FORM 8-K. Williams-Sonoma, Inc.

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 15, 2006 Williams-Sonoma, Inc. (Exact name of registrant as specified in its charter) California (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.) 3250 Van Ness Avenue, San Francisco, California (Address of principal executive offices) Registrant s telephone number, including area code (415) N/A (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Item Entry into a Material Definitive Agreement On March 14, 2006, the Compensation Committee of Williams-Sonoma, Inc. (the Company ) approved, subject to ratification by the full Board of Directors, which was received on March 15, 2006, amendments to the Company s 2001 Long-Term Incentive Plan (the Plan ). At that meeting, the Compensation Committee also approved a form of stock-settled stock appreciation right ( SSAR ) award agreement. A copy of the form of SSAR award agreement is attached hereto as Exhibit The amendments that have been made to the Plan include the following: The Plan has been amended to permit the grant of SSARs. The Plan has been amended to clarify that restricted stock units can be granted under the Plan. The Plan has been amended to provide that outside directors may be provided forms of equity other than stock options, such as restricted stock units or SSARs, in addition to or instead of stock options. The Plan has been amended to make clear that awards (other than dividend equivalents) may not be paid out in cash. Also on March 14, 2006, the Compensation Committee approved the following bonus payments pursuant to our 2001 Incentive Bonus Plan (the Bonus Plan ) to certain of our executive officers: Laura J. Alber, President, Pottery Barn - $280,000 Patrick J. Connolly, Executive Vice President, Chief Marketing Officer - $230,000 Sharon L. McCollam, Executive Vice President, Chief Financial Officer - $274,000 Aggregate bonuses paid to our other executive officers totaled $567,000. The bonuses were based upon the achievement of certain earnings per share objectives previously set by the Compensation Committee. For fiscal year 2005, our diluted earnings per share met these earnings objectives. The Compensation Committee also approved participants and performance goals for fiscal year 2006 under the Bonus Plan. Our Chief Executive Officer and our four next most highly compensated executive officers in fiscal year 2006 will participate in the Bonus Plan. For fiscal year 2006, the Compensation Committee established performance goals under the Bonus Plan based upon achievement of certain earnings per share objectives. The maximum bonus payable may not exceed the lower of three times base salary or $3,000,000. The actual bonuses payable for fiscal year 2006 (if any) will vary depending on the extent to which actual performance meets, exceeds or falls short of the goals approved by the Compensation Committee. 2

3 Item Results of Operations and Financial Condition On March 20, 2006, the Company issued a press release announcing the Company s financial results for its fourth quarter and fiscal year ended January 29, A copy of the Company s press release is attached as Exhibit The attached exhibit is provided under Item 2.02 of Form 8-K and is furnished to, but not filed with, the Securities and Exchange Commission. Item Regulation FD Disclosure On March 20, 2006, the Company issued a press release announcing the Company s financial guidance for fiscal year A copy of the Company s press release is attached as Exhibit Also on March 20, 2006, the Company issued a press release announcing that the Board of Directors has authorized the initiation of a quarterly cash dividend and the repurchase of up to 2 million additional shares of the Company s common stock. A copy of the Company s press release is attached as Exhibit The attached exhibits are provided under Item 7.01 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission. Item Financial Statements and Exhibits (c) List of Exhibits: 10.1 Form of Williams-Sonoma, Inc Long-Term Incentive Plan Stock-Settled Stock Appreciation Right Award Agreement 99.1 Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Reports Fourth Quarter and Fiscal Year 2005 Earnings Results 99.2 Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Provides Financial Guidance for Fiscal Year Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Initiates Quarterly Cash Dividend and Authorizes 2 Million Share Stock Repurchase Program 3

4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WILLIAMS-SONOMA, INC. Date: March 20, 2006 By: /s/ SHARON L. MCCOLLAM 4 Sharon L. McCollam Executive Vice President, Chief Financial Officer

5 INDEX TO EXHIBITS Exhibit Number Description 10.1 Form of Williams-Sonoma, Inc Long-Term Incentive Plan Stock-Settled Stock Appreciation Right Award Agreement 99.1 Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Reports Fourth Quarter and Fiscal Year 2005 Earnings Results 99.2 Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Provides Financial Guidance for Fiscal Year Press Release dated March 20, 2006 titled Williams-Sonoma, Inc. Initiates Quarterly Cash Dividend and Authorizes 2 Million Share Stock Repurchase Program 5

6 WILLIAMS SONOMA, INC LONG-TERM INCENTIVE PLAN STOCK SETTLED STOCK APPRECIATION RIGHT AWARD AGREEMENT Exhibit 10.1 Name: Grant Date: Number of SSARs: Social Security No: Per Share Exercise Price: Vesting: 1. Award. Williams-Sonoma, Inc. (the Company ), has awarded you the number of Stock Settled Stock Appreciation Rights ( SSARs ) indicated above. Each SSAR entitles you to purchase one share of Common Stock of the Company, at the per share exercise price set forth above, subject to the terms and conditions set forth in the Company s 2001 Long- Term Incentive Plan (the Plan ) and this Award Agreement. Prior to the distribution of any shares hereunder, this Award represents an unsecured obligation, payable only from the general assets of the Company. 2. Term, Vesting and Exercise of SSAR. The term of this SSAR commences on [X] and ends on [X], provided that you remain continuously employed by the Company or a Subsidiary. In no event may this SSAR be exercised later than [X]. This SSAR shall become vested and exercisable [describe vesting schedule], so as to be 100% vested and exercisable on [X], subject to your continued employment with the Company or a Subsidiary on each vesting date. If your employment with the Company or a Subsidiary terminates, the SSAR may be exercised only as described in paragraph 3 below. While you are alive, the Option may be exercised only by you or your legal representative. To exercise all or part of the SSAR you must deliver a Notice of Exercise, in such form as the Company authorizes. You shall not have any rights as a stockholder with respect to the shares of Common Stock subject to the SSAR until you have exercised the SSAR for such shares. Upon exercise, the number of shares of Stock issued will be net of (i) shares with a Fair Market Value equal to the aggregate exercise price of the exercised shares, and (ii) shares withheld by the Company to satisfy the minimum statutorily required tax withholding obligations. The remaining shares of Stock will be issued to you or, in case of your death, your beneficiary designated in accordance with the procedures specified by the Administrator. If at the time of your death, there is not an effective beneficiary designation on file or you are not survived by your designated beneficiary, the shares will be issued to the legal representative of your estate. 3. Termination and Certain Transactions If you cease to be employed by the Company or a Subsidiary, all then unvested SSARs awarded hereby shall immediately terminate without notice to you and shall be forfeited. In such event, you shall have ninety (90) days following your employment termination (or if less, the original SSAR term) to exercise any vested SSARs, after which date the SSARs shall immediately terminate without notice to you and shall be forfeited. Notwithstanding the foregoing, if you cease to be employed by the Company or its Subsidiaries by reason of your death, or if you die within the thirty (30) day period after you cease to be employed by the Company or its Subsidiaries, any of your vested SSARs hereunder may be exercised by your estate, personal representative or beneficiary who has acquired the SSARs by will or by the laws of descent and distribution, at any time prior to the earlier of the original SSAR term or one hundred eighty (180) days from the date of your death. Additionally, if you cease to be employed by the Company or the Company s Subsidiaries by reason of your Disability, you shall have the right to exercise any SSARs hereunder that were vested on your employment termination date at any time prior to the earlier of the original SSAR term or one hundred eighty (180) days from the date your employment terminates. 6

7 4. Tax Withholding. The Company will withhold from the number of shares of Common Stock otherwise issuable hereunder a number of shares necessary to satisfy the minimum statutorily required tax withholding obligations. Shares will be valued at their Fair Market Value when the taxable event occurs. 5. Nontransferable. You may not sell, assign, pledge, encumber or otherwise transfer any interest in the SSARs. 6. Other Restrictions. The issuance of Common Stock hereunder is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the Common Stock may be listed at the time of issuance. The Company may delay the issuance of shares of Common Stock hereunder to ensure at the time of issuance there is a registration statement for the shares in effect under the Securities Act of Additional Provisions. This Award is subject to the provisions of the Plan. Capitalized terms not defined in this Award are used as defined in the Plan. If the Plan and this Award are inconsistent, the provisions of the Plan will govern. The Plan and this Award represent the entire agreement of you and the Company with respect to this Award and supersedes in their entirety all prior undertakings and agreements of the Company and you with respect to this Award and may not be modified except by means of a written agreement between the Company and you. Interpretations of the Plan and this Award by the Committee are binding on you and the Company. No Employment Agreement. Neither the award to you of the SSAR nor the delivery to you of this Award Agreement or any other document relating to the SSARs will confer on you the right to continued employment with the Company or any Subsidiary. 7

8 Exhibit 99.1 PRESS RELEASE CONTACT: WILLIAMS-SONOMA, INC. Sharon L. McCollam 3250 Van Ness Avenue Executive Vice President, CFO San Francisco, CA (415) FOR IMMEDIATE RELEASE Williams-Sonoma, Inc. Reports Fourth Quarter and Fiscal Year 2005 Earnings Results Fiscal Year Net Revenues Increase 12.8% to $3.539 Billion Fiscal Year EPS Increases 13.1% to $1.81 Including $0.07 Per Share Hold Everything Accounting Charge Excluding Accounting Charge, Non-GAAP Fiscal Year EPS Increases 17.5% San Francisco, CA, March 20, 2006 Williams-Sonoma, Inc. (NYSE: WSM) today announced operating results for the fourth quarter and fiscal year ended January 29, Net revenues for the fourth quarter of fiscal year 2005 increased 12.1% to $1.214 billion versus $1.084 billion in the fourth quarter of fiscal year Net revenues for fiscal year 2005 increased 12.8% to $3.539 billion versus $3.137 billion in fiscal year Diluted earnings per share for the fourth quarter of fiscal year 2005, including a $0.07 per diluted share charge for the Hold Everything consolidation described below, increased 7.4% to $1.02 per diluted share versus $0.95 per diluted share in the fourth quarter of fiscal year Excluding this charge, diluted earnings per share for the fourth quarter of fiscal year 2005 increased 14.7% to $1.09 per diluted share versus $0.95 per diluted share in the fourth quarter of fiscal year Diluted earnings per share for fiscal year 2005, including the $0.07 per diluted share Hold Everything charge, increased 13.1% to $1.81 per diluted share versus $1.60 per diluted share in fiscal year Excluding this charge, diluted earnings per share for fiscal year 2005 increased 17.5% to $1.88 per diluted share versus $1.60 per diluted share in fiscal year Hold Everything Accounting Charge Stephen C. Nelson Director, Investor Relations (415) Christy M. Chanslor Investor Relations (415) On January 12, 2006, the Company announced its decision to transition the merchandising strategies of its Hold Everything brand into its other existing brands by the end of fiscal year The Company also announced that it expected to incur an accounting charge of $0.09 to $0.10 per diluted share related to this decision, of which the majority would be incurred in the fourth quarter of fiscal year 2005 and the remainder in fiscal year Consistent with this expectation, a pre-tax charge of $13.5 million ($8.3 million after tax) or $0.07 per diluted share was incurred in the fourth quarter of These costs primarily included the initial asset impairment and lease 8

9 termination costs associated with the shutdown of the Hold Everything retail stores, the asset impairment of the e-commerce website, and the write-down of impaired merchandise inventories. Of this pre-tax charge, approximately $4.5 million was included in gross margin and approximately $9.0 million in selling, general, and administrative expenses. The Company expects to incur an additional after-tax charge of $0.03 per diluted share in the first half of fiscal Ed Mueller, Chief Executive Officer, commented, We are very pleased to deliver to our shareholders another consecutive year of strong financial results. In addition to driving record sales and earnings, we made significant progress in our emerging brands and supply chain initiatives, and repurchased over 2.4 million shares of our common stock. During the year, we continued to expand the reach of the West Elm and Williams-Sonoma Home brands, including the opening of our first three Williams-Sonoma Home stores, successfully implemented our daily store replenishment program and completed the first phase of our furniture hub in-sourcing strategy in our east coast distribution operations. The successful execution of all of these initiatives has left us well-positioned to drive our business and to deliver the 2006 financial guidance that we provided today in a separate press release. Howard Lester, Chairman, commented, We are extremely proud of our 2005 results, and believe they once again highlight what is unique about our Company the strength of our brands, the power of our multi-channel strategy, and the competitive advantages we have created with our supply chain network. What I am also very proud of today is our announcement of the declaration of the first cash dividend in the history of our Company. Reflecting upon the consistency of both our operational and financial performance over the past several years, we are approaching the future with great confidence not only from a long-term growth and profitenhancement perspective, but also from a free cash flow point of view. Based on this confidence, our strong cash position today, and a projected cash flow that exceeds the funding requirements of our future growth, we believe that this is an ideal time to begin returning capital to our shareholders in the form of a quarterly dividend, in addition to our ongoing share repurchase programs. FOURTH QUARTER 2005 RESULTS FOR THE 13 WEEKS ENDED JANUARY 29, 2006 Net earnings for the fourth quarter of fiscal year 2005, including the pre-tax charge of $13.5 million ($8.3 million after tax) or $0.07 per diluted share charge for Hold Everything, increased 6.2% to $120.8 million or $1.02 per diluted share versus $113.7 million or $0.95 per diluted share in the fourth quarter of fiscal year Excluding the Hold Everything charge, net earnings for the fourth quarter of fiscal year 2005 increased 13.5% to $129.1 million or $1.09 per diluted share versus $113.7 million or $0.95 per diluted share in the fourth quarter of fiscal year Net revenues for the fourth quarter of fiscal year 2005 increased 12.1% to $1.214 billion versus $1.084 billion in the fourth quarter of fiscal year Retail net revenues in the fourth quarter of fiscal year 2005 increased 10.8% to $756.9 million versus $682.8 million in the fourth quarter of fiscal year This increase was primarily driven by a year-over-year increase in retail leased square footage of 8.6%, including 18 net new stores, and a comparable store sales increase of 5.8%. Net revenues generated in the Williams-Sonoma, Pottery Barn and West Elm brands were the primary contributors to the year-over-year revenue increase. Fourth quarter year-over-year comparable store sales by retail concept are shown in the table below. 9

10 Fourth Quarter Comparable Store Sales* by Retail Concept 13-Weeks Ended Retail Concept 1/29/06 1/30/05 Williams-Sonoma 5.9% 2.1% Pottery Barn 5.6% <2.2%> Pottery Barn Kids 3.9% 8.4% Hold Everything <3.2%> <8.4%> Outlets 11.9% 19.9% Total 5.8% 1.5% * Comparable stores are defined as those stores in which gross square footage did not change by more than 20% in the previous 12 months and which have been open for at least 12 consecutive months without closure for seven or more consecutive days. Comparable stores exclude new retail concepts until such time as we believe that comparable store results in those concepts are meaningful to evaluating the performance of the retail strategy. In the fourth quarter of fiscal year 2005, our total comparable store sales exclude the West Elm concept, which had only four stores operating for more than one year. One West Elm store was excluded in the fourth quarter of fiscal year Direct-to-customer net revenues (comprised of both catalog and Internet revenues) in the fourth quarter of fiscal year 2005 increased 14.1% to $457.5 million versus $400.8 million in the fourth quarter of fiscal year This increase was primarily driven by net revenues generated in the Pottery Barn, Pottery Barn Kids, and PBteen brands. All brands in the direct-to-customer channel delivered positive growth during the quarter, with the exception of the Hold Everything brand. Internet revenues in the fourth quarter of fiscal year 2005 increased 35.7% to $242.5 million versus $178.7 million in the fourth quarter of fiscal year Although the amount of Internet revenues that are incremental to our direct-to-customer channel cannot be identified precisely, we estimate that approximately 40% of our company-wide non-gift registry Internet revenues are incremental to the direct-to-customer channel and approximately 60% are driven by customers who recently received a catalog. Gross margin expressed as a percentage of net revenues in the fourth quarter of fiscal year 2005 was 43.6%. Excluding the $4.5 million or approximately 40 basis point impact of the Hold Everything charge, gross margin expressed as a percentage of net revenues in the fourth quarter of 2005 was 44.0% versus 44.8% in the fourth quarter of This 80 basis point decrease was primarily driven by higher inventory shrinkage, increased direct-to-customer shipping costs, expenses associated with daily store replenishment, and increased markdowns and occupancy deleveraging in the Hold Everything brand. These increases were partially offset by a rate reduction in cost of merchandise driven by increased full-price selling in the Pottery Barn and Williams-Sonoma brands. Selling, general and administrative expenses in the fourth quarter of fiscal year 2005 were $336.8 million or 27.7% of net revenues. Excluding the $9.0 million or approximately 70 basis point impact of the Hold Everything charge, selling, general, and administrative expenses in the fourth quarter of fiscal year 2005 were $327.8 million or 27.0% of net revenues versus $301.0 million or 27.8% of net revenues in the fourth quarter of fiscal year This 80 basis point decrease as a percentage of net revenues was primarily driven by lower employee benefit and workers compensation costs and year-over-year sales leverage in employment and advertising costs. FISCAL YEAR 2005 RESULTS FOR THE 52 WEEKS ENDED JANUARY 29, 2006 Net earnings for fiscal year 2005, including the pre-tax charge of $13.5 million ($8.3 million after tax) or $0.07 per diluted share charge for Hold Everything, increased 12.4% to $214.9 million or $1.81 per diluted share versus $191.2 million or $1.60 per diluted share in fiscal year Excluding the Hold Everything charge, net earnings for fiscal year 2004 increased 16.7% to $223.2 million or $1.88 per diluted share versus $191.2 million or $1.60 per diluted share in fiscal year

11 Quarter Diluted EPS Summary Including and Excluding the Hold Everything (HE) Charge 2005 As Reported Including HE Charge 2005 vs % Increase Including HE Charge Net revenues for fiscal year 2005 increased 12.8% to $3.539 billion versus $3.137 billion in fiscal year Retail net revenues increased 12.3% to $2.033 billion in fiscal year 2005 versus $1.811 billion in fiscal year This increase was primarily driven by a year-over-year increase in retail leased square footage of 8.6%, including 18 net new stores, and a comparable store sales increase of 4.9%. Net revenues generated in the Pottery Barn, Williams-Sonoma, West Elm and Pottery Barn Kids brands were the primary contributors to the year-over-year revenue increase. Fiscal year-over-year comparable store sales by retail concept are shown in the table below. Fiscal Year Comparable Store Sales* by Retail Concept * Comparable stores are defined as those stores in which gross square footage did not change by more than 20% in the previous 12 months and which have been open for at least 12 consecutive months without closure for seven or more consecutive days. Comparable stores exclude new retail concepts until such time as we believe that comparable store results in those concepts are meaningful to evaluating the performance of the retail strategy. For fiscal year 2005, our total comparable store sales exclude the West Elm concept, which had only four stores operating for more than one year. One West Elm store was excluded in fiscal year Direct-to-customer net revenues (comprised of both catalog and Internet revenues) increased 13.6% to $1.506 billion in fiscal year 2005 versus $1.326 billion in fiscal year This year-over-year increase was primarily driven by net revenues generated in the Pottery Barn, Pottery Barn Kids, West Elm, and Williams-Sonoma brands. All of the brands in the direct-to-customer channel delivered positive growth during the year with the exception of the Hold Everything brand. Internet revenues increased 36.5% to $766.3 million in fiscal year 2005, including the net revenues generated by the Hold Everything e-commerce website, versus $561.2 million in fiscal year Although the amount of Internet revenues that are incremental to our direct-to-customer channel cannot be identified precisely, we estimate that approximately 40% of our company-wide non-gift registry Internet revenues are incremental to the direct-to-customer channel and approximately 60% are generated by customers who recently received a catalog Excluding HE Charge 2005 vs % Increase Excluding HE Charge 2004 As Reported 1 st Quarter $ % $ % $ nd Quarter $ % $ % $ rd Quarter $ % $ % $ th Quarter $ % $ % $ 0.95 Fiscal Year $ % $ % $ Weeks Ended Retail Concept 1/29/06 1/30/05 Williams-Sonoma 2.8% 0.5% Pottery Barn 5.7% 4.6% Pottery Barn Kids 5.2% 4.1% Hold Everything <10.7%> 2.1% Outlets 14.7% 18.1% Total 4.9% 3.5%

12 Gross margin expressed as a percentage of net revenues in fiscal year 2005 was 40.6%. Excluding the $4.5 million or approximately 10 basis point impact of the Hold Everything charge, gross margin expressed as a percentage of net revenues in fiscal year 2005 was 40.7% versus 40.5% in fiscal year This 20 basis point increase was primarily driven by rate reductions in shipping and occupancy costs, partially offset by a rate increase in cost of goods sold. The rate reduction in shipping costs was primarily due to the successful refining of our furniture delivery network, including the late-2004 in-sourcing of line-haul management and cost efficiencies gained from our east coast distribution center, partially offset by a year-over-year increase in fuel surcharges. The rate reduction in occupancy expenses was primarily due to sales leverage in the retail channel, partially offset by increased distribution leased square footage in the direct-to-customer channel. The rate increase in cost of goods sold was primarily due to the costs associated with the implementation of the daily store replenishment program in April and May of 2005 and a higher percentage of total Company net revenues being driven by furniture, which generates a lower than average gross margin rate. Selling, general and administrative expenses in fiscal year 2005 were $1.090 billion or 30.8% of net revenues. Excluding the $9.0 million or approximately 20 basis point impact of the Hold Everything charge, selling, general and administrative expenses in fiscal year 2005 were $1.081 billion or 30.6% of net revenues versus $961.2 million or 30.6% of net revenues in fiscal year Selling, general and administrative expenses as a percentage of net revenues were essentially flat compared to last year as rate reductions in employee benefit costs were substantially offset by higher catalog advertising expenses. Increased paper costs across all brands drove the majority of the catalog advertising expense increase. CASH DIVIDEND INITIATED As announced in a separate press release this morning, the Company has declared a quarterly cash dividend of $0.10 per common share, payable on May 24, 2006, to shareholders of record as of the close of business on April 26, This is the first cash dividend ever declared by the Company. The indicated annual cash dividend, subject to capital availability, is $0.40 per common share or approximately $46 million in fiscal year 2006 based on the current number of common shares outstanding. STOCK REPURCHASE AUTHORIZED As announced in a separate press release this morning, our Board of Directors has authorized a stock repurchase program to acquire up to an additional 2,000,000 shares of our outstanding common stock. Stock repurchases under this program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. During the fourth quarter of fiscal 2005, we repurchased and retired 780,800 shares at a weighted average cost of $41.70 per share and a total cost of approximately $32,556,000. During fiscal year 2005, we repurchased and retired a total of 2,422,300 shares at a weighted average cost of $38.77 per share and a total cost of approximately $93,921,000. As of fiscal year-end, the remaining authorized number of shares eligible for repurchase was 20,000. During the first quarter of fiscal 2006, we repurchased and retired these shares at a weighted average cost of $38.84 per share and a total cost of approximately $777,000, which completed all stock repurchase programs previously authorized by our Board of Directors. CONFERENCE CALL AND WEBCAST INFORMATION Williams-Sonoma, Inc. will host a live conference call today, March 20, 2006, at 7:00 A.M. (PT). The call, hosted by Ed Mueller, Chief Executive Officer, and Howard Lester, Chairman, will be open to the general public via a live webcast and can be accessed through the Internet at A replay of the webcast will be available at 12

13 SEC REGULATION G NON-GAAP INFORMATION This press release includes non-gaap gross margin percentages, non-gaap selling, general and administrative expense percentages, non-gaap net earnings and non-gaap diluted earnings per share due to the exclusion of the accounting charge for the Hold Everything consolidation in fiscal year We have reconciled these non-gaap financial measures with the most directly comparable GAAP financial measure in the text of this release. We believe that these non-gaap financial measures provide meaningful supplemental information for investors regarding the performance of our business operations and facilitate management s internal comparisons to our historical operating results and to our guidance for fiscal year FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or they prove incorrect, could cause our results to differ materially from those expressed or implied by such forwardlooking statements. Such forward-looking statements include statements relating to our future financial guidance and results, longterm growth, profit enhancement, projected cash flow, the transitioning of Hold Everything merchandising strategies to existing brands and accounting charges resulting therefrom, initiation of a quarterly cash dividend, and the stock repurchase program. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include accounting adjustments as we close our books for the fourth quarter of 2005 and as audited year-end financial statements are prepared; new interpretations of current accounting rules; our ability to successfully transition the Hold Everything merchandise strategies; changes to current accounting rules; changes in tax laws applicable to cash dividends or share repurchases; our ability to anticipate consumer preferences and buying trends; dependence on timely introduction and customer acceptance of our merchandise; construction and other delays in store openings; competition from companies with concepts or products similar to our concepts and products; timely and effective sourcing of merchandise from our foreign and domestic vendors and delivery of merchandise through our supply chain to our stores and customers; effective inventory management commensurate with customer demand; our ability to anticipate and manage customer returns; successful catalog management, including timing, sizing and merchandising; uncertainties in Internet marketing, infrastructure and regulation; changes in consumer spending based on weather, economic, political, competitive and other conditions beyond our control; construction delays on infrastructure projects based on weather or other events; multi-channel and multi-brand complexities; our ability to introduce new brands and brand extensions; dependence on external funding sources for operating capital; our ability to control employment, occupancy and other operating costs; our ability to improve and control our systems and processes; changes to our information technology infrastructure; general political, economic and market conditions and events, including war, conflict or acts of terrorism; and other risks and uncertainties described more fully in our public announcements, reports to shareholders and other documents filed with or furnished to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended January 30, 2005 and all subsequent current reports on Form 8-K and quarterly reports on Form 10-Q. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. ABOUT WILLIAMS-SONOMA Williams-Sonoma, Inc. is a nationwide specialty retailer of high quality products for the home. These products, representing seven distinct merchandise strategies Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Williams-Sonoma Home, and Hold Everything are marketed through 570 stores, eight mail order catalogs and six e-commerce websites. 13

14 WILLIAMS-SONOMA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS) January 29, 2006 January 30, 2005 Assets Current assets Cash and cash equivalents $ 360,982 $ 239,210 Accounts receivable - net 51,020 42,520 Merchandise inventories - net 520, ,421 Prepaid catalog expenses 53,925 53,520 Prepaid expenses 31,847 38,018 Deferred income taxes 57,267 39,015 Other assets 7,831 9,061 Total current assets 1,083, ,765 Property and equipment - net 880, ,412 Other assets - net 18,151 19,368 Total assets $ 1,981,620 $ 1,745,545 Liabilities and shareholders equity Current liabilities Accounts payable $ 196,074 $ 173,781 Accrued salaries, benefits and other 93,434 86,767 Customer deposits 172, ,535 Income taxes payable 83,589 72,052 Current portion of long-term debt 18,864 23,435 Other liabilities 25,656 17,587 Total current liabilities 590, ,157 Deferred rent and lease incentives 218, ,193 Long-term debt 14,490 19,154 Deferred income tax liabilities 18,455 21,057 Other long-term obligations 14,711 13,322 Total liabilities 856, ,883 Shareholders equity 1,125, ,662 Total liabilities and shareholders equity $ 1,981,620 $ 1,745,545 Store Count Average Leased Square Footage Per Store Retail Concept October 30, 2005 Openings Closings January 29, 2006 January 30, 2005 January 29, 2006 January 30, 2005 Williams-Sonoma (3) ,700 5,700 Pottery Barn (1) ,100 11,900 Pottery Barn Kids ,800 7,800 Hold Everything 11 - (3) 8 9 7,600 6,100 West Elm ,100 14,500 Williams-Sonoma Home ,900 - Outlets ,200 15,500 Total (7) ,800 8,400 Total Store Square Footage October 30, 2005 January 29, 2006 January 30, 2005 Total store selling square footage (sq. ft.) 3,096,000 3,140,000 2,911,000 Total store leased square footage (sq. ft.) 4,967,000 5,035,000 4,637,000 14

15 WILLIAMS-SONOMA, INC. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) THIRTEEN WEEKS ENDED JANUARY 29, 2006 AND JANUARY 30, 2005 (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 15 FOURTH QUARTER (13 Weeks) (13 Weeks) % Of % Of $ Revenues $ Revenues Retail revenues $ 756, % $ 682, % Direct-to-customer revenues 457, , Net revenues 1,214, ,083, Total cost of goods sold 684, , Gross margin 529, , Selling, general and administrative expenses 336, , Earnings from operations 192, , Interest (income) expense - net (2,085) 0.2 (575) 0.1 Earnings before income taxes 194, , Income taxes 74, , Net earnings $ 120, % $ 113, % Earnings per share: Basic $ 1.05 $ 0.98 Diluted $ 1.02 $ 0.95 Shares used in calculation of earnings per share: Basic 115, ,634 Diluted 118, ,878

16 WILLIAMS-SONOMA, INC. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FIFTY-TWO WEEKS ENDED JANUARY 29, 2006 AND JANUARY 30, 2005 (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 16 YEAR-TO-DATE (52 Weeks) (52 Weeks) % Of % Of $ Revenues $ Revenues Retail revenues $2,032, % $1,810, % Direct-to-customer revenues 1,506, ,325, Net revenues 3,538, ,136, Total cost of goods sold 2,103, ,865, Gross margin 1,435, ,271, Selling, general and administrative expenses 1,090, , Earnings from operations 345, , Interest (income) expense - net (3,708) 0.1 (236) - Earnings before income taxes 348, , Income taxes 133, , Net earnings $ 214, % $ 191, % Earnings per share: Basic $ 1.86 $ 1.65 Diluted $ 1.81 $ 1.60 Shares used in calculation of earnings per share: Basic 115, ,159 Diluted 118, ,347

17 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FIFTY-TWO WEEKS ENDED JANUARY 29, 2006 AND JANUARY 30, 2005 (DOLLARS IN THOUSANDS) 17 YEAR-TO-DATE (52 Weeks) (52 Weeks) Cash flows from operating activities Net earnings $ 214,866 $ 191,234 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 123, ,624 Loss on disposal/ impairment of assets 12,050 1,080 Amortization of deferred lease incentives (24,909) (22,530) Deferred income taxes (20,791) (6,254) Tax benefit from exercise of stock options 15,743 13,085 Stock-based compensation expense Other Changes in: Accounts receivable (6,829) (10,900) Merchandise inventories (67,474) (48,017) Prepaid catalog expenses (405) (15,056) Prepaid expenses and other assets 9,032 (19,702) Accounts payable 14,365 17,773 Accrued salaries, benefits and other 15,950 9,955 Customer deposits 24,066 32,273 Deferred rent and lease incentives 27,661 42,080 Income taxes payable 11,409 7,457 Net cash provided by operating activities 348, ,437 Cash flows from investing activities: Purchases of property and equipment (151,788) (181,453) Net cash used in investing activities (151,788) (181,453) Cash flows from financing activities: Proceeds from bond issuance - 15,000 Repayment of long-term obligations (9,235) (9,789) Proceeds from exercise of stock options 28,002 26,190 Repurchase of common stock (93,921) (79,320) Credit facility costs (654) (288) Net cash used in financing activities (75,808) (48,207) Effect of exchange rates on cash and cash equivalents Net increase in cash and cash equivalents 121,772 75,300 Cash and cash equivalents at beginning of period 239, ,910 Cash and cash equivalents at end of period $ 360,982 $ 239,210

18 Exhibit 99.2 PRESS RELEASE CONTACT: WILLIAMS-SONOMA, INC. Sharon L. McCollam 3250 Van Ness Avenue Executive Vice President, CFO San Francisco, CA (415) FOR IMMEDIATE RELEASE Stephen C. Nelson Director, Investor Relations (415) Christy M. Chanslor Investor Relations (415) Williams-Sonoma, Inc. Provides Financial Guidance for Fiscal Year 2006 Revenues Projected to Increase 10.1% to 12.1% Diluted EPS Projected to Increase 5.0% to 7.2% Excluding Hold Everything, Non-GAAP Revenues Projected to Increase 11.6% to 13.7% Excluding Two New Accounting Pronouncements and the Hold Everything Accounting Charge, Non-GAAP Diluted EPS Projected to Increase 14.4% to 16.5% San Francisco, CA, March 20, 2006 Williams-Sonoma, Inc. (NYSE: WSM) today announced financial guidance for fiscal year 2006, including and excluding the diluted earnings per share impact from the prospective implementation of two new accounting pronouncements (FAS 123R, Accounting for Share Based Payments and FSP FAS 13-1, Accounting for Rental Costs Incurred During a Construction Period) and the previously announced accounting charge related to the Hold Everything consolidation. These impacts are discussed in detail in Exhibit 1 of this release. Net revenues in fiscal year 2006 are expected to be in the range of $3.897 billion to $3.968 billion an increase of 10.1% to 12.1% versus fiscal year 2005 net revenues of $3.539 billion. Excluding Hold Everything, net revenue growth in fiscal year 2006 is projected to increase in the range of 11.6% to 13.7%. Diluted earnings per share in fiscal year 2006, including the impact of the two new accounting pronouncements and the Hold Everything charge, are expected to be in the range of $1.90 to $1.94 an increase of 5.0% to 7.2% versus $1.81 in fiscal year Diluted earnings per share in fiscal year 2006, excluding the impact of the two new accounting pronouncements and the Hold Everything charge, are expected to be in the range of $2.15 to $2.19 an increase of 14.4% to 16.5% on a comparable basis versus fiscal year Diluted earnings per share in fiscal year 2005, excluding the $0.07 per diluted share Hold Everything charge, was $1.88. This is a non-gaap comparison. See Exhibit 1 for a reconciliation of fiscal year 2006 and 2005 GAAP to non-gaap diluted earnings per share, which includes and excludes the impact of these charges. This reconciliation is being provided to facilitate a meaningful evaluation of the Company s quarterly and fiscal year 2006 diluted earnings per share guidance on a comparable basis with its fiscal 2005 quarterly and fiscal year results. Ed Mueller, Chief Executive Officer, commented on the 2006 vision for the Company: As we enter 2006, we will continue to focus on the three long-term strategic initiatives that have transformed the financial performance of the Company over the last several years driving sustainable top-line growth; increasing our pre-tax operating margin as 18

19 a percentage of net revenues; and enhancing shareholder value, including delivering on the commitments we have made to our shareholders. To drive sustainable top-line growth in our core brands, we expect to add twenty-four net new retail locations including three new test stores in the Pottery Barn Bed + Bath concept to increase catalog circulation and electronic direct marketing across all brands, and to intensify the marketing support behind our e-commerce channel. On the operational side of the business, we expect to continue to improve efficiency in our supply chain by expanding our furniture hub in-sourcing initiative, capitalizing on the benefits of our daily store replenishment program, and rolling out new sourcing and logistical strategies designed to reduce customer returns, replacements, and damages. In our emerging brands (PBteen, West Elm and Williams-Sonoma Home), we will be focusing on building brand awareness and enhancing customer access to the brands. These initiatives will include launching a Williams-Sonoma Home e-commerce website in the third quarter, adding fourteen new retail locations (ten in West Elm and four in Williams-Sonoma Home), aggressively identifying new customers through retail name capture and database prospecting, and expanding the use of electronic direct marketing. To support all of these brand-building initiatives, we will invest in our long-term infrastructure, including increasing distribution capacity and implementing new information technology. Although these investments are being made in advance of the revenue stream, their impact on earnings is more than offset by our continued ability to drive greater efficiencies in our existing supply chain operations and overhead cost structure. In 2006, we remain committed to delivering against all three of these strategic initiatives, including reaching three new financial milestones surpassing $3.8 billion in revenues, delivering solid earnings growth, and, for the first time in our history, returning capital to our shareholders through the initiation of a dividend. FISCAL YEAR 2006 FINANCIAL GUIDANCE Net Revenues Net revenues are projected to be in the range of $3.897 billion to $3.968 billion. This represents a projected increase in net revenues in the range of 10.1% to 12.1% versus $3.539 billion in fiscal year Excluding Hold Everything, net revenue growth in fiscal year 2006 is projected to increase in the range of 11.6% to 13.7%. Retail net revenues are projected to be in the range of $2.223 billion to $2.261 billion. This represents a projected increase in retail net revenue in the range of 9.3% to 11.2% versus $2.033 billion in fiscal year Excluding Hold Everything, retail net revenue growth in fiscal year 2006 is projected to increase in the range of 10.1% to 11.9%. Comparable store sales growth is projected to be in the range of 3.0% to 5.0%. This compares to comparable store sales growth in fiscal year 2005 of 4.9%. Comparable stores exclude new retail concepts until such time as the Company believes that comparable store results in those concepts are meaningful to evaluating the performance of the retail strategy. For fiscal year 2006, the Company expects to exclude West Elm, which currently has only four stores operating for more than one year and Williams-Sonoma Home, which currently has no stores operating for more than one year. Hold Everything will also be excluded, as its remaining eight stores will be closed during the first quarter of fiscal year Retail leased square footage is projected to increase in the range of 7.5% to 8.5%. Selling square footage is projected to increase in the range of 7.0% to 8.0%. This compares to retail leased and selling square footage growth in fiscal year 2005 of 8.6% and 7.9%, respectively. 19

20 Store Opening and Closing Guidance by Retail Concept Q Actual Q Guidance Q Guidance Q3 and Q Guidance FY 2006 Guidance Concept Total Open Close End Open Close End Open Close End Open Close Williams-Sonoma <5> <3> <4> <12>* Pottery Barn <1> <3> <4>* Pottery Barn Bed+Bath Pottery Barn Kids * West Elm Williams-Sonoma Home Hold Everything 8 0 <8> <8> Outlets <1> 16 1 <1> 16 2 <2>* Total <14> <7> <5> <26> * Fiscal year 2006 total store opening and closing numbers for Williams-Sonoma, Pottery Barn and Outlets include 12 stores, 4 stores and 2 stores, respectively, for temporary closures due to remodeling. Fiscal year 2006 total store opening numbers for Williams-Sonoma, Pottery Barn and Pottery Barn Kids include 1 store, 2 stores and 1 store, respectively, in the New Orleans area that are reopening after having been temporarily closed in August 2005 due to Hurricane Katrina. Remodeled stores are defined as those stores temporarily closed and subsequently reopened due to square footage expansion, store modification, or relocation. Consistent with our definition of comparable stores, remodeled stores are removed from the comparable store base upon closure if the gross square footage changes by more than 20% or if the store is closed for seven or more consecutive days. Direct-to-customer net revenues (comprised of both catalog and Internet revenues) are projected to be in the range of $1.674 billion to $1.707 billion. This represents a projected increase in direct-to-customer net revenue in the range of 11.2% to 13.3% versus $1.506 billion in fiscal year Excluding Hold Everything, direct-to-customer net revenue growth in fiscal year 2006 is projected to increase in the range of 13.8% to 16.0%. Catalog circulation is projected to increase in the range of 1.0% to 2.0% with pages circulated projected to increase in the range of 6.5% to 7.5%. This compares to an approximate 4.6% increase in catalog circulation and a 9.7% increase in pages circulated in fiscal year Excluding the circulation for the Hold Everything catalog in fiscal years 2005 and 2006, catalog and page circulation in fiscal year 2006 is expected to increase in the range of 5.0% to 6.0% and 9.0% to 10%, respectively. Quarterly Net Revenue Guidance by Operating Segment (All Amounts in Millions, Except Percentages) Q Guidance Q Guidance Q Guidance Q Guidance FY 2006 Guidance Net Retail Revenue $433 - $441 $473 - $481 $490 - $498 $827 - $841 $2,223 - $2,261 Net Direct-to-Customer Revenue $356 - $362 $385 - $391 $427 - $435 $506 - $519 $1,674 - $1,707 Total Net Revenue $789 - $803 $858 - $872 $917 - $933 $1,333 - $1,360 $3,897 - $3,968 Comparable Store Sales 2.0% - 4.0% 3.0% - 5.0% 3.0% - 5.0% 3.0% - 5.0% 3.0% - 5.0% 20

21 Gross Margin Gross margin as a percentage of net revenues in fiscal year 2006, including the impact of the implementation of FSP FAS 13-1 and the Hold Everything charge, is expected to be in the range of 40.7% to 40.9%. Gross margin as a percentage of net revenues in fiscal year 2005 was 40.6%, including the fiscal year 2005 impact of the Hold Everything charge. This represents a projected increase in the gross margin rate in the range of 10 to 30 basis points. Gross margin as a percentage of net revenues in fiscal year 2006, excluding the impact of the implementation of FSP FAS 13-1 and the Hold Everything charge, is expected to be in the range of 40.9% to 41.1%. Gross margin as a percentage of net revenues in fiscal year 2005, excluding the Hold Everything charge, was 40.7%. This represents a projected increase in the gross margin rate on a comparable year-over-year basis in the range of 20 to 40 basis points. This is a non-gaap comparison. Selling, General and Administrative (SG&A) Expenses Selling, general and administrative expenses as a percentage of net revenues in fiscal year 2006, including the impact of the implementation of FAS 123R and the Hold Everything charge, are expected to be in the range of 31.4% to 31.6%. Selling, general and administrative expenses in fiscal year 2005 were 30.8%, including the fiscal year 2005 impact of the Hold Everything charge. This represents a projected increase in the SG&A expense rate of 60 to 80 basis points. Selling, general and administrative expenses as a percentage of net revenues in fiscal year 2006, excluding the impact of the implementation of FAS 123R and the Hold Everything charge, are expected to be in the range of 30.4% to 30.6%. Selling, general and administrative expenses as a percentage of net revenues in fiscal year 2005, excluding the Hold Everything charge, were 30.6%. This represents a projected decrease in the SG&A expense rate on a comparable year-over-year basis of 20 basis points at the low end of the range and no change at the high end of the range. This is a non-gaap comparison. Interest <Income> Expense - Net Income Taxes Interest <Income> Expense - Net for fiscal year 2006 is projected to be interest income in the range of $7.0 million to $8.0 million. This compares to interest income in fiscal year 2005 of $3.7 million. The income tax rate for fiscal year 2006 is projected to be in the range of 38.6% to 38.8%. This compares to an income tax rate in fiscal year 2005 of 38.4%. Diluted Earnings Per Share Diluted earnings per share in fiscal year 2006, including the impact of the two new accounting pronouncements and the Hold Everything charge, are expected to be in the range of $1.90 to $1.94 an increase of 5.0% to 7.2% versus $1.81 in fiscal year Diluted earnings per share in fiscal year 2006, excluding the impact of the two new accounting pronouncements and the Hold Everything charge, are expected to be in the range of $2.15 to $2.19 an increase of 14.4% to 16.5% on a comparable basis versus fiscal year Diluted earnings per share in fiscal year 2005, excluding the $0.07 per diluted share Hold Everything charge, were $1.88. This is a non-gaap comparison. See Exhibit 1 for a reconciliation of 2006 and 2005 GAAP to non-gaap diluted earnings per share, which includes and excludes the impact of these charges. This reconciliation is being provided to 21