Williams-Sonoma Earnings Call Insights: Williams-Sonoma Brand and Guidance Outlook
Daniel Hofkin – William Blair & Company: Had a question going back to Williams-Sonoma specifically brand. Do you feel like, was outdoor isolated to weather or was it the content of the product in your opinion. And I guess just interested in what you think the time minus for sort of getting the brand to where you wanted to be from merchandising and service standpoint? Then I just had a quick housekeeping follow-up.
Laura J. Alber – President and CEO: We saw strength, as I said, in the areas that we’re most differentiated. And so it’s the combination of both newness, and newness that is very different from what the competition offers and those areas were in-home Agrarian cookware. Outdoor, which was a key marketing message spans several categories both the tools, but also the rubs and sauces and combination of factors that made it softer than we would have liked and the reality is that we needed new flow of outdoor (indiscernible), so we told the same story throughout the entire summer season. And the outdoor business is really a cooking trend that’s around year round. So, we need to have more flows of it next year, and possibly also less of it as a marketing statement. There were other great trends that we saw the ice cream trend, for example, and some of the sweet foods and sweet stories were strong. As I said, as we move into Q3, we really are optimistic about our product line. We have, right now as you know, if you’ve been into our store, we have wine country story, which spans both food and – but also how you entertain and it’s really back to our heritage and Chuck’s Fine, and we’re seeing some nice response on that so far. As we go into the ever important holiday season, you will see us launch Halloween here in stores, we have some of it online now and we have a – I think a much stronger and broader assortment in Halloween, and then also in Thanksgiving and Christmas. The entertaining at home theme is one that we are very focused on and you’re going to see us introduce a lot of exciting things in the home bar. We know that custom cocktails are something that everyone really enjoys and we think we can help our customer draw those great parties through the holiday season. In the back half strong holiday execution is key. At the same time we’ve talked to you about testing new ideas. Our approach is to test and roll ideas versus making precipitous far reaching changes because the customer has told us through number of focus groups how much they love the brand. So, we are being very careful and thoughtful about changes we make. And we are going to keep you posted along the way as we see different things work or not work well. In summary, I’d say the Williams-Sonoma story is really a story of innovation and execution and we are making good progress against the initiatives that we outlined.
Kate McShane – Citi Investment Research: Julie, drilling down on the guidance on some of your second half commentary that we just heard. Can you help us reconcile the guidance of keeping operating margins at 10 to 10.3 yet having to spend more on your international expansion, you didn’t change the comparable brand revenue outlook. So, do you expect something different from gross margins in the back half?
Julie Whalen – EVP and CFO: So, couple of things; first, it is important to remember that we plan to drive continued long-term profitable growth by investing in our business both domestically and globally. It is essential to acknowledge that we are maintaining significant earnings growth while investing in the future to fill our vision to double the size of our revenues and these investments will position us for the next phase of growth. They will strengthen our position as a leader in multi-channel lifestyle brand building in the home furnishing space and it is the power of our multi-channel operating model that allows us to do this. As far as the factors that I spoke to regarding the guidance, I think, the one thing you have to remember is that we did roll through the $40 million on revenue on the top end. So, obviously, not all of that we to believe is going to be going down to the bottom because of the four factors that we outlined in the conference call scripts. Specifically, we did mention that we do have more upfront costs than originally anticipated for the acceleration of our build out of our global infrastructure and that’s going to continue to put pressure on our earnings in the back half, also you mentioned gross margin. We do see that we’re going to have approximately 10% higher gross margin for the rest of the year, which remember that with 10% higher occupancy – with occupancy includes depreciation, so within that number we are absorbing if you will, our 2012 capital investments and again our investments in our accelerated global expansion. From a gross margin perspective, in particular obviously, we don’t guide specifically gross margin, but with a continued promotional environment and an increase in these occupancy costs, we do believe those continue to be pressured on the gross margins. But as we have said before different from other retailers, our operating model with close to 50% of revenue coming from the Direct-to-Customer channel allows us to flex between margin and advertising costs to drive revenue growth, while maintaining our overall operating margins. Our operating margin, remember at the high end is equal to the – our record operating levels that we’ve had in the past and our operating income will be the highest it’s even been. Pat, maybe you want to explain further on how we’re able to do this with our operating model with ad cost.
Patrick J. Connolly – EVP and CMO: I think it’s so critical that we understand how we’re able to flex this between the ad cost and product promotions. And the reason we’re able to do that is really because of increased marketing effectiveness, which is a key component of the profitability. And just this year, we’ve applied a new layer of sophisticated statistical modeling and a new automated process that’s yielding further improvements in our catalog targeting, really identifying those people who are most likely to buy and curtailing the mail inch to unproductive segments. In our new brands like Mark and Graham, and West Elm, Rejuvenation and Williams-Sonoma Home catalog re-launch, we’ve developed a novel modeling strategy to identify the most receptive populations for our massive house file and that’s enabled to take these brands to the next level of growth. But I think as much as we’ve done and are doing, we see significant future opportunity here in the near future. Early this fall, we’ll launch a new personalization platform that among other things will allow us to identify and target almost five times the number of site visitors and deliver personalized content based on what we know about them. This is a big deal. In about half of our site visitors – and this is true for almost all e-commerce sites, are anonymous, we’ve never seen them before. We are actively using data science techniques to characterize and understand the intent of these visitors, so that we can deliver relevant content even to people who have never been to our site before. We’re making investments in analytics and technologies that are allowing us to identify customers across devices and across brands. This is very important. So we know – we’re going to be able to know what someone did on their iPad, so when they go to their computer we can deliver them also a very relevant experience. We’re very excited about these and believe that these investments are really – are going to allow us to increase our lead in this area.
A Closer Look: Williams-Sonoma Earnings Cheat Sheet>>