $895 million from $737 million at the end of Q2 13. Toward the end of Q2 13, we began taking ownership of our inventory earlier in the supply chain. Excluding the impact of this year-over-year additional inventory in transit, Q2 14 merchandise inventories increased 17.0% on a comparable basis.

The effective income tax rate in Q2 14 was 40.5% versus 37.5% in Q2 13, reflecting certain unfavorable income tax matters.

STOCK REPURCHASE PROGRAM

During Q2 14, we repurchased 847,946 shares of common stock at an average cost of $69.28 per share and a total cost of approximately $59 million. As of August 3, 2014, there was approximately $399 million remaining under the $750 million stock repurchase program announced in March 2013.

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FISCAL YEAR 2014 FINANCIAL GUIDANCE

3^rd Quarter 2014 Guidance

- Net revenues in the third quarter of fiscal 2014 (“Q3 14”) are expected to be in the range of $1.100 billion to $1.130 billion.

- Comparable brand revenue growth in Q3 14 is expected to be in the range of 4% to 6%.

- Diluted EPS in Q3 14 is expected to be in the range of $0.58 to $0.63.

Fiscal Year 2014 Guidance

Financial Highlights
Total Net Revenues (millions)	$4,645 – $4,725
Comparable Brand Revenue Growth	5 – 7%
Operating Margin	10.2 – 10.4%
Diluted EPS	$3.07 – $3.17
Income Tax Rate	38.3 – 38.8%
Capital Spending (millions)	$200 – $220
Depreciation and Amortization (millions)	$160 – $170

Store Opening and Closing Guidance by Retail Concept*
	FY 2013 ACT		FY 2014 GUID
	Total			New		Close			End
Williams-Sonoma		248			5		(14	)	239
Pottery Barn		194			7		(5	)	196
Pottery Barn Kids		81			9		(5	)	85
West Elm		58			11		-		69
Rejuvenation		4			1		-		5
Total		585			33		(24	)	594
*  Included in the FY 13 numbers above are 5 stores in Australia (2 West Elm, 1 Williams-Sonoma, 1 Pottery Barn and 1 Pottery Barn Kids) and 1 West Elm store in the UK. Eight additional Australian stores are included in FY 14 guidance.

CONFERENCE CALL AND WEBCAST INFORMATION

Williams-Sonoma, Inc. will host a live conference call today, August 27, 2014, at 2:00 PM (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 www.williams-sonomainc.com/webcast. A replay of the webcast will be available at www.williams-sonomainc.com/webcast.

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SEC REGULATION G — NON-GAAP INFORMATION

This press release includes non-GAAP diluted EPS. This non-GAAP financial measure excludes the impact of employee separation charges in Q1 13 and FY 13. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in Exhibit 1. We believe that this non-GAAP financial measure provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of our quarterly FY 14 actual results and FY 14 guidance on a comparable basis with prior periods. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. This non-GAAP measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

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 competitive advantages; the execution of our growth initiatives; our approach to capital allocation; our future financial guidance, including Q3 14 and FY 2014 guidance; our three-year 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 Q2 14; 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 February 2, 2014, 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 589 stores. Williams-Sonoma, Inc. currently operates in the United States, Canada, Australia and the United Kingdom, offers international shipping to customers worldwide, and has unaffiliated franchisees that operate stores in the Middle East and the Philippines.

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Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirteen weeks ended August 3, 2014 and August 4, 2013

(Dollars and shares in thousands, except per share amounts)

	2nd Quarter
	2014					2013
	$		% of Revenues			$			% of Revenues
Direct-to-customer net revenues	$	522,589		50.3	%	$	477,657			48.6	%
Retail net revenues		516,513		49.7			504,552			51.4
Net revenues		1,039,102		100.0			982,209			100.0
Cost of goods sold		657,004		63.2			613,285			62.4
Gross profit		382,098		36.8			368,924			37.6
Selling, general and administrative expenses		296,762		28.6			290,838			29.6
Operating income		85,336		8.2			78,086			8.0
Interest expense (income), net		40		—			(125	)		—
Earnings before income taxes		85,296		8.2			78,211			8.0
Income taxes		34,549		3.3			29,292			3.0
Net earnings	$	50,747		4.9	%	$	48,919			5.0	%
Earnings per share (EPS):
Basic	$	0.54				$	0.50
Diluted	$	0.53				$	0.49
Shares used in calculation of EPS:
Basic		93,979					96,892
Diluted		95,839					98,957

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Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Twenty-six weeks ended August 3, 2014 and August 4, 2013

(Dollars and shares in thousands, except per share amounts)

	Year-to-Date
	2014						2013
	$			% of Revenues			$			% of Revenues
Direct-to-customer net revenues	$	1,013,878			50.4	%	$	896,741			48.0	%
Retail net revenues		999,554			49.6			973,276			52.0
Net revenues		2,013,432			100.0			1,870,017			100.0
Cost of goods sold		1,262,926			62.7			1,166,908			62.4
Gross profit		750,506			37.3			703,109			37.6
Selling, general and administrative expenses		590,844			29.3			561,240			30.0
Operating income		159,662			7.9			141,869			7.6
Interest income, net		(29	)		—			(314	)		—
Earnings before income taxes		159,691			7.9			142,183			7.6
Income taxes		62,782			3.1			53,798			2.9
Net earnings	$	96,909			4.8	%	$	88,385			4.7	%
Earnings per share (EPS):
Basic	$	1.03					$	0.91
Diluted	$	1.01					$	0.89
Shares used in calculation of EPS:
Basic		94,010						97,470
Diluted		95,714						99,365

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Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(Dollars in thousands)

	Aug. 3, 2014		Feb. 2, 2014		Aug. 4, 2013
Assets
Current assets
Cash and cash equivalents	$	70,574	$	330,121	$	205,364
Restricted cash		—		14,289		16,967
Accounts receivable, net		69,653		60,330		62,808
Merchandise inventories, net		894,860		813,160		736,871
Prepaid catalog expenses		39,072		33,556		37,266
Prepaid expenses		55,892		35,309		61,725
Deferred income taxes, net		121,527		121,486		99,699
Other assets		9,772		10,852		11,029
Total current assets		1,261,350		1,419,103		1,231,729
Property and equipment, net		849,255		849,293		829,951
Non-current deferred income taxes, net		856		13,824		7,509
Other assets, net		52,087		54,514		54,989
Total assets	$	2,163,548	$	2,336,734	$	2,124,178
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	336,470	$	404,791	$	318,532
Accrued salaries, benefits and other		101,818		138,181		95,762
Customer deposits		251,146		228,193		225,822
Income taxes payable		14,604		49,365		2,955
Current portion of long-term debt		1,968		1,785		1,817
Other liabilities		44,713		38,781		35,531
Total current liabilities		750,719		861,096		680,419
Deferred rent and lease incentives		171,193		157,856		170,817
Long-term debt		—		1,968		1,968
Other long-term obligations		63,227		59,812		51,599
Total liabilities		985,139		1,080,732		904,803
Stockholders’ equity		1,178,409		1,256,002		1,219,375
Total liabilities and stockholders’ equity	$	2,163,548	$	2,336,734	$	2,124,178

ADDITIONAL INFORMATION	Store Count											Avg. Leased Square Footage Per Store
	May 4,        2014		Openings		Closings			Aug. 3, 2014		Aug. 4,   2013		Aug. 3, 2014		Aug. 4,   2013
Williams-Sonoma		248		-		(1	)		247		253		6,600		6,600
Pottery Barn		195		-		-			195		196		13,700		13,800
Pottery Barn Kids		84		1		(1	)		84		86		7,700		8,000
West Elm		58		1		-			59		51		14,000		14,600
Rejuvenation		4		-		-			4		4		13,200		13,200
Total		589		2		(2	)		589		590		9,900		9,900

	May 4, 2014		Aug. 3, 2014		Aug. 4, 2013
Total store selling square footage		3,600,000		3,598,000		3,600,000
Total store leased square footage		5,850,000		5,843,000		5,863,000

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Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Twenty-six weeks ended August 3, 2014 and August 4, 2013

(Dollars in thousands)

	Year-to-Date
	2014			2013
Cash flows from operating activities
Net earnings	$	96,909		$	88,385
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		79,332			73,832
Loss on sale/disposal/impairment of assets		952			1,233
Amortization of deferred lease incentives		(12,483	)		(12,621	)
Deferred income taxes		(8,326	)		(6,937	)
Tax benefit related to stock-based awards		46,174			11,733
Excess tax benefit related to stock-based awards		(22,911	)		(5,173	)
Stock-based compensation expense		22,191			18,472
Other		305			—
Changes in:
Accounts receivable		(4,227	)		(1,284	)
Merchandise inventories		(80,158	)		(97,653	)
Prepaid catalog expenses		(5,516	)		(35	)
Prepaid expenses and other assets		(18,043	)		(40,191	)
Accounts payable		(60,527	)		52,336
Accrued salaries, benefits and other current and long-term liabilities		(28,981	)		(10,677	)
Customer deposits		22,767			18,710
Deferred rent and lease incentives		17,516			12,823
Income taxes payable		(34,757	)		(38,890	)
Net cash provided by operating activities		10,217			64,063
Cash flows from investing activities:
Purchases of property and equipment		(83,519	)		(97,777	)
Restricted cash receipts (deposits)		14,289			(912	)
Other		282			1,274
Net cash used in investing activities		(68,948	)		(97,415	)
Cash flows from financing activities:
Repurchase of common stock		(112,054	)		(131,006	)
Payment of dividends		(63,996	)		(52,196	)
Tax withholdings related to stock-based awards		(49,434	)		(11,135	)
Excess tax benefit related to stock-based awards		22,911			5,173
Net proceeds related to stock-based awards		3,471			6,541
Repayments of long-term obligations		(1,785	)		(1,692	)
Other		(6	)		—
Net cash used in financing activities		(200,893	)		(184,315	)
Effect of exchange rates on cash and cash equivalents		77			(1,524	)
Net decrease in cash and cash equivalents		(259,547	)		(219,191	)
Cash and cash equivalents at beginning of period		330,121			424,555
Cash and cash equivalents at end of period	$	70,574		$	205,364

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Exhibit 1

2^nd Quarter Operating Margin By Segment*

($ in thousands)

	DTC				Retail				Unallocated				Total
	Q2 14		Q2 13		Q2 14		Q2 13		Q2 14		Q2 13		Q2 14		Q2 13
Net Revenues	$	522,589	$	477,657	$	516,513	$	504,552	$	-	$	-	$	1,039,102	$982,209
Operating Income/(Expense)		120,612		114,491		37,058		34,609		(72,334)		(71,014)		85,336	78,086
Operating Margin		23.1%		24.0%		7.2%		6.9%		(7.0%)		(7.2%)		8.2%	8.0%

Reconciliation of Quarterly and Fiscal Year Actual GAAP to Non-GAAP

Diluted Earnings Per Share

(Totals rounded to the nearest cent per diluted share)

	Q1 14         ACT	Q2 14     ACT	Q3 14     GUID	FY 14       GUID
2014 GAAP Diluted EPS	$0.48	$0.53	$0.58 - $0.63	$3.07 - $3.17
	Q1 13         ACT	Q2 13     ACT	Q3 13     ACT	FY 13       ACT
2013 GAAP Diluted EPS	$0.40	$0.49	$0.58	$2.82
Impact of Employee Separation Charges (1)	0.02	-	-	0.02
2013 Non-GAAP Diluted EPS Excluding Employee Separation Charges (2)**	$0.41	$0.49	$0.58	$2.84

* 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.

** Due to rounding to the nearest cent per diluted share, totals may not equal the sum of the line items in the table above.

Notes:

(1) Impact of Employee Separation Charges – During Q1 13 and FY 13, we incurred charges of approximately $0.02 per diluted share associated with the previously announced retirement of the former President of the Williams-Sonoma brand. These charges were recorded within the unallocated segment.

(2) SEC Regulation G – Non-GAAP Information – This table includes non-GAAP diluted EPS. We believe that this non-GAAP financial measure provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of our quarterly and FY 14 actual results and guidance on a comparable basis with prior periods. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

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