Williams-Sonoma Inc. (NYSE:WSM) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 05:00 pm ET

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Williams-Sonoma Inc. (NYSE:WSM) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Laura J. Alber

is our increased focus on leveraging the strength of our portfolio, through cross brand initiatives like our growing business-to-business division, our loyalty program and our in-home design services.

We are optimistic about the future and excited to serve and inspire our customers, with outstanding service and products, that will build a deeper connection to our brands.

Before I discuss our third quarter performance by brand, I'd like to talk about the effectiveness of our efforts to mitigate the tariff impact. Despite the impact nearly doubling quarter-to-quarter, we saw sequential improvement in gross margin deleverage from Q2. This is the result of the hard work of all of our team. We've been moving production out of China, renegotiating product costs with our Chinese vendors, and we have successfully taken selective price increases. In addition, we've been reducing the level of promotions, and as a result, we feel confident on our strategies implemented, to offset cost pressures and to deliver profitable growth.

I'm now going to talk about our brands; West Elm standout results again this quarter were powered by our strong growth strategies and effective executions. With comp growth accelerating to 14.1% this quarter, we saw broad strength across all product categories and channels. This growth was led by furniture, with particular success in new product introductions, including made-to-order upholstery, complemented by categories key to customer acquisition, which includes decorative accessories and textiles.

E-commerce growth accelerated for another quarter, as our ongoing digital innovation drove customer acquisition and improved traffic and conversion. Retail also accelerated due to our differentiated design services and our new West Elm stores continue to perform above expectations.

At West Elm, our ongoing commitment to sustainability is embedded in our products and business, fulfilling our mission to design with impact. We have continued our commitment to artisans, as 20% of our assortment is handcrafted. We are excited to lead our brands and Fair Trade Factory certification, exceeding our company goals to deliver $3 million in fair trade premiums to workers by 2020, a year ahead of schedule. We're on track to surpass our commitment to responsibly sourced wood, through a wide assortment of FSC-Certified furniture and we are meeting customer demand for organic goods by fully converting our bedding and bath assortment to be GOTS or OTS certified. Looking to Q4, our holiday assortments in West Elm were off to a strong start, and increased seasonal assortment is driving incremental growth.

Looking further ahead, we are hyper-focused on executing our key growth strategies, including highlighting our design and valued leadership, expanding into product white space, driving brand awareness and new customer acquisition, and growing across all channels to reach our goal of $3 billion in revenues for the spreads.

The Pottery Barn brands also maintained their strong momentum from last quarter, delivering comp growth of 3.4% in Pottery Barn, and 4% in Pottery Barn Kids and Teen. There is much to celebrate in the Pottery Barn brand, as we gain traction in our digital transformation and brand