Q4 2020 Williams-Sonoma Inc Earnings Call

March 17, 2021

[music].

Okay.

Please standby.

Welcome to the Williams, Sonoma, Inc, fourth quarter and fiscal year, 2020 earnings Conference call. At this time all participants are in a listen only mode. We will conduct a question and answer session. After the presentation. This call is being recorded I would now like to turn the call over to at least Wang.

Vice President of Investor Relations to discuss non-GAAP financial measures and forward looking statements. Please go ahead.

Thank you. Good afternoon. This call should be considered in conjunction with the press release that was issued earlier today.

Unless indicated otherwise our discussion today will relate to results and guidance.

Just on certain non-GAAP measures.

Reconciliation of the non-GAAP financial measures and the most directly comparable GAAP financial measures and our explanation of why and non-GAAP financial measures may be useful are discussed and exhibit one of our press release.

This call also contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, which address the financial condition results of operation.

And at the initiatives trend growth plans and prospects of the company and 2021 and beyond and are subject to risks and uncertainties that could cause actual results to differ materially from such forward looking statements.

Please refer to the company's current press release and SEC filings Inc.

Moving the most recent 10-K for more information on these risks and uncertainties.

The company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call.

I will now turn the conference call over to Laura Alber, our President and Chief Executive Officer.

Afternoon, everyone and thank you all for joining us.

2020, with your challenges and dramatic changes and the way we live.

It was also a year, where we were pushed to adapt and clarify what is important to us.

And I cannot be prouder of the accomplishments of the team here at Williams Sonoma their.

Their dedication was a vital part of our ability to substantially outperform the industry and gain market share.

And Q4, despite shipping constraints and low retail traffic, we delivered another quarter of accelerating revenue and profitability with 26% comp growth, our highest quarterly comp of the year and 85 per cent EPS growth.

This strong and for the year combined with our outperformance throughout 2020 drove record fiscal year revenue growth substantial operating margin expansion and EPS. It was almost double that of last year.

And we look forward for the year ahead, and the longer term future of our company, we are confident and our ability to drive growth and improve our profitability, we have big goals and good reasons to believe that we will achieve them.

Today I want to spend a bulk of our time talking about our three key differentiators, which set us apart and have become increasingly relevant and.

They are first our in house design.

Second our digital first channel strategy and third our values.

Let's start with our in house design capability.

And in house teams this on our own products create original aesthetics and work with our talented vendors to bring quality sustainable products to market.

Given that the bulk of our products cannot be found elsewhere and the design quality value equation is so strong we have pricing power at the others do not.

Throughout this year, we have been very deliberate and reducing promotions and all of our brands. It's a very significant and material change to our model. We have tested into this change replacing site wide promotions with inspiring content and the effectiveness of this change is clear on our results including consecutive quarters of product margin expansion.

And compared to last year.

And pottery barn, and the multi year work to improve our value proposition is paying off we are increasing brand relevance of aesthetically with a successful launch of our proprietary rustic modern furniture collections and our famous casual lifestyle point of view.

Our value engineered products are attracting new customers, we have introduced significantly more opening price points and our multi step finish high quality furniture pieces.

For the best value and the market.

We will continue to develop assortments and proven adjacent categories to drive incremental growth.

One example of this is bath renovations and.

The Bath renovation market is 80 billion or 20 per cent of the U S home improvement market.

They're in house of product development, and our new marketplace model, our Bath renovation business is growing at a rate of nearly 30% per year and is projected to contribute an incremental $100 million over the next three years.

Yeah.

And pottery barn kids and teen we have amplified our leadership and design and sustainability and the children's home furnishings business.

We are proud to say that 100 per cent of our wooden furniture offering is now greenguard gold certified and.

Aligned with our promise of products that are good for kids and good for the planet.

In addition to strong core introductions of furniture, we have added a new modern aesthetic that is growing at over 50% and actually.

Attracting new customers to our brands.

Another example of growth is our baby business, our baby business saw 23% growth last year, and we are actively targeting the 2 billion plus baby registry market.

West Elm has truly become the home furnishings brand of choice for millennial and millennial minded people, we continue to build the business with the original design and by filling out white space and underdeveloped categories.

For example of this year, we materially expanded into seasonal decor Oh.

Historically small business for the brand.

And the holiday season, we sold out with many of the products within the first couple of weeks of launch.

Which built a strong foundation for further incremental volume in the years to come.

Another category, we are aggressively going after is outdoor.

Currently west Elms outdoor business is less than half the size of pottery barn, and doubling this business and drive an incremental 6% growth for the West Zone brand.

Now I'd like to talk about Williams Sonoma.

This year and marked a dramatic change in strategy for the brand.

We implemented a content driven marketing strategy that featured exclusive products and relevant lifestyle stories instead of promotions.

We also grew our exclusive products to 70% of our total business.

This has been one of our key strategic.

Key strategic initiatives to increase the mix of product only available at Williams, Sonoma, which has grown from 50% to 70% and the last five years.

Looking ahead, we will be even more aggressive and growing our exclusive product, which we expect to reach over 80% of our total business by the end of FY 'twenty one.

We also see significant opportunities and categories that are underdeveloped, including the high end luxury furniture market.

At Williams Sonoma home brand is significantly underrepresented at in this market and represents a substantial opportunity to drive growth and gain market share for the Williams Sonoma brand.

In addition to growth and our brands, we also of growth and new customer segments, such as business of business and the global home category.

We are building, our mighty business to business teen and we are accelerating and sales volume across multiple industry verticals.

Last year, we drove over $350 million of revenues and we expect this business of surpassed $500 million this year.

And our global business our strategy for growth is through the capital light franchise model.

We plan to double our revenues globally and the next five years led by the continued expansion of West Elm.

Growth and our franchise operations as well as in our Canada E Commerce business.

Our second differentiator is our digital first channel strategy.

One of the key reasons, we outperformed was because of our E. Commerce platform was able to serve our customers at scale, we are uniquely positioned to take market share at the home industry shifts online.

We are already of the number one non pure play e-commerce retail or at home furnishings, and the top 25 e-commerce retailer and the U S across all industry and today, our business is over 70% E Commerce.

And our digital channels, we have been acquiring new customers at record rates of all year and our customer retention metrics continue to improve among new customers. We have of platform the supply chain infrastructure, the tech stack and the talent to push our growth and e-commerce, even higher.

We are digital first.

But not digital only on.

Our stores are competitive advantage that support our online business for customers, who want to experience our products in person as well as for those who prefer the convenience of our omni channel services.

And the past quarter, we increased our total buy online pickup and store and ship from store sales by over 130 per cent as we leveraged our retail network as fulfillment hubs.

That's a huge unlock for our distribution operations and it was one of the reasons, we were able to fulfill higher than expected volumes. This holiday season, despite grid lock issues that impacted the industry.

And we look ahead and our future growth will be driven predominantly by E. Commerce, one of the key advantages of having built our tech platform and house is that we are able to implement and test new initiatives quickly and adjust based on customer feedback.

We already of several initiatives planned to further enhance customer engagement and conversion on mind.

And you'll also see our three D visualization capability come to life as we introduce new functionalities toward design crew room planner, including immersive multi product and our room layouts and 360 degree of experiences.

These enhancements are important because of this tool and drive sales.

We saw significant increase and the usage of this tool fire of design associates and customers. This year with total plants created of 55 per cent compared to last year.

Also those who utilize this tool currently generate twice as many sales as non users.

And our supply chain, we are aggressively expanding our U S manufacturing and fulfillment capability by over 20% to 30% next year, including adding close to 2 million square feet of distribution space to our delivery network.

This will support our elevated demand, particularly in furniture.

To help mitigate industry wide shipping constraints and higher costs, we will test and extend our in home delivery to include small packages and addition to leveraging our omni channel network.

Being digital first also enables us to explore new offerings and business models such as marketplace.

Our marketplace assortment is of the same superior quality as the rest of our products often exclusive and source for my trusted socially responsible vendor base.

Place also Leverages, our website reached and is capital light.

This year marketplace was just over 4% of our total business and.

And we are planning to almost triple its size and the next five years.

Our third differentiator is our values.

We care deeply about sustainability equity action and supporting our associates and the communities where we work.

Our commitment to sustainability is one of the main reasons, our customers choose us over our competitors for.

For example, a recent survey found that are part of our end customers are three times more likely to be at the top environmentally focused households.

There's a direct correlation between the good work, we are doing and the world and our increasing relevance with our customers and.

And we are thrilled to be recognized for the work in this area. Just last month. We were ranked at number 16 on Barron's 100, most sustainable companies up from 32 last year and we are continuing our recognition as the only home furnishings retailer on the entire Baron's list.

And we look for the future we will deepen our sustainability commitments further on.

Pottery barn brand kicked off and new year with a commitment of plant 3 million trees, and three years, where we will plant a tree for every piece of indoor wooden furniture, we sell.

Companywide, we will meet our 100 per cent responsibly sourced cotton and 50 per cent responsibly sourced wood goals and grow our selection of sustainably made products.

Most exciting is our upcoming announcement of an ambitious public goal for carbon reduction across our operations and throughout our entire supply chain.

Diversity equity inclusion is also central to who we are as a company.

We continue to lead and gender equity and we are proud to be included and Bloomberg's gender equality index. This year for of gender equity achievements across talent K culture and workplace policies.

We also lead and LGBTQ equity and continue to score at 90% or higher and the human rights campaign's corporate equality index.

And in order to improve racial equity we've established our equity action plan and although there is still a lot more to do we have made measurable progress.

We have committed our ongoing support for over 25 national and local nonprofit organizations. The advocate for ratio Justice and equity and have increased our black African American and representation through hiring partnerships and collaborations.

And of course, we cannot overemphasize the value of our associates.

Our people are at the heart of our business.

And 2020, we continued to pay our associates during the initial months of Covid, while our stores and offices were closed and provided several pandemic bonuses and hourly wage increases to our frontline workers throughout the year.

To help protect the safety of our associates and our communities. We continue to provide personal protective gear and COVID-19 testing to our store and supply chain and associates.

And through our Williams Sonoma, Inc. Foundation, we have given the financial assistance to over 850 associates experiencing COVID-19 hardship this year.

In addition to these COVID-19 related benefits, we also enhanced our parental leave policy to provide more paid time off for primary both primary and secondary caregivers.

The positive impact of all of these initiatives was evident and our team's unwavering dedication throughout the year, including the best holiday execution, we have ever had.

We will continue to follow through on our equity action plan and commitments to advance racial equity both inside our company and and the communities we serve.

We have set aggressive goals to further diversify our work force vendor partners and collaborators and we are committed to providing transparency on our progress.

In summary, our business excelled and 2020, despite the extremely difficult operating environment.

We believe this reflects the power of our three key Differentiators, which we will continue to invest and to drive growth and gain market share.

Looking ahead for 2021 and beyond we are very optimistic about our runway for growth and profitability.

But before I give our financial outlook, let me provide some insight into what we're currently seeing and our business.

All of our brands are starting the year strong.

We're seeing higher than expected e-commerce traffic and sales and continuing recovery and our retail comps.

Our entertaining related categories, such as eastern outdoor are driving very strong results for us, giving us the confidence that this entertaining lifestyle trend will accelerate post pandemic as people welcome friends and families back into their home.

Our <unk> business sales trends also continue to accelerate week after week growth and our global business is also building momentum driven by strong demand for from our franchise partners and our E Commerce business in Canada.

In addition, our merchandize margins continue to expand as we have substantially reduced promotions.

We will continue to chase inventory and unfortunately, we are experiencing additional delays due to COVID-19 related slowdowns of foam shortage due to the inclement February weather and the south and delays due to port congestion and of shipping container shortage. We are doing all of that we can to expedite inventory flow.

And for our customers, but our in stock recovery is now most likely push to Q3 and.

And while this is a challenge. It is also one related to a very strong demand.

We expect this strong demand to continue through 2021 and beyond based on a number of factors.

First is the ongoing strength of our growth initiatives and our three key differentiators that will continue to set us apart from the competition and allow us to take market share.

It is the recovery and our retail traffic and replenishment of our inventory levels as we move throughout the year and beyond that will drive additional growth.

And third at is the favorable macro trends that we believe will continue to benefit our business.

These include high consumer confidence of strong housing market, a continuing shift to E. Commerce. The expected continuation of working from home hybrid work and the importance of sustainability and value to the customer.

This gives us the confidence that we can deliver mid to single high and mid to high single digit revenue growth and operating margin expansion in 2021.

Longer term, our three key differentiators our in house designed our digital first channel strategy and our values will drive profitable market share gains accelerating our path to $10 billion of revenues and 15% operating margins and the next five years.

Julia will speak to this financial outlook and more detail, but before I turn the call over to her.

I want to express my sincere gratitude to our associates, particularly our frontline workers and manufacturing and distribution, who worked tirelessly around the clock through the pandemic.

Our incredible performance over the past year could not have been achieved without our team's innovation collaboration and hard work I could not be proud of our associates and all of the day of accomplished and taking care of each other our customers and our communities and with that I would now like to pass the call over to Julie. Thank.

Thank you Laura and good afternoon, everyone.

I also want to begin by thanking all of our associates for their resilience and hard work over the past year, as we navigated and extremely challenging environment for making operational changes at the onset of the pandemic to preserve liquidity and maintain strong financial health to managing the impact of widespread store closures, while continuing to pay our people just not feeling.

Higher than expected online volumes as we grappled with parcel shipping cash and supply chain disruptions. We stayed relentlessly focused on taking care of of all of our stakeholders, our associates, our customers and our shareholders and at once this focus that enabled us to report record fourth quarter and fiscal year results today.

And the fourth quarter net revenues reached approximately $2 3 billion with net comparable brand revenue growth of 25, 7% and and even higher demand comp of nearly 30%, which includes orders placed but not yet filled and the quarter.

E Commerce grew at a comp of 47, 9% and our retail stores continued to improve sequentially ending the quarter with a negative comp of seven 6%.

This outperformed our expectations given the substantial COVID-19 restrictions that were in place throughout the quarter and the overall decline and national store traffic of over 30%.

All brands drove strong revenue growth and the fourth quarter.

Williams, Sonoma and delivered a 26, 2% comp pottery barn accelerated to a path of 25, 7% west.

Westbound accelerated to a 25, 2% comp on top of last year's 13, 9% comp and pottery barn kids and teen accelerated to a comp of 25, 7%.

And in our emerging brands rejuvenation, and Mark and Graham combined we delivered another quarter of over 20% growth.

Moving down the income statement gross margin expanded 450 basis points to 42, 1% and the fourth quarter driven by another quarter of substantially higher merchandise margin and occupancy leverage.

And merchandize margins resulted from significantly reduced promotional activity as we replace site wide promotions with relevant content across all of our brands.

Occupancy leveraged 190 basis points and the quarter, resulting from higher sales and relatively flat year over year occupancy dollars at approximately $181 million.

Our efforts to renegotiate rent and to close less profitable stores have enabled us to minimize our occupancy dollar growth and to deliver this occupancy leverage.

While we did incur higher shipping costs year over year from a higher mix of E Commerce sales and peak shipping surcharges from our third party shippers. We are pleased to see our selling margins, which include these higher shipping costs sequentially improved again, this quarter, expanding 260 basis points year over year and of 110 basis points from the third quarter.

SG&A and the fourth quarter was 24, 2% of net revenues compared to 26, 1% last year leveraging of 190 basis points year over year and sequentially, improving 10 basis points as of right from the third quarter.

SG&A dollars grew 15, 5% compared to last year, primarily driven by higher and point of cost from increased incentive compensation, given our fiscal year outperformance.

Higher hourly variable pay, particularly and our supply chain as our teams worked for fulfill higher than expected volume during the quarter and incremental pandemic related costs, such as bonuses for our frontline workers work from home stipend for our corporate associates and increased levels of P. P E and cleanings across our facilities.

Despite these incremental costs, we were able to maintain a low SG&A rate due to the strength of our sales volume and our overall strong financial discipline, which kept SG&A growth substantially below sales growth.

As a result, we delivered another quarter of record profitability with operating income growth of 92% to $410 million and operating margin expansion of 630 basis points to 17, 9%.

This resulted in diluted earnings per share of $3 95.

Or 85% higher than that of 2019 at $2 13 and stuff.

These fourth quarter results combined with the outperformance we have seen throughout 2020 allowed us to deliver record financial performance on a year.

Some of our fiscal year 2020 highlights include net.

Net revenues at all time highs in 2020 at nearly $6 8 billion, including comparable brand revenue growth of 17%.

Our E Commerce business grew at a comp of 44, 5%. This year, taking our e-commerce mixed at over 70% or $4 8 billion of our total revenues.

In retail we delivered a negative 22, 5% comp despite substantial COVID-19 disruptions with our stores closed for severely limited throughout the year and and overall national clients store traffic of about 45% and.

In addition, our stores this year and played an integral role of supporting our online growth through virtual design and omni fulfillment services.

By brand, we delivered double digit growth and significant acceleration across all brands across the pottery barn brands comp accelerated to 15, 6% on top of for 2% last year with pottery barn at a 15, 2% comp and our children's business part of our kids and teen at of 16, 6% comp.

Williams Sonoma accelerated to 23, 8% comp driven by e-commerce comps well above 70%.

West Elm, our largest growth initiatives delivered their 11th consecutive year of double digit revenue growth and another year of double digit comps at 15, 2% on top of last year's $14 four per cent com.

Our emerging brands rejuvenation, and Mark and Graham combined delivered another year of double digit growth.

Additionally, our cross brand initiatives continued to gain scale and momentum most notably is our business to business division, which delivered approximately $360 million and revenues for the year of 15% over last year and contributing an incremental 140 basis points of our total company comp.

And our cross brand loyalty program for key we enrolled nearly 4 million customers, bringing our total membership to almost 12 million members for 23% over 2019.

And our complementary design through services accounted for almost 50% of our fiscal year 'twenty and store revenue.

And this top line performance along with our strong financial discipline, all year enabled us to generate operating income of over $960 million, which was over 90% higher than 2019. This.

And this resulted in record operating margin expansion of 560 basis points to 14, 2% and EPS of $9 for Seth almost double that of 2019.

Additionally, at this level of earnings growth allowed us to substantially increase our return on invested capital from $22 four per cent to $38 one per cent with all brands substantially improving and significantly outperforming our peer set medium.

On the balance sheet, and we ended the year with a cash balance of over $1 2 billion compared to $432 million and 2019.

Which reflects our strong financial performance and operating cash flow of almost $1 3 billion, which was more than double last year.

In addition to our strong cash balance. We also ended the year with no amount outstanding on our line of credit this.

And the strong liquidity position allowed us to fund for the operations of the business, including nearly $170 million of capital expenditures, primarily and technology and supply chain to support our e-commerce growth and to provide shareholder returns of over $300 million through dividends and share repurchases.

While many companies to spend at their dividends in 2020, we continued to pay dividends to our shareholders all year, including increasing our dividend payout by 10% this past quarter for annual dividend payout for shareholders of $158 million.

We also after initially suspending share repurchases repurchase shares at the same level of 2019 for approximately $150 million on the back half of 2020.

Moving down the balance sheet merchandise inventories were 1.006 billion for a decrease of eight 6% year over year, which was at 200 basis point improvement from the third quarter.

While we are pleased to see a sequential improvement and our inventory position and compared to last quarter and the gradual and narrowing of the GAAP between demand and net costs. This quarter. We are continuing to work through our high end back order levels with our vendor partners and expect to be back and stock to more normalized levels and the back half of 2021.

Now, let me turn to our expectations for the year ahead and beyond give.

Given the ongoing strength of our business as we enter 2021, the expected recovery and our retail business and inventory levels as we move throughout the year as well as the macro trends that will continue to benefit our business. We expect 2021 to be in line with our previously provided long term financial outlook of mid to high single digit revenue.

And our 5% to 9% and year over year operating margin expansion.

As far as our capital allocation and 2021, we plan to first invest in the business and then return excess cash to our shareholders. We expect to invest approximately $200 million of $250 million of business with over 85% of the capital spend and prioritize on technology and supply chain initiatives that primarily support our e-commerce growth.

And technology, we are focused on enhancing customer engagement and conversion online and and the supply chain. We are planning to spend primarily on the addition of two new distribution centers to provide an incremental 2 million square feet and D. C capacity to support our elevated growth as well as various investments and automation to drive speed and efficiency.

Router operations.

As the consumer and our business continued to shift more online and so have our levels of e-commerce related capital spend over.

Over the last five years alone we have shifted from less than 50% e-commerce related spend to now over 85% of our estimated spend in 2021.

And we expect this shift of hold at these levels going for it.

We also plan to return excess cash to our shareholders and the form of increased quarterly dividend payout and increased levels of share repurchases.

Following the 10 per cent quarterly dividend increase that went into effect last quarter, we announced earlier today, another double digit increase and our quarterly dividend of 11, 3% or six cents to <unk> 59 per share.

As far as share repurchases, we plan to increase our level of repurchases over last year. Today. We also announced that our board has approved a new $1 billion share repurchase program, which will supersede the remaining outstanding under a prior authorization.

While our stock is hovering around all time highs. We continue to believe that it remains undervalued given our projections for growth and profitability. As a result, we believe investing and our own stock will also drive long term financial returns.

And finally, given our strong liquidity position and our expectations for another year of robust operating cash flow generation, we paid off our $300 million term loan early and expect to let our $200 million 364 day line of credit facility naturally expire in May 2021.

All of these decisions reflect our confidence and the long term growth and profitability outlook of our company and our unwavering commitment to maximizing returns for our shareholders.

Longer term as Laura mentioned, given the acceleration and our business along with the macro trends that should continue to favor our business for the long term, we see a faster path to now reach $10 billion of net revenues and 15% operating margin and the next five years.

We estimate the pottery barn will expand to almost $3 5 billion and revenues westbound will grow double digits almost doubling in five to over $3 billion.

Williams Sonoma will reach almost $1 6 billion and revenues and our pottery barn kids and teen business will grow to $1 4 billion.

And cash anticipated topline growth and addition to strong growth and our core business will be fueled by accelerated double digit growth across a number of our key initiatives, including our beat of E business expanding to $1 billion and revenues our marketplace business growing at almost three times the size of per day to over $700 million.

Our emerging brands expanding to a combined revenue of over 600 million and.

And our global operations more than doubling in $5 million to $700 million.

From a profitability perspective further operating margin expansion should predominantly be driven by overall sales leverage from higher sales levels and a continued shift to a more efficient and profitable e-commerce business.

Reduced occupancy costs for the renegotiation of our lease agreements and the expected closure of approximately 25 per cent of our retail fleet as our leases come up for renewal and continued strength and our product margins from and ongoing focus on more content led marketing and more value engineered high quality and sustainable products as well as overall store.

<unk> financial discipline, maintaining expense growth below sales growth.

In summary, our record performance. This year is a testament to the strength of our teams and the power of our three key Differentiators. Our in house designed our digital first channel strategy and our values.

As we look into next year and beyond we are optimistic about our business.

And given the favorable long term macro trends, including strong housing market disruption of brick and mortar and an accelerating shift E. Commerce. The expected continuation of working from home and some capacity post pandemic and the increasing importance of sustainability and being a values driven company combined with our key differentiator is our growth initiatives.

Our double digit growth and new customer accounts and loyalty members and our strong operating cash flow and liquidity and a proven track record of strong financial discipline. We believe we are uniquely positioned to drive long term growth and profitability, resulting in market share gains and strong financial returns for our shareholders I would now like to open.

The call for questions. Thank you.

Thank you.

I would like to signal and with questions. Please press star one on your Touchtone telephone if you join US today and you say speaker phone. Please make sure your functions just turned off to allow your signal to reach our equipment.

Please ask one question at a time.

And at Star one if you would like to ask questions store what.

And our first question today will come from Adrian and young with Barclays.

Good afternoon.

Congratulations I mean at it really is a nice topping two what was a difficult year, but he made it through extraordinarily well.

And Laura.

So my first question is for you.

It looks like the brands are all hitting sort of at this.

Accelerated sweet spot of growth here and the U S.

And can you talk a little bit about the foreign businesses and you know.

You you haven't yet stepped into Europe, and so we're seeing some players in the space, obviously launch into Europe kind of at their next phase of kind of Tam growth.

And so can you talk about that first and foremost and then Julie a really interesting on the occupancy line and that is it's pretty incredible their sales grew 24 per cent of your occupancy is flat. So I really wanted to understand what the occupancy.

And trajectory looks like for 2021 should we assume it's kind of flattish as we go through Q1, and then into the full year and then on the flip side of that on the merch margins are you at historically low levels of clearance and have you permanently change the nature of the business such that we won't go ever go well won't go back and we won't be and river.

And back to historical levels of promo. Thank you so much and congrats again.

Thank you.

In terms of global.

We recognized as we traveled the world that no one else is doing what we're doing and we've had great success and really bringing e-commerce and some.

Of these markets, particularly the franchise partner and so we're very well established but didn't have a big e-commerce business and so we have partnered with great people and the middle East.

Really sizeable operation in fact this week, we just opened a brand new flagship store in Dubai and that is phenomenal with of Williams Sonoma home expression that is something you haven't ever seen before.

For two days and we're off to a great start there and that's just one example of.

The great stores that we're building together and the business were building together with our franchise partners around the world, There's still a lot of growth there.

West Elm is one hasn't been as established and these franchise markets and then also the E. Commerce continues to be a higher per cent of sales in.

And these and these are global markets.

We announced last year that we'd be going into India.

We are still on track to do that it's a little of delayed but it's a big market.

On our forecast is that it's one of at most sizable for us and we're very excited about that partnership we want to do it really well and so we put on China and what we don't have plans to enter China at this point Similarly, we are and.

And we're in London with West Elm, we have and some things that.

And.

Some of the Department stores. There. We also have of kids website, but we don't have further plans to expand other than and e-commerce.

It's just there's a lot more easy places to go right now than Europe with a long leases and also just the difficulty of doing business. There. So we're not when I was doing a big push right now in Europe.

And it's very nice for Julien.

So regarding occupancy and your question there. So I think first of all if you look back you'll see that we have at holding occupancy dollar growth down for a while now and we do expect that to continue the important thing to remember is there's many things that go on occupancy like depreciation from from capital investments at.

So our distribution center rent, so there'll be ups and downs, but the reality is as I said in my prepared remarks and for clotting closing apparently about 25 per cent of our fleet of at least that will lower our occupancy dollars and then potentially be offset by these other things that I just mentioned, but then you combine that with the higher sales volume higher E Commerce volume.

And all of that Leverages that line. So I do expect both to have more muted dollar growth, but also the higher sales will drive that leverage going forward for the foreseeable future as.

As far as merchandise margins.

Yes, we do have some of the lowest levels of clearance inventory that we've had on the company and at this point and time, we expect that to continue but it's also the fact that we've made a decision.

A decision to really pull off of Sitewide promos and go after content led relevant marketing. So instead of just doing a blank and email and we gave at 20% off we're getting more and more fine tuned about what we serve up to you to give you what he wants and if you watch it we could only get it from us and and that combined with the fact that we are value.

Engineering, the product to get at the right price and the right quality and the right sustainability levels and we will never compromise on that it puts it at a situation where people wanted you got to buy at is of great products that people are buying it and so that is we are going after that aggressively and that's why we're so confident of merchandize margins continuing to expand going for it.

Great very helpful Best of luck.

Thank you thank you and.

Our next question will come from Steven Forbes with Guggenheim Securities.

Thank you Steven Forbes Your line is open go ahead. Please.

Sorry about that good evening.

And I'll follow up on the selling and logging or merchandise margin commentary you provided a number.

On the call right I think you said selling margins expanded 60 basis points during the fourth quarter.

So can you remind us what that number was for the year and then as we think about the pass through of 15% EBIT margin and.

Any commentary on the key lighthouse and snow and margin profile and the business.

As you think about potentially cycling something some of these transitory headwinds whether it be clearance of EBIT.

Indore.

On promotional activity do you see anything as it relates to the cadence and the selling margin.

And.

I mean at selling margins all year and have been accelerating on from an improvement standpoint and from expansion standpoint. So you know again, we expect that to continue going forward and I don't have handy right now the exact amount on a year, but if you look back you can see by quarter that they've continued to expand and in this quarter and particular with the largest expansion.

As far as you know puts and takes us of what could drive for selling margins I mean, we've always bad debt. The shipping costs are a part of selling margins and so that obviously has become something that we've been focused on more recently, especially as our mix shifts the e-commerce and more furniture, we have and there's been higher rates that have come through with our third party shippers, but I think of combination of the fact that we.

And drive these merch margin expansion you know throughout and then you layer it with occupancy on top of it is what it's been able to give us. This incredible of gross margin expansion for the entire year and so that is why we're confident going forward that will continue. We obviously also of working specifically on shipping costs and trying to minimize those increases as much.

And as possible the health of the selling margins going forward. In addition to the merch margins.

And whether that's using more of our omni fulfillment at our stores.

She has been a huge win for US obviously during this time and it's a it's a differentiator of the fact that we have these stores as hubs around the country.

You know to obviously trying to figure out ways to take this larger items and bring it into our own delivery network and and lowering some of the costs with our third party shippers now at the same time, we have great relationships with third party shippers and so we're working with them to come to a great solution, but we are focused not only on offsetting shipping costs, but also lowering them and an absolute.

To keep driving these selling margins to where they are.

Thank you best of luck the same.

Thank you.

Thank you. Our next question will come from all of her winter mental with Evercore.

Yeah. Thanks, guys I had a question regarding labor costs.

You mentioned Covid pay and in 2020, but then also bonuses and and all of that.

So wanted to see how you plan for 2021 and beyond core.

On labor costs.

So our labor cost as we spoke to during the year of obviously gone up you've heard that from many other retailers, especially the hourly rates and so across the board. We have moved two of $14 per hour of rates. So at least we're at $14 per hour or even higher and our.

Distribution centers and particular in certain areas and so we've got a lot of that and our base. Obviously, there's always pressure and we always look at the hourly wages on a market by market basis, and we want to be competitive our people have been the secret sauce, if you will.

Especially this year and so we are making certain that we're taking care of them from and Audi rate perspective, but since we've made these moves and the past we at.

It's not as much of a headwind for us as it might be for others on them on a flip side I think you mentioned COVID-19 costs. We obviously expect that there will be reduced or eliminated COVID-19 costs, which is going to help us next year, because those are fairly substantial and so.

So you've got some moving parts labor you've got the annual they shouldn't be the hourly wages and and you know potential of a little more pressure on the on the labor line. He's got the fact that we may have some more advertising spend.

And on the flip side, you've got Covid costs that are coming on so it gives us a lot of confidence combined with our merchandise margin expansion and our occupancy leverage and with higher sales leveraging the entire P&L that we can drive operating margin expansion next year.

Got it thanks, very much and good luck.

Thank you.

Thank you. Our next question comes from Seth Basham with Wedbush Securities.

Thanks, a lot and good evening, congrats on a great quarter and year of my question is around the outlook very impressive in terms of the margin now and that's particularly for 2021, just perhaps you provide a little bit more color on the complexion of on the large expansion you're expecting in 2021, how much of it will be in.

Our gross margin how much of it and yesterday and do you expect both of those to provide our expansion for your operating margins.

Yeah. This is giuliano answer that question. So we we expect expansion on both of them, it's obviously going to depend by quarter on and we're not giving quarterly line item guidance, but at the end of a day and where for a very confident on merchandise margin expansion, we're very confident and our occupancy leverage and as I just mentioned on on the last.

Question that we have the benefit of some of these COVID-19 costs that are gonna be flipping out and yes. We will have some increased cost, but we will be able to more than cover that as a result of at the higher.

Covid costs that'll be coming out of tolerance, and so that combined with higher sales will allow us to leverage on any of those costs and are coming through and drive operating margin expansion on the bottom line and remember you know a lot of the sales that we're driving now with an expectation of 70 per cent of hire are going to be commerce and ecommerce. We have historically been one of the most profitable E Commerce company.

He's out there and so as we shift more and more to ecommerce that completely leverages. The P&L. So that's our expectation.

Understood and just a follow up and if youre going to be expanding your operating margins and so simo.

And really materially in 2021, and your goal is 15% and 2025. It seems like you don't have that much more expansion plan for 2022, two for you guys.

And he thought is that just conservatism at this point and time.

I'd say this and conservatism, but also you know we want to make sure that our value proposition stays really compelling and at our service is the best and the industry and.

So we're it's a bit of conservatism and it's also making sure we have the money set aside to invest back into the business to stay on top.

Understood Congrats and best of luck.

Thank you.

And our next question comes from Cristina Fernandez with Telsey Advisory group.

Hi, and congratulations also on a good quarter I have two questions. One when you look at your demand trends for deepwater base or are you seeing any notable differences and markets that where the strength has been lifted or have hired vaccination rates versus stores that don't.

And so that's one and then my second question is on fulfillment I wanted to see if you could talk more about the ship from store and how you can now roll that further and help out.

And the perhaps more some of your of you know at all.

Order a cost of goods for the orders and how do you see at it won't be going for the next couple of years.

Yeah. So thank you. This is Laura let me just first take the ship from store on and then I'm gonna possible Felix to answer them.

What we're seeing or not seeing with of correlations and so in terms of ship from store.

Kipp from stores right, because it leverages inventory that would otherwise be trapped and stores and helps us better fulfill customer's demand.

And we're getting better and better at it and driving it and marketing it correctly and putting on filters to our site. They can sort for you know things.

And if it's on an area of the gone up a ton more of this year.

But there's still a lot more room for for us to do more with that and in particular with buy online pick up and store.

So we've been pushing that as well not just because of COVID-19, but because it's another great way to service the customer who wants to get and in and out quickly. So youre going to see is continuing and market them better and have better site experiences and put more power behind infrastructure when it passes.

And what we're seeing with vaccination and phase opening at all.

That was true thanks.

Thanks for the question of we have.

What we've seen and our data is that demand for furniture is still very strong and states.

Their vaccination rates are high so there is no correlation between changes in state level of that vaccination rates and our our data and our growth and our furniture business.

So.

What we're seeing is it's really not a zero sum game here you know what.

More people get vaccinated.

Travel starts to open up.

At school start to open up and we have a substantial gear business of luggage business.

And as of action vaccination rates increase we expect people to open up their homes more so our dining and entertainment business for us are primed for that so early indications are no correlation in fact I'm you know, it's a negative correlation and that's what we're seeing we're seeing strong rates.

Across the board regardless of vaccination rates.

Okay.

And our next question will come from Jonathan Mounsey Whiskey with Jefferies.

Hey, guys great quarter. Thanks for taking my questions. My first one was just.

On the Williams Sonoma concept of another remarkable quarter, there I'm curious, what you're seeing as far as a repeat of spending trends now that we're beginning to anniversary. Some of these cook and eat at home are true.

Trends from last year any color there at all.

For us kind of new and repeat customers would be helpful.

Helpful and that was my first question.

Sure first of all of them I'll say that.

Yes Williams Sonoma.

Made a lot of changes to that strategy and it's paying off from the exclusive to shifting from what was predominantly of store business to an online business and really driving content again at which we're thrilled to continue to do.

In terms of the Williams similar categories that are working we are seeing great strength across the board, particularly in the areas, where most of the dominant and cookware, Colorado electrics.

In terms of customer metrics, we have very favorable customer and customer metrics and it's interesting we have very high orders per customer versus last year of repeat customers and we you know when you compare for someone like a way fair and.

You see that we have.

<unk> hundred dollars and all of those categories, particularly higher dollars per order.

Extremely productive online advertising and online profitability as Julie mentioned earlier sales did I Miss anything there or do you want to add anything to that.

No I mean, just to reiterate we haven't we've seen our repeat rates be very strong and.

And as Laura mentioned all of those new customers we acquired.

During shelter in place are returning at record rates and actually shopping across our portfolios at record rates.

No.

We think our share of wallet within these new customers will continue to grow and as we introduce them to not just the best of Williams Sonoma, but what are other brands have to offer and.

And leveraging our loyalty program to encourage them to shop across our portfolio.

Great. That's Super helpful. And then just a quick one on squeeze and design crew I think you mentioned around half of our in store revenues and I think you mentioned you know that.

Customers are spending around two times as much. So just curious you know you've had a lot of success integrating kind of outward with with room planner and all of that you.

You know how are you thinking about maybe capital for potentially other tech related M&A options going forward.

Any color there.

For your thoughts would be helpful. Thanks.

I thought you can ask a different question and I was ready for the other one which is I wanted to tell you that one of the most of amazing things that happened during the shutdown.

Is that the people, who worked and store who couldn't work did virtual design shop.

And they have done such a phenomenal job that's a whole new channel for US now. So we have the online design services, where you don't need to do anything but use our tools and fast you can power yourself for three D tour tool, which nobody has done that before other people, allowing them to pay and have their design of send you back three day models you can actually.

Go on yourself as a customer at and do it or you can call a store and go into a store or you can do at virtually.

And so yes, we are continuing to shift capital dramatically from.

Brick and mortar to online services online e-commerce and infrastructure for supply chain and supports at all and that ship is remarkable Julie you want to give a few number of Sam yeah, we used to spend less than 50 per cent basically on E. Commerce spend e-commerce related Spanish and say and now we're spending about 85 per cent or expected to.

This year and we expect on a hold and be higher so our complete ship and capital is going to E. Commerce now and that's one of the examples that we will be spending on as well.

And as it relates to innovation we.

Have a lot of great stuff that we're building in house.

That is as good as anything I've seen and of course, we're always looking at the landscape to see how we can.

Get a jump on anything that we had already planned to do anyway.

Very helpful. Thanks for the color.

Thank you. Our next question will come from Marni Shapiro with retail tracker.

Congratulations guys amazing quarter of amazing years, and and loves the weight of stores look right now at transition spring it's been beautiful.

So Laura and Julie I guess kind of a bigger picture question here to start.

The home space has become.

Very popular and I'm getting a little bit more crowded on line. So you outlined some of your key Differentiators Wood wood.

That's.

Also fit into like what are your Differentiators online what are your advantages that you have on E. Commerce that differentiates you and separates you from the pack as it gets more crowded.

Great question Martin and thank you. So you know on line, we really bring not just of single product to life, but of lifestyle.

And so we have spent a long time and other pets at the product information page is the money shop and everything that is on that page for helping make that decision whether its three D.

Or you know UGC, which we've really amped up online and then different guided shopping path, if you're interested in something and we're seeing that.

Really help us add on to and order. If you went on to look for one thing to be able to show you and have you at something else and.

And you know inspire you to buy things you didn't think you were looking for.

And you know for our competition, there's a lot of people selling many things, but sometimes it's about really helping the customer and make a decision and if they trust you with your quality of your sustainability and your value equation the conversion of tire.

So we know that the work that we've done to build the brands.

And through our stores and at a lot of cases and through our catalogs.

Is now coming to fruition.

And so we continue to make the investments and the things that make it easier for the customers to make a decision whether that watches color accuracy.

<unk> modeling and rooms, and immersive experiences and just simply realize photography showing people how other customers that use something really makes a different I'd say deals and that's really different about us is that with all of these different brands run by separate people of such a wealth of ideas and innovation.

And we can try something and one brand and then.

Not the best of farm and <unk>.

Pushed across multiple brands once we know it works and yeah. This team is very innovative and looking at E. B testing and always trying something new and that's been a big part of our success with our teen Tech partners.

So it actually makes more sense of just ask a quick follow up to at also.

And I guess at it.

It's a two part follow up even the trends that you're seeing that emerged during COVID-19 and which ones do you think will be sticky is post pandemic and also it sounds like in spite of the enormous growth online and all your work on line. It sounds like in every turn you're still talking about the stores and it sounds like that's still an important part of the store.

Sorry is that is that how youre thinking about at go forward.

So let's talk about the trends that we see when you when you when you think about it and at first of all we're so excited that the vaccine is underway and we're still hopeful for reopening of the economy. Once we reach for the annuity.

Home has always been your biggest investment.

On values have gone up over time, historically for Americans, they invest and at home they know that they usually get it back and.

And this year, it's the centerpiece of every everything you were there too much and you learn a lot of new things and a lot of millennials and younger people learned to Cook and once you Linda Cook you never go back you May go out for dinner, but youre going to cook, better and you're always going to be interested in and the cook and trend and that is key for the future of on.

And in Sonoma, and I would say secondly, entertaining and.

We haven't been able to entertain right and Easter and some people might actually be able to get together for Easter.

July 4th and imagine holidays, we are busy dreaming of the most inspiring Christmas party.

You know Hanukkah party.

New year's party that we can host at our homes and how we make that at our for our customers and we cannot wait to serve our customers also outdoor.

Outdoor.

We all got fresh air and nobody got nobody even half of cold or the flu.

I think you're gonna stay outdoors, a lot more than you did before we are seeing I mentioned, the strength and west Elm and outdoor well by the way it's equally as good at pottery barn, and Williams Sonoma home and if you haven't seen the new Williams Sonoma home catalog.

At the peak at that because of the dominant and display of luxury outdoor debt.

And you'll be extremely inspired by.

The last big trend and I just wanted to talk about was obviously hybrid work work from home.

I don't know about you, but I still haven't really.

<unk> the perfect worked from home station and I still have a desk to buy it and you know it's been so busy you just don't get around to it there's still a lot more room to make those work from home space is better and new home builds are going to include it.

That's a business, we really plan and we have that workspace business and West zone, and we continue to grow at and we have a lot on the horizon and innovation for work from home.

There's a lot of lot of opportunity for us money and its just whether its product growth strategies or.

The business of channel strategies.

It takes those growth strategies together and you put it with our three key differentiators and the macro and I'm, telling you where we are we're going to have a great ride here and it's a multiyear right.

Thank you and that does conclude the question and answer session and I'll now turn the conference back over to Laura Alber for any additional or closing remarks.

Well. Thank you all for joining us and I really wish you and your families for the best and we appreciate your interest and look forward to talking to you soon.

And in person.

Well. Thank you that does conclude today's conference. We do thank you for your participation and have an excellent day.

Okay.

[music].

Yeah.

[music].

Welcome to the Williams, Sonoma, Inc, fourth quarter and fiscal year, 2020 earnings conference call at.

At this time all participants are in a listen only mode.

We will conduct a question and answer session. After the presentation. This call is being recorded I would now like to turn the call over to at least Wang Vice President of Investor Relations to discuss non-GAAP financial measures and forward looking statements. Please go ahead.

Thank you. Good afternoon. This call should be considered in conjunction with the press release that we issued earlier today.

Unless indicated otherwise all of them.

Discussion today will relate to results and guidance based on certain non-GAAP measures.

A reconciliation of the non-GAAP financial measures and the most directly comparable GAAP financial measures and <unk>.

Out of the nature of what and non-GAAP financial measures may be useful are discussed and exhibit one of our press release.

This call also contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, which address the financial condition results of operations business initiatives trends and growth plans and prospects of the company and 2021 and beyond and are subject to risks.

And uncertainty that could cause actual results to differ materially from such forward looking statements.

Please refer to the company's current press release and SEC filings.

And the most recent 10-K for more information on these risks and uncertainties.

The company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call.

I will now turn the conference call over to Laura Alber, our President and Chief Executive Officer.

Good afternoon, everyone and thank you all for joining us.

2020, with your challenges and dramatic changes and the way we live.

It was also a year, where we were pushed to adapt and clarify what is important to us.

And I could not be prouder of the accomplishments of the team here at Williams Sonoma their.

And their dedication was a vital part of our ability substantially outperformed the industry and gain market share.

This strong end to the year combined with our outperformance throughout 2020 drove record fiscal year revenue growth substantial operating margin expansion and EPS. It was almost double that of last year.

Today I want to spend a bulk of our time talking about our three key differentiators, which set us apart and have become increasingly relevant and they are.

Our first our in house design second.

Second our digital first channel strategy and third our values.

Let's start with our in house design capability.

Our in house teams this on our own products create original aesthetics and work with our talented vendors to bring quality sustainable products to market.

Given that the bulk of our products cannot be found elsewhere and the design quality value question is so strong we have pricing power at the others do not.

Throughout this year, we have been very deliberate and reducing promotions and all of our brands is the very significant material change to our model. We have tested into this change and replacing site wide promotions with inspiring content and the effectiveness of this change is clear on our results including consecutive quarters of product margin expansion.

Compared to last year.

And pottery barn, and the multiyear work to improve our value proposition is paying off.

We are increasing brand relevance of aesthetically with a successful launch of our proprietary rustic modern furniture collections and our famous casual lifestyle point of view on.

Our value engineered products are attracting new customers, we have introduced significantly more opening price points and our multi step finished high quality furniture pieces are the best value and the market.

We will continue to develop assortments and proven adjacent categories to drive incremental growth.

One example of this is bath renovation.

The Bath renovation market is $80 billion or 20% of the U S home improvement market.

Through in house product development, and our new marketplace model, our Bath renovation business is growing at a rate of nearly 30% per year and is projected to contribute an incremental $100 million over the next three years.

And pottery barn kids and teen with amplified our leadership and design and sustainability and the children's home furnishings business.

We are proud to say that 100% of our wooden furniture offering is now greenguard gold certified aligns with our promise of products that are good for kids and good for the planet.

In addition of strong core introductions of furniture, we have added a new modern aesthetic that is growing at over 50% and.

Attracting new customers to our brands.

Another example of growth is our baby business, our baby business of 23% growth last year, and we are actively targeting the $2 billion plus baby registry market.

Historically small business for the brand and.

And the holiday season, we sold out with many of the products within the first couple of weeks of launch.

And which built a strong foundation for further incremental volume in the years to come.

Another category, we are aggressively going after is outdoor.

Currently west Elm outdoor business is less than half the size of pottery barn, and doubling this business would drive an incremental 6% growth for the West Zone brand.

Now I'd like to talk about Williams Sonoma.

This year and Mark the dramatic change in strategy for the brands.

We implemented a content driven marketing strategy that featured exclusive products and relevant lifestyle stores instead of promotions and we also grew our exclusive products to 70% of our total business.

And this has been one of our key strategic key.

Key strategic initiatives to increase the mix of product only available at Williams, Sonoma, which has grown from 50% to 70% and the last five years.

Looking ahead, we will be even more aggressive and growing our exclusive product, which we expect to reach over 80% of our total business by the end of FY 'twenty one.

We also see significant opportunities and categories that are underdeveloped, including the high end luxury furniture market.

Our Williams Sonoma home brand is significantly underrepresented and this market and represents a substantial opportunity to drive growth and gain market share for the Williams Sonoma brand.

In addition to growth and our brands, we also of growth and new customer segments, such as business to business and the global home category.

We are building, our <unk> business to business teen and we are accelerating and sales volume across multiple industry verticals.

Last year, we drove over $350 million of revenues and we expect this business of surpassed $500 million this year.

And our global business our strategy for growth is through the capital light franchise model we.

And we plan to double our revenues globally and the next five years led by the continued expansion of West zone growth on our franchise operations as well as in our Canada E Commerce business.

Our second differentiator is our digital first channel strategy.

One of the key reasons, we outperformed for us because our E. Commerce platform was able to serve our customers at scale, we are uniquely positioned to take market share as the home industry shifts online.

We are already of the number one non pure play e-commerce retailer and home furnishings, and the top 25 e-commerce retailer and the U S across all industries and today, our business is over 70% E Commerce.

We are digital first but not digital only our stores are competitive advantage that support our online business for customers, who want to experience our products in person as well as for those who prefer the convenience of our omni channel services.

And the past quarter, we increased our total buy online pickup and store and ship from store sales by over 130% as we leveraged our retail network as fulfillment hubs.

This is a huge unlock for our distribution operations and it is one of the reasons, we were able to fulfill higher than expected volumes. This holiday season, despite grid lock issues that impacted the industry.

As we look ahead of our future growth will be driven predominantly by e-commerce.

One of the key advantages of having built our tech platform and house is that we are able to implement and test new initiatives quickly and adjust based on customer feedback.

We already on several initiatives planned to further enhance customer engagement and conversion online.

And you'll also see our <unk> visualization capability come to life as we introduced new functionalities towards design crew room planner, including immersive multi product and our room layouts and 360 degree of experiences.

These enhancements are important because of this tool and drive sales.

We saw a significant increase and the usage of this tool fire of design associates and customers. This year with total plans created of 55% compared to last year.

And also those who utilize this tool currently generate twice as many sales as non users.

And our.

Fly chain, we are aggressively expanding our U S manufacturing and fulfillment capability by over 20% to 30% next year, including adding close to 2 million square feet of distribution space to our delivery network.

This will support our elevated demand, particularly in furniture.

To help mitigate industry wide shipping constraints and higher costs, we will test and extend our in home delivery to include small packages and addition to leveraging our omni channel network.

Being digital first also enables us to explore new offerings and business models such as marketplace.

Our marketplace assortment is of the same superior quality of the rest of our products often exclusive and source from our trusted socially responsible vendor base.

Marketplace also leverages, our website reach and is capital light.

This year marketplace was just over 4% of our total business and.

And we are planning to almost triple its size and the next five years.

Our third differentiator is our values.

We care deeply about sustainability equity action and supporting our associates and the communities where we work.

Our commitment to sustainability is one of the main reasons, our customers choose us over our accounts competitors for.

For example, a recent survey found that our pottery barn customers are three times more likely to have been of top environmentally focused households.

And as a direct correlation between the good work, we are doing and the world and our increasing relevance with our customers and.

As we look for the future, we will deepen our sustainability commitments further on.

Pottery barn brand kicked off for new year with a commitment for plant 3 million trees, and three years, where we will plan to tree for every piece of indoor wooden furniture, we sell.

Companywide, we will meet our 100% responsibly sourced cotton and 50% responsibly sourced what goals and grow our selection of sustainably made products.

And most exciting is our upcoming announcement of an ambitious public goal for carbon reduction across our operations and throughout our entire supply chain.

Diversity equity inclusion is also central to who we are as a company.

We continue to lead and gender equity and we're proud of included and Bloomberg's gender equality index. This year for our gender equity achievements across talent K culture and workplace policies.

We also lead and LGBTQ equity and continue to score of 90% or higher and the human rights campaign's corporate equality index.

And in order to improve ratio equity, we've established our equity action plan and although there is still a lot more to do we have made measurable progress.

And we have committed our ongoing support to over 25 national and local nonprofit organizations. The advocate for ratio of Justice and equity and have increased our black African American and representation through hiring partnerships and collaborations.

And of course, we cannot overemphasize the value of our associates.

Our people are at the heart of our business.

To help protect the safety of our associates and our communities. We continue to provide personal protective gear and COVID-19 testing to our store and supply chain associates.

And through our Williams Sonoma, Inc. Foundation, we have given the financial assistance to over 850 associates experiencing COVID-19 hardship this year.

In addition to these COVID-19 related benefits, we also enhanced our parental leave policy to provide more paid time off for primary both primary and secondary caregivers.

The positive impact of all of these initiatives was evident and our team's unwavering dedication throughout the year, including the best holiday execution, we have ever had.

We will continue to follow through on our equity action plan commitments to advance ratio equity both inside our company and and the communities we serve.

We have set aggressive goals to further diversify our workforce vendor partners and collaborators and we are committed to providing transparency on our progress.

In summary, our business excelled and 2020, despite the extremely difficult operating environment.

We believe this reflects the power of our three key Differentiators, which we will continue to invest and to drive growth and gain market share.

Looking ahead to 2021 and beyond we are very optimistic about our runway for growth and profitability.

But before I give our financial outlook, let me provide some insight into what we're currently seeing and our business.

All of our brands are starting the year strong.

We're seeing higher than expected e-commerce traffic and sales and continuing recovery and our retail comps.

Our <unk> business sales trends also continue to accelerate week after week growth and our global business is also building momentum driven by strong demand from our franchise partners and our E Commerce business in Canada.

In addition, our merchandize margins continue to expand as we have substantially reduced promotions.

For our customers, but our in stock recovery is now most likely push to Q3 and.

And while this is a challenge. It is also one related to a very strong demand.

We expect this strong demand to continue through 2021 and beyond based on a number of factors.

First is the ongoing strength of our growth initiatives and our three key differentiators that will continue to set us apart from the competition and allow us to take market share.

It is the recovery and our retail traffic and a replenishment of our inventory levels as we move throughout the year and beyond that will drive additional growth.

And third at is the favorable macro trends that we believe will continue to benefit our business.

This gives us the confidence that we can deliver mid to single high and mid to high single digit revenue growth and operating margin expansion in 2021 law.

Longer term, our three key differentiators.

Our in house designed our digital force channel strategy, and our values will drive profitable market share gains accelerating our path to $10 billion of revenues and 15% operating margins and the next five years.

Julie will speak to this financial outlook and more detail, but before I turn the call over to her.

Want to express my sincere gratitude to our associates, particularly our frontline workers and manufacturing and distribution, who worked tirelessly around the clock through the pandemic.

Thank you Laura and good afternoon, everyone.

Higher than expected online volumes as we grappled with parcel shipping cap and supply chain disruptions. We stayed relentlessly focused on taking care of all of our stakeholders, our associates, our customers and our shareholders and at what this focus that enabled us to report record fourth quarter and fiscal year results today.

E Commerce grew at a comp of 47, 9% and our retail stores continued to improve sequentially ending the quarter with a negative comp of seven 6%.

This outperformed our expectations given the substantial COVID-19 restrictions that were in place throughout the quarter and the overall decline and national store traffic of over 30% of.

All brands drove strong revenue growth and the fourth quarter.

Williams, Sonoma and delivered a 26, 2% comp pottery barn accelerated to a comp of 25, 7% west.

Westbound accelerated to a 25, 2% cash on top of last year's 13, 9% top and pottery barn kids and teen accelerates for a comp of 25, 7%.

And in our emerging brands rejuvenation, and Mark and Graham combined we delivered another quarter of over 20% growth.

Moving down the income statement gross margin expanded 450 basis points to 42, 1% and the fourth quarter driven by another quarter of substantially higher merchandise margin and occupancy leverage.

For merchandise margins resulted from significantly reduced promotional activity as we replaced five wide promotions with relevant content across all of our brands.

Occupancy leveraged 190 basis points and the quarter, resulting from higher sales and relatively flat year over year occupancy dollars at approximately $181 million.

Our efforts to renegotiate rent and to close less profitable stores have enabled us to minimize our occupancy dollar growth and to deliver this occupancy leverage while.

While we did incur higher shipping costs year over year from a higher mix of E Commerce sales and peak shipping surcharges from our third party shippers. We are pleased to see our selling margins, which include these higher shipping costs sequentially improve again this quarter, expanding 260 basis points year over year and of 110 basis points from the third quarter.

SG&A dollars grew 15, 5% compared to last year, primarily driven by higher employment costs from increased incentive compensation, given our fiscal year outperformance higher hourly variable pay, particularly and our supply chain as our teams worked for fulfill higher than expected volume during the quarter.

And incremental pandemic related costs, such as bonuses for our frontline workers work from home stipend for our corporate associates and increased levels of PPE and cleaning is across our facilities.

As a result, we delivered another quarter of record profitability with operating income growth of 92% to $410 million and operating margin expansion of 630 basis points to 17, 9%.

This resulted in diluted earnings per share of $3 95 for.

For 85% higher than that of 2019 at $2 13.

These fourth quarter results combined with the outperformance we have seen throughout 2020 allowed us to deliver record financial performance on a year.

Some of our fiscal year 2020 highlights include net revenues at all time highs in 2020 at nearly $6 $8 billion, including comparable brand revenue growth of 17%.

Our E Commerce business grew at a comp of 44, 5%. This year, taking our e-commerce mix to over 70% or $4 8 billion of our total revenues.

And in retail we delivered a negative 22, 5% comp despite substantial COVID-19 disruptions with our stores closed for severely limited throughout the year and on overall national decline and store traffic of about 45%.

In addition, our stores this year and played an integral role of supporting our online growth through virtual design and omni fulfillment services.

Yes.

Williams Sonoma accelerated to 23, 8% comp driven by e-commerce comps well above 70%.

West Elm, our largest growth initiatives delivered their 11th consecutive year of double digit revenue growth and another year of double digit comps at 15, 2% on top of last year's 14, 4% comp.

Our emerging brands rejuvenation, and Mark and Graham combined delivered another year of double digit growth.

And our cross brand loyalty program for key we enrolled nearly 4 million customers, bringing our total membership to almost 12 million members for 23% over 2019.

And our complementary design through services accounted for almost 50% of our fiscal year 'twenty and store revenue.

This top line performance, along with our strong financial discipline, all year enabled us to generate operating income of over $960 million, which was over 90% higher than 2019.

This resulted in record operating margin expansion of 560 basis points to 14, 2% and EPS of $9 for SaaS, almost double that of 2019 and.

Additionally, at this level of earnings growth allowed us to substantially increase our return on invested capital from 22, 4% to 38, 1% with all brands substantially improving and significantly outperforming our peer set medium.

On the balance sheet, and we ended the year with a cash balance of over $1 2 billion compared to $432 million and 2019.

Which reflects our strong financial performance and operating cash flow of almost $1 3 billion, which was more than double last year.

In addition to our strong cash balance. We also ended the year with no amount outstanding on our line of credit and.

This strong liquidity position allowed us to fund for the operations of the business, including nearly $170 million and capital expenditures, primarily and technology and supply chain to support our e-commerce growth and to provide shareholder returns of over $300 million through dividends and share repurchases.

While many companies suspended their dividends in 2020, we continued to pay dividends to our shareholders all year, including increasing our dividend payout by 10% this past quarter for annual dividend payout to shareholders of $158 million.

We also after initially suspending share repurchases repurchase shares at the same level of 2019 for approximately $150 million and the back half of 2020.

Moving down the balance sheet merchandise inventories were $1 6 million for a decrease of eight 6% year over year, which was at 200 basis point improvement from the third quarter.

While we are pleased to see a sequential improvement and our inventory position and compared to last quarter and the gradual narrowing of the GAAP between demand and net costs. This quarter. We are continuing to work through our high end back order levels with our vendor partners and expect to be back and stock to more normalized levels and the back half of 2021.

Now, let me turn to our expectations for the year ahead and beyond given.

Given the ongoing strength of our business as we enter 2021, the expected recovery and our retail business and inventory levels as we move throughout the year as well as the macro trends and will continue to benefit our business, we expect 2021 and to be in line with our previously provided long term financial outlook of mid to high single digit revenue.

And our 5% to 9% and year over year operating margin expansion.

As far as our capital allocation and 2021, we plan to first invest in the business and then return excess cash to our shareholders. We expect to invest approximately $200 million at $250 million of business with over 85% of of capital spend and prioritize on technology and supply chain initiatives that primarily support our e-commerce growth.

Out of our operations.

As the consumer and our business continued to shift more online and so have our levels of e-commerce related capital spend over.

Over the last five years alone we have shifted from less than 50% e-commerce related spend to now over 85% of our estimated spend in 2021 and we expect this shift of hold at these levels going forward.

We also plan to return excess cash to our shareholders and the form of increased quarterly dividend payouts and increased levels of share repurchases.

Following the <unk> 10 per cent quarterly dividend increase that went into effect last quarter, we announced earlier today, another double digit increase and our quarterly dividend of 11, 3% or <unk> to <unk> 59 per share.

All of these decisions reflect our confidence and the long term growth and profitability outlook of our company and our unwavering commitment to maximizing returns for our shareholders.

We estimate the pottery barn will expand to almost $3 5 billion and revenues westbound will grow double digits almost doubling in five to over $3 billion.

Williams Sonoma will reach almost $1 6 billion and revenues and are part of our kids and teen business will grow to $1 4 billion.

This and cash anticipated top line growth and addition to strong growth and our core business will be fueled by accelerated double digit growth across a number of our key initiatives, including our <unk> business and expanding to $1 billion and revenues our marketplace business growing at almost three times the size of per day over $700 million.

Our emerging brands expanding to a combined revenue of over 600 million and.

And our global operations more than doubling in $5 million to $700 million.

From a profitability perspective further operating margin expansion and should predominantly be driven by overall sales leverage from higher sales levels and a continued shift to a more efficient and profitable e-commerce business.

Reduced occupancy costs for the renegotiation of our lease agreements and the expected closure of approximately 25% of our retail fleet as our leases come up for renewal and continued strength and our product margins from and ongoing focus on more content led marketing and more value engineered high quality and sustainable products as well as overall store.

Wrong financial discipline, maintaining expense growth below sales growth.

As we look into next year and beyond we are optimistic about our business.

And given the favorable long term macro trends, including a strong housing market and disruption of brick and mortar and an accelerating shift E. Commerce. The expected continuation of working from home and some capacity post pandemic and the increasing importance of sustainability and being a values driven company combined with our key differentiators are growth initiatives.

And our double digit growth and new customer accounts and loyalty members and our strong operating cash flow and liquidity and a proven track record of strong financial discipline. We believe we are uniquely positioned to drive long term growth and profitability, resulting in market share gains and strong financial returns for our shareholders I would now like to open.

The call for questions. Thank you.

Thank you.

And I would like to signal with questions. Please press star one on your Touchtone telephone.

Joined today use a speaker phone please make sure new functions just turned off to allow your signal to reach our equipment.

Please ask one question at a time at.

And Thats Star one if you would like to ask questions to store what.

And our first question today will come from Adrienne <unk> with Barclays.

Good afternoon.

Gratulation I mean at it really is a nice topping to what was a difficult year, but you made it through extraordinarily well.

And Laura So my first question is for you on.

It looks like the brands are all hitting sort of at this.

You know accelerated sweet spot of growth here and the U S.

Can you talk a little bit about the foreign businesses.

You know you you haven't yet stepped into Europe, and so we're seeing some players in this space, obviously launch into Europe kind of at their next phase of kind of Tam growth.

So can you talk about that first and foremost.

And then Julie really interesting on the occupancy line and that is it's pretty incredible.

Credible that your sales grew 24% of your occupancy at flat. So I really wanted to understand what the occupancy line trajectory looks like for 2020. One should we assume it's kind of flattish as we go through Q1, and then into the full year and then on the flip side of that on the merch margins are you at historically low levels of clearance.

And have you permanently change the nature of the business such that we won't go we won't go back and we won't mean revert back to historical levels of promo. Thank you so much and congrats again.

Thank you.

In terms of global.

And we recognized as we traveled the world that no. One else is doing what we're doing and we've had great success and really bringing e-commerce and some of these markets, particularly of the franchise partners, who are very well established but didn't have.

A big e-commerce business and so on.

We have and we partnered with great people and the Middle East.

<unk> done and we're off to a great start there and that's just one example of.

And the great stores that we're building together and the business will build and together with our franchise partners around the world.

Still of lot of growth there.

West Elm is one hasnt been as established and these franchise markets and then also E. Commerce continues to be a higher percent of sales.

In these and these are global markets.

We announced last year that we'd be going into India.

We are still on track to do that it's a little bit delayed, but it's a big market.

On our forecast is that it's one of the most sizable for us and we're very excited about that partnership we want to do it really well and so we put on China and we don't have plans to enter China at this point. Similarly, we are in.

We're in London with West Elm, we have some things.

And.

Some of the Department stores. There. We also have of kids website, but we don't have further plans to expand other than and e-commerce.

It's just there's a lot more easy places to go right now than Europe with long leases and also just the difficulty of doing business. There. So we're not we're not doing a big push right now in Europe.

Okay fair enough for Julien.

So regarding occupancy and your question there. So I think first of all if you look back you'll see that we have and holding occupancy dollar growth down for a while now and we do expect that to continue the important thing to remember is there is many things that go into occupancy like depreciation from from capital investments also our distribution center rent, so there'll be ups and downs.

But the reality is as I said in my prepared remarks, and for clotting closing, apparently about 25% of our fleet of at least.

That will lower our occupancy dollars and then potentially be offset by these other things that I just mentioned, but then you combine that with the higher sales volume higher E Commerce volume and all of that Leverages that line. So I do expect both to have more muted dollar growth, but also the higher sales will drive that leverage going forward for the foreseeable.

Future.

And as far as merchandise margins.

A decision to really pull off of Sitewide promos and go after content led relevant marketing. So instead of just doing of blank and E Mail, where you gave at 20% off we're getting more and more fine tuned about what we serve up to you to give you what you want and if you watch it we can only get it from us and that combined with the fact that we are value.

Engineering, the product to get at the right price and the right quality and the right sustainability levels and we will never compromise on that it puts it at a situation where if you wanted to you got to buy it and it's a great products for people are buying it and so that is we are going after that aggressively and that's why we're so confident and merchandize margins continuing to expand going forward.

Great very helpful Best of luck.

Thank you thank you and.

Our next question will come from Steven Forbes with Guggenheim Securities.

Hey, good Steven Forbes. Your line is open go ahead. Please.

Sorry about that good evening.

For a follow up on the selling margin of our merchandize margin commentary you provided.

During the call right I think you said selling margins expanded 60 basis points during the fourth quarter per can.

Can you remind us what that number was for the year and then as we think about the path to a 15% EBIT margin.

And Terry on the.

After selling margin profile on the business.

As you think about potentially cycling something some of these transitory headwinds whether it be clearance and you just mentioned or.

On promotional activity do you see anything as it relates to the cadence and the selling margin.

I mean selling margins all year on have been accelerating from and improvement standpoint, and from an expansion standpoint.

So again, we expect that to continue going forward I don't have handy right now the exact amount on a year, but if you look back you can see by quarter that they've continued to expand on and this quarter and particular with the largest expansion.

As far as puts and takes us of what could drive of selling margins I mean, we've always bad debt. The shipping costs are a part of selling margins and so that obviously has become something that we've been focused on more recently, especially as our mix shift to e-commerce and more furniture, we have and there has been higher rates that have come through with our third party shippers, but I think the combination of the fact that.

We can drive these merch margin expansion throughout.

And then you've layered with occupancy on top of it is what it's been able to give us. This incredible of gross margin expansion for the entire year and so that is why we're confident going forward that will continue. We obviously also of working specifically on shipping costs and trying to minimize those increases as much as possible to help with of selling margins going forward. In addition to the merch margins.

And whether that's using more of our omni fulfillment at our stores, which has been a huge win for US obviously during this time and it's a differentiator of the fact that we have these stores as hubs around the country.

Two obviously trying to figure out ways to take this larger items and bring it into our own delivery network and lowering some of the cost with our third party shippers now at the same time, we have great relationships with our third party shippers and so we're working with them to come to a great solution, but we are focused not only on offsetting shipping costs, but also lowering them and an absolute best of <unk>.

Keep driving these selling margins to where they are.

Thank you best of luck.

Thank you.

Thank you. Our next question will come from Oliver Winter mental with Evercore.

Yeah. Thanks, guys I had a question regarding labor costs.

You mentioned <unk>.

And we pay in 2020, but then also of bonuses and all of that.

So wanted to see how you plan for 2021 and beyond core.

On labor costs.

Distribution centers and particular in certain areas and so.

So we've got a lot of that on our base. Obviously, there is always pressure and we always look at the hourly wages on a market by market basis, and we want to be competitive our people have been the secret sauce, if you will.

Especially this year and so we are making certain that we're taking care of them from and Audi rate perspective, but since we've made these moves and the past.

It's not as much of a headwind for us as it might be for others on the flip side I think you mentioned COVID-19 costs. We obviously expect that there will be reduced or eliminated COVID-19 costs, which is going to help us next year, because those are fairly substantial and.

So you've got some moving parts labor, you've got the <unk> bees hourly wages and <unk>.

Potential a little more pressure on the on the Labor line, you've got the fact that we may have some more advertising spend.

But on the flip side, you've got Covid costs that are coming of ash and so it gives us a lot of confidence combined with our merchandise margin expansion and our occupancy leverage and with higher sales leveraging the entire P&L that we can drive operating margin expansion next year.

Got it thanks, very much and good luck.

Thank you.

Our next question comes from Seth Basham with Wedbush Securities.

Thanks, a lot and good evening.

Congrats on a great quarter and year of my questions around the outlook very impressive in terms of the margin outlook, particularly for 2021, just perhaps you can provide a little bit more color on the complexion of on the large expansion and you're expecting in 2021, how much of it will be in <unk>.

Gross margin and what you did and Destiny and you expect those of those to provide.

Expansion to your operating margins.

Yes. This is Julian answer that question. So we expect expansion on both at the.

Obviously going to depend by quarter on and we're not giving quarterly line item guidance, but at the end of the day and we're very confident on merchandise margin expansion, we're very confident and our occupancy leverage and as I just mentioned on on the lapse.

And question that we have.

The benefit of.

Some of these COVID-19 costs that are going to be flipping out.

And yes, we will have some increased cost, but we will be able to more than cover that on as result of the higher COVID-19.

Covid costs that'll be coming out to cover it and so that combined with higher sales will allow us to leverage and.

Any of those costs and are coming through and drive operating margin expansion on the bottom line and remember a lot of the sales that we're driving now with an expectation of 70 per cent of hire are going to be commerce and E. Commerce. We have historically been one of the most profitable e-commerce companies out there and so as we shift more and more of than E. Commerce that completely leverages. The P&L. So that's our expectation.

Understood and just a follow up and if youre going to expand on your operating margins seemingly.

And seemingly materially in 2021 and your goal is 15% and 2025. It seems like you don't have that much more expansion plan for 2020 to 25 is that just conservatism at this point and time.

I'd say, there's some conservatism, but also we want to make sure that our value proposition space really compelling and at our services the best in the industry and.

And so we're it's.

It's a bit of conservatism and it's also making sure we have the money set aside to invest back into the business to stay on top.

Understood Congrats and best of luck.

Thank you.

And our next question comes from Cristina Fernandez with Telsey Advisory group.

Hi, and congratulations also on a good quarter.

Two questions one when you look at your demand trends.

For our base or are you seeing any notable differences and markets that where restrictions have been lifted or have hired vaccination rates versus stores.

And so that's one and then my second question is on fulfillment.

So for <unk> I wanted to see if you could talk more about the ship from store and how you can now will get further and help them.

Perhaps more some of your of.

Order of cost to fulfill the orders and how do you see at it won't be going for the next couple of years.

Yes. So thank you. This is Laura let me just first take the ship from store and then I'm going to pass on the Felix to answer.

And what we're seeing or not seeing with of correlations. So in terms of ship from store.

Ship from store is great because it leverages inventory that would otherwise be trapped and stores and helps us better fulfill customer's demand.

And we are getting better and better at it and driving it and marketing it correctly and putting on filters to our site they can sort for things and.

And it's an area that has gone up a ton more of this year.

But there's still a lot more room for for us to do more with that and in particular with buy online pick up and store.

So we've been pushing that as well not just because of COVID-19, but because it's another great way to service the customer who wants to get in and out quickly. So youre going to see us continue to market them better and have better site experiences and put more power behind the infrastructure for the passage of feeling.

And what we're seeing with vaccination phase opening at all.

Sure. Thanks.

Thanks for the question we have.

What we've seen and our data is that demand for furniture is still very strong in states.

And our vaccination rates are high and so there's no correlation between changes in state level of that vaccination rates and.

And our.

Our data and our growth and our furniture business. So.

What we're seeing is it's really not a zero sum game here.

More people get vaccinated.

Yes.

Travel starts to open up.

At school start to open up and we have a substantial gear business of luggage business and as of action vaccination rates increase we expect people to open up their homes more so our dining and entertainment business.

And are primed for that so early indications are no correlation in fact, it's at.

And negative correlation and that's what we're seeing we're seeing strong rates across the board regardless of vaccination rates.

And our next question will come from Jonathan <unk> with Jefferies.

Hey, guys great quarter. Thanks for taking my questions. My first one was just.

On the Williams Sonoma concept of another remarkable quarter, there curious what youre seeing as far as repeat spending trends now that we're beginning to anniversary some of these cook and eat at home.

Friends from last year any color there.

For us kind of new and repeat customers would be held.

Helpful and that was my first question.

Sure first of all say that.

Williams Sonoma.

Made a lot of changes to that strategy and it's paying off from exclusive to shifting from what was predominantly of store business to an online business and.

And I'm really driving content again, which we're thrilled to continue to do.

In terms of the Williams Sonoma categories that are working we are seeing great strength across the board.

The areas, we're most dominant cookware cutlery electrics.

In terms of customer metrics, we have very favorable customer customer metrics and.

It's interesting we have very high orders per customer versus last year of repeat customers and when you compare it to someone like a way fair and.

You see that we have.

Higher dollars and all of those categories, particularly higher dollars per order.

Of extremely productive online advertising and online profitability as Julie mentioned earlier still looks good.

And if anything there or do you want to add anything to that.

No I mean, just to reiterate we haven't we've seen our repeat rates be very strong.

And as Laura mentioned all of those new customers we acquired.

During shelter in place are returning at record rates and actually shopping across our portfolios at record rates.

So.

We think our share of wallet within these new customers will continue to grow and as we introduce them to not just the best of Williams Sonoma, but what are other brands have to offer.

And leveraging our loyalty program to encourage them to shop across our portfolio.

Great. That's Super helpful. And then just a quick one on squeeze in.

Design crew I think you mentioned around half of our in store revenues and I think you mentioned.

Customers are spending around two times as much so just curious.

<unk> had a lot of success integrating kind of outward with room planner and all of that.

How are you thinking about maybe capital for potentially other tech related M&A options going forward.

Any color there with your thoughts would be helpful. Thanks.

I thought youre going to ask a different question and I was ready for the other one which is of the I wanted to tell you that one of the most of amazing things that happened during the shutdown is that the people who worked and store who couldn't work did virtual design shop.

And they have done such a phenomenal job, it's a whole new channel for us now.

We have the online design services, where you don't need to do anything but use our tools and fact, you can power yourself for three detour tool, which nobody has done that before other people, allowing them to pay and have their design of send you back three day models you can actually go on yourself as a customer at and do it or you can call of store go into a store.

Or you can do at virtually.

And so yes, we are continuing to shift capital dramatically for.

Brick and mortar to online services online e-commerce and infrastructure for supply chain and supports at all.

And that shift is remarkable Julie you want to give a few number of staff, we used to spend less and 50% basically on E. Commerce spend e-commerce related Spanish and say and now we're spending about 85% are expected to this year and we expect on a hold and be higher so on a complete shift and capital is going to e-commerce out and Thats one of the examples that we have.

Spending on as well.

And as it relates to innovation we.

Have a lot of great stuff that we're building in house.

That is as good as anything I've seen and of course, we're always looking at the landscape to see how we can get.

And <unk> jump on anything that we had already planned to do anyway.

Very helpful.

Helpful. Thanks for the color.

Thank you. Our next question comes from Marni Shapiro with retail tracker.

Congratulations guys amazing quarter of amazing years, and and loves the weighted stores look right now at transition spring has been beautiful.

So Laura and Julie I guess kind of a bigger picture question here to start.

The home space has become.

Very popular and I'm getting a little bit more crowded on line. So you outlined some of your key Differentiators Wood wood.

That's.

Also fit into like what are your Differentiators on line with your advantages that you have on E. Commerce that differentiates you and separates you from the pack as it gets more crowded.

Great question, Martin and thank you so online and we really bring not just of single product to life for the lifestyle.

And so we have spent a long time and other pets at the product information page is the month of shop and everything that is on that page at the help you make that decision and whether it's <unk>.

For UGC, which we've really amped up online and then different guided shopping patterns, if you're interested in something and we're seeing that.

Really help us add on to and order. If you went on to look for one thing to be able to show you and have you at something else at.

And you know and.

Inspire you to buy things you didn't think you were looking for.

And you know versus our competition.

Tissue and Theres, a lot of people selling many things, but sometimes it's about really helping the customer make a decision and.

And if they trust you.

With your quality and your sustainability and your value equation the conversion of tire.

So we know that the work that we've done to build the brands actually through our stores and at a lot of cases and through our catalogs.

<unk> is now coming to fruition.

And so we continue to make the investments and the things that make it easier for the customers to make a decision whether that watches color accuracy.

<unk> modeling and rooms, immersive experiences and just simply realized photography showing people how other customers of use something really makes a difference I'd say deals and that's really different about us is that with all of these different brands run by separate people of such a wealth of ideas and innovation.

And we can try something one brand and then.

Not at the farm and <unk>.

And across multiple brands once we know it works and <unk> team is very innovative and looking at AB testing and always trying something new and that's been a big part of our success with our key Tech partners.

That actually makes a lot of sense can I just ask a quick follow up to at also.

I guess at it.

It's a two part follow up even the trends that youre seeing that emerged during COVID-19 and which ones do you think will be sticky is post pandemic.

And also it sounds like in spite of the enormous growth online and all your work on line. It sounds like in every turn you're still talking about the stores and it sounds like that's still an important part of the story is that is that how youre thinking about at go forward.

So let's talk about the trends that we see when you when you when you think about it and at first of all we are so excited that the vaccine rollout is underway and we're still hopeful for reopening of the economy once we reach and.

The entity.

The home has always been your biggest investment.

On values have gone up over time, historically for Americans, they invest and at home they know that they usually get it back at.

And this year, it's the centerpiece.

And everything you were there too much.

And you learned a lot of new things and a lot of millennials and younger people learned to Cook and once you Linda Cook.

Never go back you May go out to dinner, but youre going to cook, better and Youre always going to be interested and the cook and trend and that is key for the future of Williams Sonoma and I would say secondly, entertaining and we haven't been able to entertain right I mean, Easter and some people might actually be able to get together for Easter.

July 4th and imagine holidays, we are busy dreaming of the most inspiring Christmas party debt.

Hanukkah parties.

New year's party that we can host at our homes and how we make that at our for our customers and we cannot wait to serve our customers also.

George.

We don't get fresh air and nobody nobody even at the cold or the flu.

I think youre going to stay outdoors, a lot more than you did before we are seeing I mentioned and strength in west Elm and outdoor <unk>.

By the way, it's equally as good at pottery barn, and Williams Sonoma home and if you haven't seen the new Williams Sonoma home catalog and take a peek at that because of the dominant display of luxury outdoor debt.

I think it'll be extremely inspired by.

The last big trend I just wanted to talk about was obviously hybrid work work from home.

I don't know about you, but I still haven't really accomplished the perfect worked from home station and they'll have a desk to buy it.

It's been so busy you just don't get around to at Theres still a lot more room to make those work from home space is better and new home builds are going to include it. So that's a business, we really plan and we have that workspace business and west Elm and we continue to grow at and we have a lot on the horizon and innovation for work from home.

A lot of a lot of opportunity for us and it's just.

And whether it's product growth strategies or.

The business of channel strategies at.

It takes those growth strategies together and you put it with our three key differentiators and the macro and I'm, telling you, where we are and we're gonna have a great ride here and it's a multiyear ride.

Thank you and.

And that does conclude the question and answer session and I'll now turn the conference back over to Laura Alber for any additional or closing remarks.

Well. Thank you all for joining us and I really wish you and your families for the best and we appreciate your interest and look forward to talking to you soon hopefully.

Hopefully in person.

Well. Thank you that does conclude today's conference. We do thank you for your participation have and excellent day.

Q4 2020 Williams-Sonoma Inc Earnings Call

Request a DemoDemo

WSM

Williams-Sonoma

Earnings