[caption id="attachment_81389" align="aligncenter" width="666"] Source: Company reports/Coresight Research[/caption] 4Q18 Results Williams-Sonoma reported 4Q18 revenues of $1.84 billion, up 9.3%. Comps increased 2.4%, in line with consensus, driven by West Elm, whose comps increased 11.1%. Management commented that 4Q18 comps were below expectations due to a softer gift business in the quarter. E-commerce revenue growth accelerated to 14.3%, accounting for 54.6% of total revenue. Adjusted EPS was $2.10, up 25.3% and ahead of the $1.96 consensus estimate. GAAP EPS was $1.93, up 70.4% year over year, and including charges of $0.08 per share for outward-related items, $0.02 per share in employment-related expense, $0.01 per share for tax legislation, and $0.06 per share in impairment and early termination charges. During the quarter, the company opened eight stores and closed 16, ending the quarter with 625 stores. FY18 Results FY18 revenues were $5.67 billion, up 7.2%. Comps increased 3.7%, down from 3.2% the prior year. E-commerce revenues were $3.1 billion, up 10.9% and comprising 54.3% of total revenues. Adjusted EPS was $3.61, up 23.7%. GAAP EPS was $4.05, compared with $3.02 the prior year. FY18 revenue breakdown:

• Pottery Barn revenues were $2.2 billion (comprising 38.4% of total revenues), up 5.4% from the prior year.
• West Elm revenues were $1.3 billion (comprising 22.8% of total revenues), up 16.1% from the prior year.
• Williams-Sonoma revenues were $1.1 billion (comprising 18.6% of total revenues) , up 3.3% from the prior year.
• Pottery Barn Kids and Teen revenues were $896 million (comprising 15.8% of total revenues), up 5.4% from the prior year.
• Other revenues were $250 million (comprising 4.4% of total revenues), up 9.2% from the prior year.

The company ended the year and quarter with 625 stores, down from 631 stores a year ago. 4Q18 Segment Performance

• Pottery Barn reported a (0.4)% comp decrease, down from 4.1% in the year-ago quarter. 
• West Elm reported a 11.1% comp increase, down from 12.3% in the year-ago quarter. Growth was driven by strong e-commerce performance and continued strength in the core furniture business.
• Williams-Sonoma reported a 0.1% comp increase, down from 4.3% in the year-ago quarter. Comps dipped largely due to a reduction in promotional activity as the company reduced inventories and continued to refine the balance between top-line growth and profitability for the brand. Emerging brands Rejuvenation and Mark and Graham continue to scale with double-digit growth and increasing profitability.
• Pottery Barn Kids and Teen reported a 1.6% comp increase, up from 1.4% in the year-ago quarter. The business substantially improved from last year, and the baby business continues to gain momentum, up 15% and attracting new customers at the entry point to the brand and to Registry creations

Other Details from the Quarter and Year In the year, the company continued to scale its loyalty program The Key and its complementary design service, Design Crew. The Key membership grew nearly six times over the past year, significantly exceeding company goals. In addition to increasing customer engagement and brand loyalty, the company has also seen a significant lift in sales, since loyalty members typically spend over five times the value of their rewards.  The company also launched two new initiatives during the year: Design Crew Room Planner and The One Registry Collective. Both enable a more personalized and convenient shopping experience.  Outlook In 2019, the company plans to maximize growth, maintain high profitability, and prioritize West Elm, its newly launched business-to-business offering, as well as emerging brands such as Williams Sonoma Home, Rejuvenation and Mark and Graham, in addition to its largest Pottery Barn and flagship Williams-Sonoma brands. The Key is also expected to drive growth. The company offered the following guidance for 2019:

• Revenues of $5.67-5.84 billion, up 0-3%.
• Comps to increase 2-5%.
• Adjusted EPS of $4.50-4.70 (up 1-5%), above the $4.44 consensus estimate.
• Net 30 store closures for a total count of 595 by the end of the year.
• Capital spending of $200-220 million.

Long-term financial targets are as follows:

• Total net revenue growth in the mid-to-high single digits.
• Adjusted operating income growth in line with revenue growth, in the mid- to high-single digits.
• Stable (flat) operating margins.
• Above-industry average return on invested capital (ROIC).