Williams-Sonoma Net Rises

The fiscal 2005 results constituted "the highest diluted earnings per share and cash flow in the history of the company, and met or exceeded the earnings guidance we provided to our shareholders in every quarter," Williams Sonoma CEO Ed Mueller commented in the conference call. Mueller added that, excluding the charge for Hold Everything, the company's pre-tax operating margin reached double digits for the first time.

For the fourth quarter ended Jan. 29, Williams-Sonoma earned $120.8 million, or $1.02 per diluted share versus $113.7 million, or 95 cents per diluted share in the fourth quarter of fiscal year 2004. For the full year, the company's earnings climbed 12.4% to $214.9 million, or $1.81 per diluted share versus $1.60 per diluted share in fiscal year 2004.

Net revenues increased 12.1% to $1.21 billion for the fourth quarter and revenues for the full year increased 12.8% to $3.54 billion. Comparable store sales increased 5.8% for the quarter and 4.9% for the year despite negative comps for the Hold Everything brand, which declined 3.2% for the quarter and 10.7% for the year.

Mueller pointed out during the conference call that Williams-Somona's higher retail sales in 2005 was primarily driven by both the higher comp sales and a year-over-year increase in retail leased square footage of 8.6%, including 18 net new stores. He noted that the new stores included the first three Williams-Sonoma Home stores.

Mueller said that the company expects to add 24 new stores in fiscal 2006, part of a three-prong strategy in which the store openings are designed to "drive sustainable top-line growth in our core brands." The 24 will include the three new test stores for the Pottery Barn Bed + Bath format.

In addition to opening new stores, Mueller described efforts to build the company's emerging brands such as PBteen, West Elm and Williams-Sonoma Home through new efforts like the launch of a Williams-Sonoma Home e-commerce website in the third quarter, "aggressively identifying new customers through retail name capture," along with database prospecting and "expanding the use of electronic direct marketing."

In 2006, the company expects to surpass $3.8 billion in revenues, deliver "solid earnings growth," Mueller said, and to pay a dividend to shareholders for the first time in its history. Williams-Sonoma Inc. operates 570 stores under the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Williams-Sonoma Home, and Hold Everything brands. It also markets via eight mail order catalogs and six e-commerce web sites.

The charge that reduced earnings by seven cents per share resulted from the company's previously announced decision to shutter its Hold Everything brand and to shift that merchandise into its other existing brands by the end of fiscal year 2006. The seven cents per share worked out to a pre-tax charge of $13.5 million and $8.3 million after taxes for the fourth quarter of 2005.