Molly Langenstein, Chico’s FAS Chief Executive Officer and President, commented, “We delivered another quarter of strong operating income and earnings performance, which was consistent with our outlook.

“For all three brands, full-priced sales remained healthy, we attracted new customers, and we gained market share. Total Company average dollar spend and units per transaction increased, and we increased average unit retail at Chico’s and Soma. Our apparel customers continued to buy head-to-toe dressing, and responded to new proportions in sportswear, and our intimates customers responded to new strapless and unlined bra launches.”

Langenstein concluded, “We continue to deliver strong results and generate meaningful cash flow. Our unrelenting focus on our brand strategy and four strategic pillars of customer led, product obsessed, digital first, and operationally excellent gives us confidence in achieving our long-term financial targets and further enhancing our operating performance, strengthening our balance sheet, and increasing shareholder value.”

Business Highlights

The Company’s second quarter highlights include:

• Consistent profitability: For the second quarter, the Company reported net income per diluted share of $0.49 and adjusted net income per diluted share of $0.28, excluding a non-cash tax benefit.
  
• Compelling two-year stacked comparable sales: For the second quarter, total Chico’s FAS comparable sales decreased 3.0% versus last year’s second quarter and increased 16.5% on a two-year stacked basis. Chico’s^® comparable sales decreased 2.5% versus the second quarter last year. White House Black Market^® (“WHBM”) comparable sales decreased 5.7% versus last year’s second quarter, marking a sequential improvement from the first quarter. Soma^® comparable sales were down 0.5% versus last year’s second quarter, marking a sequential comparable sales improvement over the last four consecutive quarters. For all three brands, full-priced sales remained healthy, and year-over-year total Company average dollar spend and units per transaction increased.
  
• Continued market share gains: Our brands continued to take market share. According to market research firm Circana, for the second quarter year over year, Chico’s and WHBM gained share with customers over 45 with household incomes over $100,000. During the same period, Soma outpaced the market and gained share with customers over 35 with household incomes over $100,000.
  
• Strong operating income: Second quarter income from operations was $46.5 million, or 8.5% of net sales, reflecting solid gross margin performance combined with continued, disciplined expense management and investment in the Company’s growth strategies.
  
• Solid balance sheet: The Company ended the second quarter with $150.7 million in cash and marketable securities and total liquidity of $385.8 million, with $24.0 million in long-term debt.

Overview of Financial Results

For the second quarter, the Company reported net income of $59.3 million, or $0.49 per diluted share, compared to net income of $42.0 million, or $0.34 per diluted share, for last year’s second quarter. The Company reported second quarter adjusted net income of $33.7 million, or $0.28 per diluted share, excluding the reversal of a $25.6 million non-cash tax valuation allowance, as presented in the accompanying GAAP to non-GAAP reconciliation.

Sales

The Company reported second quarter net sales of $545.1 million compared to $558.7 million in last year’s second quarter. This decrease of 2.4% primarily reflects a comparable sales decrease of 3.0% since last year’s second quarter. The 3.0% comparable sales decline was driven by a decrease in transaction count, partially offset by an increase in average dollar sale.

The following table depicts comparable sales percentages for Chico’s FAS, Chico’s, WHBM, and Soma:

Gross Margin

For the second quarter, gross profit was $216.9 million, or 39.8% of net sales, compared to $231.5 million, or 41.4% of net sales, in last year’s second quarter. The 160-basis-point decrease in gross margin primarily reflects higher occupancy costs; lower average unit retail; increased raw material costs partially offset by lower inbound freight; and the benefit of disciplined expense management.

Selling, General, and Administrative Expenses

For the second quarter, selling, general, and administrative expenses (“SG&A”) were $170.4 million, or 31.3% of net sales, compared to $173.3 million, or 31.0% of net sales, for last year’s second quarter. The 30 basis points of deleverage primarily reflects increased store operating expenses and deleverage on lower net sales, partially offset by disciplined expense management.

Income Taxes

The Company’s second quarter effective tax rate was a 28.6% benefit compared to a 26.6% expense for last year’s second quarter. This year’s effective tax rate primarily reflects a $25.6 million non-cash discrete benefit due to a reversal of the majority of the valuation allowance on deferred tax assets. The Company’s second quarter effective tax rate, excluding the reversal of the valuation allowance, was 26.9%. Last year’s second quarter effective tax rate primarily reflected the impact of losses in foreign jurisdictions on which a full valuation allowance was recorded.

Cash, Marketable Securities, and Capital Allocation

At the end of the second quarter, cash and marketable securities totaled $150.7 million compared to $172.5 million at the end of last year’s second quarter.

Long-term debt at the end of the second quarter totaled $24.0 million compared to $99.0 million at the end of last year’s second quarter, reflecting a principal payment of $25.0 million in the first quarter of fiscal year 2023, in addition to the $50.0 million repaid in fiscal year 2022.

During the second quarter of fiscal 2023, the Company announced that its Board authorized a new share repurchase program of up to $100 million of the Company’s common stock and canceled the remainder of its $300 million share repurchase program.

Inventories

At the end of the second quarter, inventories totaled $300.2 million compared to $338.8 million at the end of last year’s second quarter. The decrease of $38.6 million, or 11.4%, was primarily due to normalized supply chain conditions that resulted in significantly lower in-transit inventories.

Fiscal 2023 Third Quarter and Full-Year Outlook

For fiscal 2023 third quarter, the Company currently expects:

• Consolidated net sales of $505 million to $525 million;
• Gross margin rate as a percent of net sales of 38.5% to 39.0%;
• SG&A as a percent of net sales of 35.1% to 35.6%;
• Effective income tax rate of 29.0%; and
• Earnings per diluted share of $0.08 to $0.12.

For fiscal 2023, a 53-week year, the Company currently expects:

• Consolidated net sales of $2,145 million to $2,175 million;
• Gross margin rate as a percent of net sales of 38.5% to 38.8%;
• SG&A as a percent of net sales of 33.0% to 33.3%;
• Effective income tax rate of 26.0%;
• Earnings per diluted share of $0.87 to $0.95; and
• Capital and cloud-based expenditures of $75 million to $85 million.

The post Chico’s FAS, Inc. Reports Second Quarter Results appeared first on RetailToday.

“Today we are reporting second quarter sales results that are at the high-end of the outlook we shared in May and profitability that was better than expectations,” said Corie Barry, Best Buy CEO. “These results continue to demonstrate our strong operational execution as we balance our reaction to the current industry sales pressure with our ongoing strategic investments.”

“Our financial results were better than expected, and they reflect a consumer electronics industry that remains challenged due to the pull-forward of demand in prior years and the various macroeconomic factors that we are all too familiar with,” Barry continued. “With that said, we continue to expect that this year will be the low point in tech demand after two years of sales declines. Next year the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation. I am very proud of the way our teams are managing the business and preparing for our future, and we remain incredibly excited about our future opportunities.”

FY24 Financial Guidance

“In May, we noted that we were preparing for a number of scenarios within our annual guidance range, and we believed our sales were aligning closer to the midpoint of the annual comparable sales guidance,” said Matt Bilunas, Best Buy CFO. “Today we are lowering the high-end of our full year revenue outlook to our previous midpoint, while keeping the low-end of our revenue guidance unchanged. At the same time, we are narrowing our profitability ranges, effectively raising the midpoint of our previous annual guidance for non-GAAP operating income rate and non-GAAP diluted EPS.”

Bilunas continued, “As it relates specifically to the third quarter, we expect our comparable sales to be slightly better than the negative 6.2% we reported for the second quarter and our non-GAAP operating income rate to be approximately 3.4%.”

Best Buy’s guidance for FY24, which includes 53 weeks, is the following:

• Revenue of $43.8 billion to $44.5 billion, which compares to prior guidance of $43.8 billion to $45.2 billion
• Comparable sales decline of 4.5% to 6.0%, which compares to prior guidance of a decline of 3.0% to 6.0%
• Enterprise non-GAAP operating income rate² of 3.9% to 4.1%, which compares to prior guidance of 3.7% to 4.1%
• Non-GAAP effective income tax rate² of approximately 24.5%, which remains unchanged
• Non-GAAP diluted EPS² of $6.00 to $6.40, which compares to prior guidance of $5.70 to $6.50
• Capital expenditures of approximately $850 million, which remains unchanged

Note: Incorporated in the above guidance, the 53rd week is expected to add approximately $700 million of revenue to Q4 FY24 and provide a benefit of approximately 10 basis points to the company’s full year non-GAAP operating income rate.²

Domestic Segment Q2 FY24 Results

Domestic Revenue

Domestic revenue of $8.89 billion decreased 7.1% versus last year primarily driven by a comparable sales decline of 6.3%.

From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were appliances, home theater, computing and mobile phones. These drivers were partially offset by growth in gaming.

Domestic online revenue of $2.76 billion decreased 7.1% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was flat to last year at 31.0%.

Domestic Gross Profit Rate

Domestic gross profit rate was 23.1% versus 22.0% last year. The higher gross profit rate was primarily due to: (1) favorable product margin rates; (2) improved financial performance from the company’s membership offerings, which included higher services margin rates and reduced costs associated with program changes made to the company’s free membership offering; and (3) an improved gross profit rate from the company’s Health initiatives.

Domestic Selling, General and Administrative Expenses (“SG&A”)

Domestic GAAP SG&A was $1.73 billion, or 19.5% of revenue, versus $1.73 billion, or 18.1% of revenue, last year. On a non-GAAP basis, SG&A was $1.71 billion, or 19.2% of revenue, versus $1.71 billion, or 17.9% of revenue, last year. Both GAAP and non-GAAP SG&A were approximately flat to last year, as higher incentive compensation was primarily offset by reduced store payroll expense.

International Segment Q2 FY24 Results

International revenue of $693 million decreased 8.8% versus last year. This decrease was primarily driven by a comparable sales decline of 5.4% and the negative impact of approximately 340 basis points from foreign currency exchange rates.

International operating income was $19 million, or 2.7% of revenue, compared to $28 million, or 3.7% of revenue, last year. The lower operating income rate was primarily driven by SG&A deleverage on lower revenue, which was partially offset by an improvement in the company’s gross profit rate of approximately 80 basis points compared to last year.

Income Taxes

The Q2 FY24 GAAP effective tax rate was 26.1% versus 15.6% last year. On a non-GAAP basis, the effective tax rate was 26.6% versus 16.7% last year. The lower GAAP and non-GAAP effective tax rates last year were primarily due to the resolution of certain discrete tax matters.

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“We achieved record quarterly revenues of over $1 billion, representing growth of 12% on a constant currency basis to prior year. Both the Crocs and HEYDUDE brands continue to gain share and bring in new consumers with our comfortable offerings, as evidenced by DTC growth of 26% in the second quarter,” said Andrew Rees, Chief Executive Officer. “We continue to invest behind our strategic priorities that are driving profitable growth.”

Amounts referred to as “Adjusted” or “Non-GAAP” are Non-GAAP measures and include adjustments that are described under the heading “Reconciliation of GAAP Measures to Non-GAAP Measures.” A reconciliation of these amounts to their GAAP counterparts are contained in the schedules below.

Second Quarter 2023 Highlights

• Consolidated revenues of $1,072.4 million increased 11.2%, or 12.0% on a constant currency basis, as compared to 2022.
• Crocs Brand revenues of $833.0 million increased 13.8%, or 14.9% on a constant currency basis, as compared to 2022.
• Crocs Brand growth was fueled by Asia revenue growth of 33.2%, or 39.0% on a constant currency basis, and North America direct-to-consumer (“DTC”) comparable sales growth of 12.9%, as compared to 2022.
• HEYDUDE Brand DTC revenues grew 29.7% and digital revenues increased 36.7% as compared to 2022.
• Operating margin was 29.7% and adjusted operating margin was 30.3%.
• Diluted earnings per share increased 31.4% to $3.39 as compared to the same period last year. Adjusted diluted earnings per share rose 10.8% to $3.59.
• We paid down $299.1 million of debt in the first half of 2023 and reduced gross leverage to 1.8x.

Second Quarter 2023 Operating Results

• Revenues were $1,072.4 million, an increase of 11.2% from the same period last year, or 12.0% on a constant currency basis. DTC revenues, which includes retail and e-commerce, grew 26.0%, or 27.2% on a constant currency basis. Wholesale revenues grew 0.2% compared to 2022, or 0.8% on a constant currency basis.
• Gross margin was 57.9% compared to 51.6% in the prior year. Adjusted gross margin improved 290 basis points to 58.1% compared to 55.2% in the same period last year.
• Selling, general, and administrative expenses (“SG&A”) of $302.8 million increased from $249.8 million in the same period last year, and SG&A as a percent of revenues rose to 28.2% from 25.9% in prior year. Adjusted SG&A rose to 27.8% of revenues versus 25.1% for the same period last year.
• Income from operations increased 28.4% to $318.5 million and operating margin improved to 29.7%, compared to 25.7% for the same period last year, due to higher gross margin and significantly less HEYDUDE acquisition expenses. Adjusted income from operations rose 11.7% to $324.6 million and adjusted operating margin improved 20 basis points to 30.3%.
• Diluted earnings per share increased 31.4% to $3.39, as compared to $2.58 for the same period last year. Adjusted diluted earnings per share increased 10.8% to $3.59 compared to 2022.

Second Quarter 2023 Brand Summary

• Crocs Brand: Revenues increased 13.8%, or 14.9% on a constant currency basis, to $833.0 million. DTC comparable sales increased 19.5%. Wholesale revenues increased 3.8%, or 4.6% on a constant currency basis.
  • North America revenues of $474.6 million increased 12.2%, or 12.5% on a constant currency basis.
  • Asia Pacific revenues of $198.3 million increased 33.2%, or 39.0% on a constant currency basis.
  • Europe, Middle East, Africa, and Latin America (“EMEALA”) revenues of $160.1 million declined 0.2%, or 1.4% on a constant currency basis.
• HEYDUDE Brand: Revenues during the second quarter increased 3.0% to $239.4 million. DTC revenues increased 29.7% to $90.6 million. Wholesale revenues declined 8.4% to $148.8 million following pipeline fill in the same period last year.

 Balance Sheet and Cash Flow

• Cash and cash equivalents were $166.2 million as of June 30, 2023, compared to $191.6 million as of December 31, 2022.
• Inventories decreased to $436.3 million as of June 30, 2023, compared to $471.6 million as of December 31, 2022 and $501.5 million as of June 30, 2022.
• Capital expenditures during the six months ended June 30, 2023 were $51.6 million, compared to $56.7 million for the same period last year, reflecting continued investments in our distribution centers and expansion of our corporate facilities to support growth.
• Borrowings were $2,027.5 million as of June 30, 2023 compared to $2,322.4 million as of December 31, 2022, as we repaid $299.1 million of debt. Our liquidity position remains strong with $166.2 million in cash and cash equivalents and $563.7 million in available borrowing capacity as of June 30, 2023.

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Lowe’s Companies, Inc. (NYSE: LOW) today reported net earnings of $2.3 billion and diluted earnings per share (EPS) of $3.77 for the quarter ended May 5, 2023, compared to diluted EPS of $3.51 in the first quarter of 2022.

During the first quarter, the company recognized a gain associated with the 2022 sale of the Canadian retail business. This positively impacted first quarter diluted EPS by $0.10. Excluding this benefit, the company delivered adjusted diluted EPS¹ of $3.67, an increase of 5% compared to prior year.

Total sales for the quarter were $22.3 billion. Comparable sales decreased 4.3%, driven by lumber deflation, unfavorable weather and lower DIY discretionary sales.  Comparable sales are based on comparison to weeks 2-14 in 2022.

“We are pleased with the performance of our business despite record lumber deflation and unfavorable spring weather. Although we delivered positive comparable sales in Pro and online for the first quarter, we are updating our full-year outlook to reflect softer-than-expected consumer demand for discretionary purchases,” said Marvin R. Ellison, Lowe’s chairman, president and CEO. “We remain optimistic about the medium-to-long term outlook for home improvement and our ability to continue to grow market share through our Total Home strategy. I would like to thank all of our front-line associates for their continued hard work and dedication.”

Capital Allocation
The company continues to execute a disciplined capital allocation program to deliver long-term, sustainable shareholder value. During the quarter, the company repurchased approximately 10.6 million shares for $2.1 billion, and it paid $633 million in dividends.

Lowe’s Business Outlook
Based on higher-than-expected lumber deflation and lower-than-expected DIY discretionary sales, the company is updating its outlook for the operating results of full year 2023.

Adjusted operating income, adjusted operating margin, adjusted diluted EPS and adjusted effective income tax rate are non-GAAP financial measures that exclude the gain associated with the 2022 sale of the Canadian retail business, recorded in the first quarter. The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort, including timing of adjustments associated with the sale of our Canadian retail business.

Full Year 2023 Outlook – a 52-week Year (comparisons to full year 2022  – a 53-week year)

• Total sales of approximately $87 – $89 billion (previously $88 – 90 billion)
• Comparable sales expected to be down -2% to -4% as compared to prior year (previously flat to down -2%)
• Adjusted operating income as a percentage of sales (adjusted operating margin) of 13.4% to 13.6% (previously 13.6% to 13.8%)
• Interest expense of approximately $1.5 billion
• Adjusted effective income tax rate of approximately 25%
• Adjusted diluted earnings per share of $13.20 to $13.60 (previously $13.60 to $14.00)
• Capital expenditures of up to $2 billion

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“We successfully navigated 2022 from a position of financial and operational strength. Despite an increasingly volatile macroeconomic climate, through the ongoing execution of our Polaris strategy, we remained agile, pivoted to meet customer demand and elevated our approach to inventory management,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “In the fourth quarter, we benefited from our disciplined inventory approach and compelling gift-giving strategy, which allowed us to provide fresh fashion and style at great values for all our customers. We were competitive but measured in our promotions, took strategic markdowns and intentionally did not chase unprofitable sales. As we look to 2023 and beyond, we believe our five growth vectors which include our private brands reimagination, off-mall expansion, online marketplace, luxury brands acceleration and personalized offers and communication will further solidify our modern department store positioning.”

Added Adrian Mitchell, chief financial officer, “We have built a solid foundation for long-term, profitable growth through enterprise-wide investments in our supply chain, data and analytics, pricing science, digital and technology which have enabled our operations and talented teams to become more efficient and flexible. Looking ahead, we will continue to take a balanced approach to expense management and capital allocation. With an ongoing focus on maintaining our financial health and strong balance sheet, we will make disciplined investments to drive growth while returning capital to shareholders.”

Fourth Quarter 2022 Highlights

Comparisons are to fourth quarter 2021 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the COVID-19 pandemic.

• Diluted earnings per share of $1.83 and Adjusted diluted earnings per share of $1.88, which includes a $46 million discrete income tax benefit, or $0.17 per share, related to the favorable resolution of a state income tax litigation.
  • This compares to diluted earnings per share of $2.44 and Adjusted diluted earnings per share of $2.45 in the fourth quarter of 2021.
  • This compares to diluted earnings per share of $1.09 and Adjusted diluted earnings per share of $2.12 in the fourth quarter of 2019.
• Net sales of $8.3 billion, down 4.6% versus the fourth quarter of 2021; down 0.9% versus the fourth quarter of 2019.
  • Digital sales decreased 9% versus the fourth quarter of 2021; up 24% versus the fourth quarter of 2019.
  • Brick-and-mortar sales decreased 2% versus the fourth quarter of 2021; down 11% versus the fourth quarter of 2019. The comparison to 2019 is impacted by store closures, including approximately 80 Macy’s full-line stores.
• Comparable sales down 3.3% on an owned basis and down 2.7% on an owned-plus-licensed basis versus the fourth quarter of 2021; up 3.1% and up 3.3%, respectively, versus the fourth quarter of 2019.
• Highlights of the company’s nameplates include:
  • Macy’s comparable sales were down 3.9% on an owned basis and down 3.3%, on an owned-plus-licensed basis.
    • Performance year-over-year primarily reflects the impacts of macroeconomic pressures on the consumer in conjunction with a lack of government stimulus benefits and a heightened competitive retail environment driven by industry-wide inventory surpluses.
    • Experienced sales strength in gifting and occasion-based categories, including beauty, men’s tailored apparel, dresses and shoes, while sales in active, casual and soft home declined versus the prior year.
  • Bloomingdale’s comparable sales were up 1.2% on an owned basis and up 0.6% on an owned-plus-licensed basis.
    • Beauty, women’s and men’s apparel in both contemporary and dressy performed well partially offset by weakness in handbags and textiles.
  • Bluemercury comparable sales were up 7.2% on an owned basis.
    • Results were driven by strength in skincare and color, strategic partnerships and its new initiative The Cache, an incubator platform that curates the latest undiscovered, emerging, and cutting-edge brands.
• Gross margin for the quarter was 34.1%, down from 36.5% in the fourth quarter of 2021.
  • Merchandise margin declined largely due to planned markdowns and promotions, which were higher relative to last year, when inventory constraints in the industry led to low promotional levels and robust full-price sell-throughs. The higher level of markdowns and promotions was reflective of both the company’s commitment to end 2022 with inventories at the right level and composition, as well as its response to the competitive retail environment.
  • Delivery expense as a percent of net sales was 60 basis points lower than the prior year due to a 200 basis points decline in digital penetration combined with lower peak delivery surcharges.
• Selling, general and administrative (“SG&A”) expense of $2.4 billion, a $30 million decrease from the fourth quarter of 2021.
  • SG&A expense as a percent of sales was 29.0%, 100 basis points higher compared to the fourth quarter of 2021 and an improvement of 110 basis points from the fourth quarter of 2019.
  • The company has been investing in its colleagues to remain competitive and attract the best talent, while simultaneously remaining disciplined in its SG&A expense productivity efforts.
• Net credit card revenue of $262 million, down $2 million.
  • Represented 3.2% of sales, 20 basis points higher than the fourth quarter of 2021.
  • Performance primarily driven by lower-than-expected bad debt levels and larger balances within the portfolio.

Full-Year 2022 Highlights

Comparisons are to full-year 2021 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the COVID-19 pandemic.

• Diluted earnings per share of $4.19 and Adjusted diluted earnings per share of $4.48.
  • This compares to a diluted earnings per share of $4.55 and an Adjusted diluted earnings per share of $5.31 in 2021.
  • This compares to diluted earnings per share of $1.81 and Adjusted diluted earnings per share of $2.91 in 2019.
• Net sales of $24.4 billion, down 0.1% versus 2021; down 0.5% versus 2019.
  • Digital sales decreased 6% versus 2021; up 31% versus 2019.
  • Brick-and-mortar sales increased 3% versus 2021; down 11% versus 2019.
• Comparable sales up 0.3% on an owned basis and up 0.6% on an owned-plus-licensed basis versus 2021; up 3.5% and up 3.7%, respectively, versus 2019.
• Customer count for the company’s nameplates totaled:
  • 42.7 million active customers shopped the Macy’s brand, a 4% decrease compared to the prior year.
    • Star Rewards program members made up approximately 70% of the total Macy’s brand owned-plus-licensed sales, up approximately 1 percentage point versus the prior year.
  • 4.1 million active customers shopped the Bloomingdale’s brand, a 5% increase compared to the prior year.
    • Strength in luxury coupled with its 150th Anniversary activation and consistent customer engagement supported a banner year for the nameplate.
  • Approximately 662,000 active customers shopped the Bluemercury brand, a 12% increase compared to the prior year.
• Gross margin for the year was 37.4%, down from 38.9% in 2021.
  • Merchandise margin declined largely due to planned markdowns and promotions, which were higher year-over-year as a result of the impact in the shift of consumer demand from pandemic-related categories like active, casual and soft home to occasion-based categories including dresses, tailored clothing, fragrances and luggage. Elevated industry-wide inventory levels also contributed to a heightened competitive retail landscape.
  • Delivery expense as a percent of net sales decreased 30 basis points from 2021 primarily due to lower digital penetration.
• Inventory turnover for the year decreased approximately 4% versus 2021 and increased approximately 15% over 2019.
  • Inventory was down approximately 3% and approximately 18% versus 2021 and 2019, respectively.
  • Inventory productivity was driven by a culmination of disciplined inventory management, strategic use of data analytics, the alignment of its merchandising team and the successful integration and modernization of its supply chain.
  • Inventory productivity continues to be a focus for the company in 2023 and beyond.
• SG&A expense of $8.3 billion, a $270 million increase from 2021.
  • SG&A expense as a percent of sales was 34.0%, 110 basis points higher than 2021 and an improvement of 260 basis points from 2019.
  • The prior year benefited from a significant number of open positions due to the tight labor market. The positions have since largely been filled.
  • Additionally, the company made investments in talent including increasing minimum wage for store and distribution center colleagues and has been adjusting colleague compensation to remain competitive and attract the best talent.
• Net credit card revenue of $863 million, up $31 million from 2021.
  • Represented 3.5% of sales, 10 basis points higher than 2021.
  • Performance driven by lower-than-expected bad debt levels, larger balances within the portfolio as well as higher-than-expected spend on co-brand credit cards.

Financial Highlights

2023 Guidance

Macy’s, Inc. anticipates that the heightened level of uncertainty within the macroeconomic environment will continue in 2023. The company is taking a prudent approach to its outlook, which reflects the potential differences in the severity and duration of macroeconomic headwinds, offset by how the business can respond. The full outlook for 2023, presented on a 53-week basis unless otherwise noted, can be found in the presentation posted to macysinc.com/investors.

The company does not provide reconciliations of the forward-looking non-GAAP measures of comparable owned plus licensed sales change and adjusted diluted earnings per share to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate.

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For the fiscal year ended January 28, 2023, net earnings were $245 million and diluted EPS was $1.51, with EBIT of $465 million, or 3.1 percent of sales. Excluding a gain on the sale of the Company’s interest in a corporate office building, Trunk Club wind-down costs and a supply chain technology and related asset impairment charge, all of which were reported in the first three quarters, adjusted EBIT was $502 million, or 3.3 percent of sales, and adjusted EPS was $1.69 for fiscal 2022.

For the fourth quarter ended January 28, 2023, net sales decreased 4.1 percent versus the same period in fiscal 2021 and gross merchandise value (“GMV”) decreased 4.2 percent. Nordstrom banner net sales decreased 2.4 percent and GMV decreased 2.5 percent compared with the fourth quarter of 2021. Net sales for Nordstrom Rack decreased 8.1 percent.

“We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty. We also made the difficult decision to wind down operations in our Canadian business. This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business,” said Erik Nordstrom, chief executive officer of Nordstrom, Inc. “As we enter fiscal 2023, we are focused on enhancing the customer experience, improving Nordstrom Rack performance, increasing inventory productivity and continuing to advance our supply chain optimization initiatives. We remain confident in the strength of our brands and our ability to drive profitable growth and deliver long-term value to our shareholders.”

In the fourth quarter, men’s apparel had the strongest growth versus 2021. For fiscal 2022, men’s apparel, shoes and women’s apparel had the strongest growth versus 2021.

“While the incremental markdowns in the second half impacted our margins, we are better positioned for a stronger 2023. Our actions have given us increased flexibility to react more quickly to changing customer demand and provide the newness and fashion our customers love,” said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. “We want to thank our teams for all their hard work helping our customers feel good and look their best.”

As previously announced on February 28, 2023, the board of directors declared a quarterly cash dividend of $0.19 per share to be paid to shareholders of record at the close of business on March 14, 2023, payable on March 29, 2023. During fiscal 2022, the Company repurchased 2.8 million shares of its common stock for $62 million under its existing $500 million share repurchase program. A total capacity of $438 million remains available under this share repurchase authorization.

FOURTH QUARTER 2022 SUMMARY

• Total Company net sales in the fourth quarter decreased 4.1 percent compared with the same period in fiscal 2021. Full-year revenue for fiscal 2022, including retail sales and credit card revenues, increased 5.0 percent compared with fiscal 2021. GMV decreased 4.2 percent in the fourth quarter and increased 5.0 percent in fiscal 2022 when compared with the same periods in 2021.
• For the Nordstrom banner, net sales in the fourth quarter decreased 2.4 percent compared with the same period in fiscal 2021. GMV decreased 2.5 percent and increased 6.9 percent in the fourth quarter and in the fiscal year, respectively, when compared with the same periods in 2021.
• For the Nordstrom Rack banner, net sales decreased 8.1 percent compared with the same period in fiscal 2021. Eliminating store fulfillment for Nordstrom Rack digital orders in the third quarter negatively impacted fourth quarter Rack banner net sales by approximately 500 basis points.
• Digital sales in the fourth quarter decreased 13.1 percent compared with the same period in fiscal 2021. Eliminating store fulfillment for Nordstrom Rack digital orders in the third quarter and sunsetting Trunk Club earlier in fiscal 2022 negatively impacted fourth quarter digital sales by approximately 500 basis points. Digital sales represented 40 percent of total sales during the quarter and 38 percent of sales for the fiscal year.
• Gross profit, as a percentage of net sales, of 33.2 percent decreased 525 basis points compared with the same period in fiscal 2021 primarily due to higher markdown rates, as the Company prioritized rightsizing inventory levels in a highly promotional environment.
• Ending inventory decreased 15.2 percent compared with the same period in fiscal 2021, versus a 4.1 percent decrease in sales.
• Selling, general and administrative (“SG&A”) expenses, as a percentage of net sales, of 31.5 percent decreased 240 basis points compared with the same period in fiscal 2021, primarily due to supply chain expense efficiencies.
• EBIT was $187 million in the fourth quarter of 2022, compared with $299 million during the same period in fiscal 2021, primarily due to higher markdowns, partially offset by supply chain expense efficiencies. EBIT was $465 million for fiscal 2022, and adjusted EBIT of $502 million excluded a gain on the sale of the Company’s interest in a corporate office building, wind-down costs related to Trunk Club and a supply chain technology and related asset impairment charge, all of which were reported in the first three quarters.² EBIT margin was 4.5 percent of sales for the quarter, which was 235 basis points lower than the fourth quarter of 2021. EBIT margin and adjusted EBIT margin for the fiscal year were 3.1 percent and 3.3 percent, respectively.
• Interest expense, net, of $27 million decreased from $33 million during the same period in fiscal 2021, due to higher interest income and reduced credit facility borrowings.
• Income tax expense during the fourth quarter was $41 million, or 25.2 percent of pretax earnings, compared with $66 million, or 24.8 percent of pretax earnings, in the same period of fiscal 2021. The full-year income tax rate was 27.2 percent.
• The Company ended the year with $1.5 billion in available liquidity, including $687 million in cash and the full $800 million available on its revolving line of credit, and a leverage ratio of 3.1 times.

STORES UPDATE

During fiscal 2022, the Company opened three stores:

The Company has also announced plans to open or relocate the following stores:

The Company had the following store counts as of quarter-end:

During the fourth quarter, the Company closed one Nordstrom Rack store.

NORDSTROM WINDS DOWN CANADIAN OPERATIONS

As part of its initiatives to drive long-term profitable growth and enhance shareholder value, and after careful consideration of all reasonably available options, the Company also announced today it has decided to discontinue support for Nordstrom Canada’s business operations.³

“We regularly review every aspect of our business to make sure that we are set up for success,” said Erik Nordstrom. “We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business. We want to thank our team for their performance and dedication in serving customers in Canada. This decision will simplify our structure, intensify focus on our growth and profitability goals and position us to create greater value for our shareholders.”

Accordingly, Nordstrom Canada has commenced a wind-down of its operations, obtaining an Initial Order from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) earlier today to facilitate the wind-down in an orderly fashion.

Nordstrom Canada intends to wind down its Nordstrom and Nordstrom Rack stores across Canada, with the help of a third-party liquidator, and its Canadian e-commerce platform. The e-commerce platform will cease operations on March 2, 2023. The in-store wind-down is anticipated to be completed by late June 2023.

The Company expects that Nordstrom Canada will be deconsolidated from the Company’s financial statements as of the date of the CCAA filing. The Company expects to report approximately $300 million to $350 million of pre-tax charges related to the wind-down in the first quarter of fiscal 2023, driven primarily by the write-down of the Company’s investment in Nordstrom Canada. The wind-down is expected to result in an approximately $400 million decline in total Company net sales and a $35 million improvement in total Company EBIT in fiscal 2023, relative to fiscal 2022, excluding the aforementioned charges associated with the wind-down.

Nordstrom Canada operates six Nordstrom stores and seven Nordstrom Rack stores, as well as the Nordstrom.ca website, and employs approximately 2,500 people.

FISCAL YEAR 2023 OUTLOOK

The Company is providing the following financial outlook for fiscal 2023, which includes a 53rd week. The Company’s outlook also includes the anticipated impact of the wind-down of Canadian operations:

• Revenue decline, including retail sales and credit card revenues, of 4.0 to 6.0 percent versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week
• EBIT margin (including the negative impact of charges related to the wind-down of Canadian operations) of 1.2 to 2.1 percent of sales
• Adjusted EBIT margin (excluding charges related to the wind-down of Canadian operations) of 3.7 to 4.2 percent of sales
• Income tax rate of approximately 32 percent, including an approximately 500 basis point unfavorable impact from the one-time Canada charges
• EPS (including the negative impact of charges related to the wind-down of Canadian operations) of $0.20 to $0.80, excluding the impact of share repurchase activity, if any
• Adjusted EPS (excluding charges related to the wind-down of Canadian operations) of $1.80 to $2.20, excluding the impact of share repurchase activity, if any

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Net sales for the fourth quarter of fiscal 2022 totaled $1.543 billion, a 10.9% decrease compared to $1.732 billion for the same period last year. The decline to last year was driven by a comparable sales decrease of 13.0%. We estimate comparable sales were adversely impacted by approximately 130 basis points due to product shortages in furniture, resulting from the unexpected closure of our largest vendor in November. This impact excludes the attachment impact on adjacent categories, such as soft home. Net new stores and relocations contributed approximately 210 basis points of sales growth compared to the fourth quarter of 2021.

Commenting on today’s results announcement, Bruce Thorn, President and CEO of Big Lots stated, “Despite the extremely difficult consumer environment throughout 2022, we’ve taken action to strengthen and transform our business model. Against that backdrop, we made sequential progress to improve our margins, tightly manage expenses, and right-size our inventories over the last few quarters.” 

“Even though our furniture business was adversely impacted by the unexpected closure of our largest vendor, we were able to deliver fourth quarter sales and gross margins that were in line with guidance. Further, our year-over-year inventories came down materially to appropriate levels. We also saw favorability in SG&A, as we tightly managed costs, and have further strengthened our balance sheet through asset monetization efforts. I remain impressed by the agility and efforts of the team, who once again delivered on our targets under challenging conditions.”

“As we enter 2023, we remain excited about the opportunity to provide more value to our customers, while improving our sales and earnings momentum as the year progresses. We continue to accelerate the transformation of our business through key action points. These include offering even more compelling opening price points and better bargains and treasures, which are easier to find and more convenient to shop. In addition, we will continue to take strides to meet our customer’s needs, grow our relevance, and be more efficient across our fleet. We remain focused on growing margin, reducing expenses, and making highly disciplined investment decisions.”

A summary of adjustments to loss per diluted share is included in the table below.

Fiscal 2022
For fiscal 2022, the company reported a net loss of $210.7 million, or $7.30 per diluted share. Excluding the net charge for store asset impairments and a gain on the sale of real estate and related expenses, the adjusted net loss was $171.9 million, or $5.96 per diluted share compared to adjusted net income of $181.6 million, or $5.44 per diluted share (non-GAAP) for fiscal 2021.

Net sales for fiscal 2022 totaled $5.468 billion, an 11.1% decrease compared to $6.15 billion last year, with the decrease resulting from a comparable sales decrease of 12.9% partially offset by sales growth in new and relocated non-comp stores.

Inventory and Cash Management
Inventory ended the fourth quarter of fiscal 2022 at $1.148 billion compared to $1.238 billion for the same period last year, with the 7.3% decrease driven by lower in-transit inventory and on-hand units.

The company ended the fourth quarter of fiscal 2022 with $44.7 million of Cash and Cash Equivalents and $301.4 million of Long-term Debt, compared to $53.7 million of Cash and Cash Equivalents and $3.5 million of Long-term Debt as of the end of the fourth quarter of fiscal 2021.

Dividend and Share Repurchases
As announced in a separate release, on February 28, 2023 the Board of Directors declared a quarterly cash dividend of $0.30 per common share. This dividend payment of approximately $8.7 million will be payable on March 31, 2023, to shareholders of record as of the close of business on March 17, 2023. The company did not execute any share repurchases during the quarter. The company has $159 million remaining under its December 2021 $250 million authorization.

Company Outlook
For the first quarter, the company expects comps to be down in the low to mid-teens range. Net new stores will add about 40 basis points of growth versus 2022. The company expects the first quarter gross margin rate to improve sequentially versus Q4 into the high-30s range. Given an atypically wide range of potential outcomes, the company is not providing EPS guidance at this point. The company expects a share count of approximately 29.1 million for Q1.

With regard to the full year, the company is targeting improvement in financial results versus 2022. Earnings momentum will be weighted towards the back half of the year, as key actions to improve the business gain traction, and as freight cost reductions continue to be realized. Given greater than usual uncertainty in the macroeconomic environment, at this point the company is not providing formal full year guidance.

The post Big Lots Fiscal 2022 Net Sales Totaled $5.468 Billion, an 11.1% decrease Y-o-Y appeared first on RetailToday.

• Identical Sales without fuel increased 6.2%
• Operating Profit of $826 million; Adjusted FIFO Operating Profit of $1,274 million
• EPS of $0.62; Adjusted EPS of $0.99
• Executed go-to-market strategy to deliver value for customers
  • Our Brands identical sales increased 10.1%
  • Digital sales grew 12%

Fiscal 2022 Highlights

• Identical Sales without fuel increased 5.6%
• Operating Profit of $4.1 billion; Adjusted FIFO Operating Profit of $5.1 billion
• EPS of $3.06; Adjusted EPS of $4.23
• Delivered Adjusted EPS growth of 15%
• Cost savings exceeded $1 billion for fifth consecutive year
• Significantly increased associate wages resulting in average hourly wage of $18 and rate of over $23 with comprehensive benefits factored in
• Announced definitive merger agreement with Albertsons Companies, Inc.

The Kroger Co. (NYSE: KR) today reported its fourth quarter and fiscal year 2022 results, provided 2023 guidance and updated investors on how Leading with Fresh and Accelerating with Digital continues to position Kroger for long-term sustainable growth.

Comments from Chairman and CEO Rodney McMullen

“Kroger achieved exceptional results in 2022 as we executed on our Leading with Fresh and Accelerating with Digital strategy, building on record years in 2020 and 2021.  

We appreciate our associates for remaining customer-focused, delivering the products customers want, when and how they want them, with zero compromise on quality, convenience and selection. Our associates enable our success, and we are committed to investing in theirs by continuing to improve wages, comprehensive benefits and career development opportunities.

Providing affordable food is even more essential at a time when inflation is affecting so many of our customers’ lives. We do this by delivering fresh products at a great value, trusted Our Brands items, and personalized promotions.

Our proven go-to-market strategy enables Kroger to successfully navigate many operating environments. We believe that by delivering value for our customers, investing in our associates and serving our communities, Kroger will continue to achieve attractive and sustainable total returns for our shareholders.”  

Fourth Quarter Financial Results

Total company sales were $34.8 billion in the fourth quarter, compared to $33.0 billion for the same period last year. Excluding fuel, sales increased 5.9% compared to the same period last year.

Gross margin was 21.8% of sales for the fourth quarter. The FIFO gross margin rate, excluding fuel, decreased 1 basis point compared to the same period last year. This result reflected Kroger’s ability to effectively manage higher product cost inflation through strong sourcing practices and lower supply chain costs, while maintaining competitive pricing and helping customers manage their budgets.

The LIFO charge for the quarter was $234 million, compared to a LIFO charge of $20 million for the same period last year, driven by higher product cost inflation primarily in grocery.

The Operating, General & Administrative rate decreased 56 basis points, excluding fuel and adjustment items, compared to the same period last year. The decrease in OG&A rate was driven by sales leverage, continued execution of cost savings initiatives and the cycling of several one-time expenses, partially offset by planned investments in associates.

Fiscal 2022 Financial Results

Total company sales were $148.3 billion in 2022, compared to $137.9 billion for the same period last year. Excluding fuel, sales increased 5.2% compared to the same period last year.

Gross margin was 21.4% of sales for 2022. The FIFO gross margin rate, excluding fuel, decreased 9 basis points compared to the same period last year. This result reflected Kroger’s ability to effectively manage higher product cost inflation through strong sourcing practices, while maintaining competitive prices and helping customers manage their budgets.

The LIFO charge for 2022 was $626 million, compared to a LIFO charge of $197 million for the same period last year, driven by higher product cost inflation.

The Operating, General & Administrative rate decreased 19 basis points, excluding fuel and adjustment items, compared to the same period last year. The decrease in OG&A rate was driven by sales leverage and the continued execution of cost savings initiatives partially offset by planned investments in associates.

Capital Allocation Strategy

Kroger expects to continue to generate strong free cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth, as well as maintaining its current investment grade debt rating. The Company expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval. Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons.

Kroger’s net total debt to adjusted EBITDA ratio is 1.57, compared to 1.63 a year ago (Table 5). The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.

Full-Year 2023 Guidance*

• Identical sales without fuel of 1.0% – 2.0%, with underlying growth of 2.5% – 3.5% after adjusting for the effect of Express Scripts
• Adjusted net earnings per diluted share of $4.45 – $4.60, including an estimated benefit from the 53rd week of approximately $0.15
• Adjusted FIFO Operating Profit of $5.0 – $5.2 billion
• Effective tax rate of 23%**
• Capital expenditures of $3.4 – $3.6 billion
• Adjusted Free Cash Flow of $2.3 – $2.5 billion***

Comments from CFO Gary Millerchip

“Kroger’s 2022 results demonstrate the strength of our value creation model. In 2023, we expect to build on this momentum and deliver revenue and EPS growth on top of the record results achieved over the past three years.

We expect to grow revenue by continuing to invest in our customers through competitive pricing and personalization, fresh products and a better shopping experience. Building on our significant investments over the past four years, we will also continue to increase associate wages. We will fund these investments through product mix improvements, cost saving initiatives and growth in our alternative profit businesses.   

Looking forward, we believe Kroger is well positioned to successfully operate in an evolving economic environment and continue to deliver attractive total returns for our shareholders.”

Fourth Quarter 2022 Highlights

Leading with Fresh  

• Celebrated the 10^th anniversary of the Simple Truth brand, a greater than $3 billion brand providing customers with more than 1,500 unique natural and organic products
• Opened 1,000^th Murray’s Cheese shop within Kroger stores offering customers a highly curated cheese selection in more than 30 states across America
• Announced the top 2023 food trends predicting customer behaviors and popular items for the year ahead

Accelerating with Digital

• Increased delivery sales by 22% over last year driven by our delivery solutions
• Opened a new Kroger Delivery Customer Fulfillment Center in the Denver Metro area, one of the fastest-growing areas in the country
• Increased digitally engaged households by approximately 900,000 compared to the same period last year

Associate Experience

• Invested approximately $600 million in incremental wages in 2022, for a total of $1.9 billion in incremental investments since 2018
• Named to Computerworld’s 2023 Top 100 Best Places to work in IT list, marking the fifth consecutive year the company achieved this distinction for having an innovative, industry-leading workplace culture
• Honored by Ripplematch with a 2023 Campus Forward Award for excellence in career hiring, including programs that embrace innovative recruitment strategies, make significant investments in diversity and inclusion, and support the next generation of talent through impactful internships and entry-level programs
• Supported the continuing education of associates with more than 5,000 associates, 90% of whom are hourly, taking advantage of Kroger’s best-in-class education assistance program in 2022

Live Our Purpose

• Recognized as one of Newsweek’s “Most Responsible Companies” for 2023, marking the fourth consecutive year of being recognized for its dedication to corporate responsibility
• Achieved 100% execution of Zero Hunger I Zero Waste food rescue activity in participating Kroger stores
• Celebrated Kroger Health’s recognition as Retailer of the Year by Mass Market Retailers, for elevating the connection between nutrition and health through its food as medicine initiative

The post Kroger’s fourth-quarter earnings beat analysts’ expectations appeared first on RetailToday.

Tom Kingsbury, Kohl’s chief executive officer, stated, “Kohl’s fourth quarter results reflect meaningful proactive measures we took to better position the business for 2023, as well as sales pressure driven by the ongoing persistent inflationary environment. Kohl’s has a solid foundation and a highly motivated team with a set of priorities to capitalize on what I see as a substantial opportunity to make a difference in the retail landscape.”

Kingsbury continued, “Our efforts to drive the business are already underway. We are refining our strategy and re-establishing merchandise disciplines with a customer-centric focus across the organization. I am confident that our efforts will drive improved, and more consistent, sales and earnings performance over the long-term.”

Fourth Quarter 2022 Results
Comparisons refer to the 13-week period ended January 28, 2023 versus the 13-week period ended January 29, 2022

• Net sales decreased 7.2% year-over-year, to $5.8 billion, with comparable sales down 6.6%.
• Gross margin as a percentage of net sales was 23.0%, a decrease of 1,016 basis points. Clearance markdowns impacted margin by approximately 750 basis points and product cost inflation impacted margin by approximately 200 bps.
• Selling, general & administrative (SG&A) expenses decreased 0.6% year-over-year, to $1.7 billion. As a percentage of total revenue, SG&A expenses were 27.9%, an increase of 190 basis points year-over-year.
• Operating loss was $302 million compared to operating income of $450 million in the prior year. As a percentage of total revenue, operating loss was 5.0%, a decrease of 1,195 basis points year-over-year.
• Net loss was $273 million, or ($2.49) per diluted share. This compares to net income of $299 million, or $2.20 per diluted share in the prior year.
• Inventory was $3.2 billion, an increase of 4% year-over-year.
• Operating cash flow was $707 million driven by improvements in working capital during the fourth quarter of 2022.

Fiscal Year 2022 Results
Comparisons refer to the 52-week period ended January 28, 2023 versus the 52-week period ended January 29, 2022

• Net sales decreased 7.1% year-over-year, to $17.2 billion, with comparable sales down 6.6%.
• Gross margin as a percentage of net sales was 33.2%, a decrease of 485 basis points.
• SG&A expenses increased 2.0% year-over-year, to $5.6 billion. As a percentage of total revenue, SG&A expense was 30.9%, an increase of 268 basis points year-over-year.
• Operating income was $246 million compared to $1.7 billion in the prior year. As a percentage of total revenue, operating income was 1.4%, a decrease of 729 basis points year-over-year.
• Net loss of $19 million, or ($0.15) per diluted share. This compares to net income of $938 million, or $6.32 per diluted share, and adjusted net income of $1.1 billion, or $7.33 per diluted share, in the prior year.
• Operating cash flow was $282 million.

2023 Financial and Capital Allocation Outlook
For the full year 2023, the Company currently expects the following:

• Net sales: A decrease of (2%) to (4%), includes the impact of the 53rd week which is worth approximately 1% year-over-year.
• Operating margin: Approximately 4.0%.
• Diluted earnings per share: In the range of $2.10 to $2.70, excluding any non-recurring charges.
• Capital Expenditures: $600 million to $650 million, including expansion of its Sephora partnership and store refresh activity.
• Dividend: On February 21, 2023, Kohl’s Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.50 per share. The dividend is payable March 29, 2023 to shareholders of record at the close of business on March 15, 2023.
• Debt Reduction: The Company retired $164 million of bonds that matured in February 2023, and expects to retire $111 million of bonds maturing in December 2023.

The post Kohl’s Net sales decreased 7.1% year-over-year, to $17.2 billion appeared first on RetailToday.

“We are proud of another strong quarter generating an 8.1% comp, or a 25% two-year comp and an almost 50% three-year comp, with record EPS growth of 12% over last year to $3.72 per share. These results reflect the continuation of backlog order fulfillment, strong product margins and disciplined cost control,” said Laura Alber, President and Chief Executive Officer.

“We delivered another quarter of record revenues and earnings in a challenging environment. Our topline results illustrate our ability to gain market share. Our bottom-line results demonstrate the power of our operating model to sustain merchandise margin and control SG&A expenses,” added Jeff Howie, Chief Financial Officer.

Alber concluded, “Although the macro backdrop has become more uncertain, we believe our strong positioning, growth initiatives, and culture of financial discipline will allow us to outperform in any environment.”

THIRD QUARTER 2022 HIGHLIGHTS

• Comparable brand revenue. Increased 8.1% with a 2-year comp of 25.0% and a 3-year comp of almost 50%.
• Gross margin. Rate of 41.5% which was 220bps below last year, driven by higher shipping and freight costs with merchandise margin flat to last year with occupancy deleverage of 30bps. Occupancy costs increased 10.5% to $202 million.
• SG&A. Rate of 26.0% leveraging 160bps on a GAAP basis and 150bps on a non-GAAP basis, reflecting employment and advertising leverage.
• Operating income. $340 million, increasing 2.8% on a GAAP basis and 2.0% on a non-GAAP basis, with operating margin of 15.5%.
• Diluted EPS. $3.72 per share, increasing 13.1% on a GAAP basis and 12.0% on a non-GAAP basis.
• Cash and cash flow. Ended the quarter with $113 million in cash and generated $205 million in operating cash flow.

OUTLOOK

• We are reiterating our fiscal year 2022 guidance of mid-to-high single digit annual net revenue growth and operating margins relatively in-line with our fiscal year 2021 operating margin.
• Given the macro uncertainty, we will not reiterate or update our guidance through fiscal year 2024.
• We will provide guidance for fiscal 2023 and beyond in our press release announcing our fourth quarter fiscal 2022 results.

Williams-Sonoma, Inc. is the world’s largest digital-first, design-led and sustainable home retailer. The company’s products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, and Mark and Graham — are marketed through e-commerce websites, direct-mail catalogs and retail stores.

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