U.S. Markets closed
  • S&P 500

    +8.70 (+0.24%)
  • Dow 30

    +37.90 (+0.13%)
  • Nasdaq

    +111.44 (+0.92%)
  • Russell 2000

    +10.25 (+0.56%)
  • Crude Oil

    -0.31 (-0.68%)
  • Gold

    -23.60 (-1.31%)
  • Silver

    -0.81 (-3.46%)

    +0.0043 (+0.3587%)
  • 10-Yr Bond

    -0.0340 (-3.87%)
  • Vix

    -0.41 (-1.93%)

    -0.0053 (-0.4004%)

    -0.1990 (-0.1909%)

    +124.70 (+0.75%)
  • CMC Crypto 200

    -7.64 (-2.26%)
  • FTSE 100

    +4.65 (+0.07%)
  • Nikkei 225

    +107.40 (+0.40%)

Edited Transcript of WSM.N earnings conference call or presentation 19-Nov-20 10:00pm GMT

·51 min read

Q3 2020 Williams-Sonoma Inc Earnings Call SAN FRANCISCO Nov 20, 2020 (Thomson StreetEvents) -- Edited Transcript of Williams-Sonoma Inc earnings conference call or presentation Thursday, November 19, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Elise Wang Williams-Sonoma, Inc. - VP of IR * Felix Carbullido Williams-Sonoma, Inc. - Executive VP & CMO * Julie P. Whalen Williams-Sonoma, Inc. - Executive VP & CFO * Laura J. Alber Williams-Sonoma, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Adrienne Eugenia Yih-Tennant Barclays Bank PLC, Research Division - MD, Senior eCommerce & Brand Retailing Analyst * Anthony Chinonye Chukumba Loop Capital Markets LLC, Research Division - MD * Bradley Bingham Thomas KeyBanc Capital Markets Inc., Research Division - Director and Equity Research Analyst * Brian William Nagel Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst * Charles P. Grom Gordon Haskett Research Advisors - MD & Senior Analyst of Retail * Katharine Amanda McShane Goldman Sachs Group, Inc., Research Division - Equity Analyst * Marni Shapiro The Retail Tracker - Co-Founder * Oliver Wintermantel Evercore ISI Institutional Equities, Research Division - MD & Fundamental Research Analyst * Seth Mckain Basham Wedbush Securities Inc., Research Division - MD Of Equity Research * Simeon Ari Gutman Morgan Stanley, Research Division - Executive Director * Steven Paul Forbes Guggenheim Securities, LLC, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, welcome to the Williams-Sonoma, Inc. Third Quarter 2020 Earnings Conference Call. (Operator Instructions) This call is being recorded. I would now like to turn the call over to Elise Wang, Vice President of Investor Relations, to discuss non-GAAP financial measures and forward-looking statements. Please go ahead. -------------------------------------------------------------------------------- Elise Wang, Williams-Sonoma, Inc. - VP of IR [2] -------------------------------------------------------------------------------- Thank you. Good afternoon. This call should be considered in conjunction with the press release that we issued earlier today. Unless indicated otherwise, our discussion today will relate to results and guidance based on certain non-GAAP measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures, and our explanation of why the non-GAAP financial measures may be useful, are discussed in Exhibit 1 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, growth plans and prospects of the company in 2020 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, including 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. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Elise. Good afternoon, everyone. Thank you all for joining us. Also on the call with me today are Julie Whalen, our Chief Financial Officer; Felix Carbullido, our Chief Marketing Officer; and Yasir Anwar, Chief Technology Officer. On today's call, I want to talk to you about our outstanding third quarter results and more importantly, our company's distinctive positioning and long-term growth prospects. In the third quarter, sales, again, outperformed expectations with demand comp up nearly 31% compared to a net comp of 24%, driven by strength across all of our brands. E-commerce accelerated sequentially to a record net comp of over 49%, and we were pleased to see our store performance improved throughout the quarter to a net negative 11% comp. Even more encouraging is the retail demand comp at negative 4%. And we delivered these sales more profitably with operating margins reaching record levels, expanding to 15.7% versus last year's 7.6%. All of our brands outperformed. Pottery Barn delivered a net comp of 24.1%, driven by double-digit comps in all divisions. Growth initiatives, including PB Apartment and Marketplace, continue to build a momentum, growing more than 100% again this quarter to reach nearly $200 million in sales year-to-date. Our Pottery Barn Kids and Teen business grew at a net comp of 23.8% with accelerated growth in all areas. We also saw a longer tail in our back-to-school business, with our Gear and study-at-home solutions delivering a strong finish to the season. The Williams-Sonoma brand delivered another record quarter with a net comp of 30.4%. This is a business that has always had a smaller online percentage compared to our other brands, and this represents a big opportunity. Our initiatives in e-commerce and our real estate optimization strategies are driving our channel mix shift. We're also pleased to see our stores performing better than expected in the Williams-Sonoma brand. And finally, in our West Elm brand, we saw a significant pickup in net comp in Q3 to 21.8%, driven by strong growth in all major categories as well as the traditional retail-dominant categories of textiles and decorative accessories. As we enter the fourth quarter, holiday is off to a strong start across all of our brands. We are seeing earlier sales in holiday products than in years prior, and our teams are prepared and ready to meet this demand by moving up launch dates and marketing for our holiday merchandise. And we continue to see DTC's strength in retail improving despite reductions in store occupancy. Our supply chain team is also working diligently to meet this elevated demand. Despite industry-wide capacity and shipping constraints due to COVID-19, our teams are leveraging our scale and unique business model to do everything we can to ensure the best customer experience this holiday. Our global sourcing team has been partnering with our vendors to expand capacity, leveraging our in-country presence and long-standing vendor relationships. Our transportation team worked quickly and aggressively early this year to further diversify our carrier network, and we believe we have successfully secured parcel shipping capacity for the elevated volumes we expect to drive this holiday. We will also be maximizing our omni-channel capabilities such as ship from store and buy online, pick up in store to supplement our supply chain fulfillment capacity. We expect our omni services to fulfill up to 20% of our expected total DTC volume this holiday. These results demonstrate our company's ability to deliver long-term profitable growth post-pandemic. Our company's mission is to enhance the quality of people's lives at home. We have built our business with this mission at the forefront, investing in areas that matter most to our customers. These include high-quality, well-designed, sustainable products at a great value because of our scale and vertical supply chain; inspiring marketing; and the convenience of our high-touch digital-first omnichannel experience. And this, combined with our loved brands that serve a wide range of customers across aesthetics and price points, is our distinctive positioning and is our competitive advantage. No one else in the market is doing what we are doing. Our mission also extends to how we take care of our employees, our vendor partners, our customers and our shareholders. At Williams-Sonoma, Inc., and across our brands, we are good by design from managing resources responsibly, caring for our people and leading with our value. In a year marked by social, environmental and health crises on a scale not previously seen in our lifetime, these values are more important than ever. And we are proud to be leaders in our industry through our financial performance, our impactful ESG programs and how we have taken care of our people, while increasing returns to our shareholders. As we look at our business today, there are 3 key accomplishments that we believe will deliver significant growth for the future. First, we've been acquiring new customers in our digital channels at a rate of over 30% year-to-date, a significant acceleration compared to previous years. While we have seen this in the past, it generally foreshadow strong business in the future. This is particularly notable -- a particularly notable increase as stores have historically been the key driver of new customer growth. This overall increase, despite less store traffic, shows the effectiveness of our current digital marketing strategy in acquiring new customers. Second, and even more encouraging, is that we are attracting these customers while deliberately shifting away from promotions towards marketing that has inspiring content and it's brand building. This should mean that we have higher retention of these customers post-pandemic. And finally, all of our brands are resonating with younger generations. Over the last 3 years, this cohort has driven the majority of our new customer growth. And year-to-date, millennials represent nearly 50% of our sales from new customers. This, of course, has not been a coincidence as our value proposition and competitive strengths are highly appealing to younger generations who have a strong affinity for design, engaging content and accessible sustainably made products. In addition to these 3 internal positive indicators, industry trends also support our longer-term growth. These industry trends include the rapid shift to e-commerce, further industry consolidation, the generational shift to a younger customer, the importance of sustainability and consumer purchasing decisions and the increase in remote work and population mobility. We believe that we are one of the few retailers best positioned to take market share in the years to come. Not only is our value proposition relevant and compelling, our multiyear growth strategies and investments are working. We will continue to prioritize e-commerce growth and push the natural shift in our channel mix. We will also expand into product whitespace and aggressively support the growth of new businesses and opportunities within our brands and cross-brand. For example, our business-to-business opportunity. We believe that Williams-Sonoma, Inc. business-to-business will be our next $1 billion business within the next 5 years. The B2B market is large and highly fragmented with a market size of $80 billion in the U.S. alone. Our competitive advantage is that we have 8 unique brands, in-house product development capabilities and a sustainable supply chain, which allows us to simplify the customer experience for our B2B customers. Since the launch of this business in 2019, we have gained traction in all areas with average order size and repeat purchases both growing double digits, and major project wins in residential, commercial, education, health care and hospitality verticals. Our number of contract accounts are up 50% versus last year. We are aggressively pursuing this growth opportunity and are on track to drive over $300 million in sales this year, which represents strong double-digit growth compared to last year. Another key growth driver that we believe is underappreciated is our global opportunity. Our expansion to date has proven that we can grow profitably and with low capital investment, further supporting the viability of profitable growth in this business for us, and the estimated $450 billion global home furnishings market. To reiterate, our strategy for expansion is through a franchise model, and we look forward to growing our presence in our current markets, and our launch in India next year. In summary, our vision is to own the home. And with our distinctive positioning, we will only become more relevant. We have brands that serve a wide range of customers across aesthetics and price points. And unlike our competitors with undifferentiated marketplace models, we have always been different. We designed the vast majority of our products. And for those that we carry from third-party vendors, we ensure that they are high-quality, sustainable and the best value in the market. We offer service that is high-touch, both in-person and virtually because of our impactful stores and associates and our sophisticated e-commerce platform. And most importantly, the shift to e-commerce favors our business and provides a long runway to gain market share. We have the strategies, the team and the world-class platform to successfully execute on our growth opportunities. And we are confident that we will continue to drive accelerating sales growth with increasing profitability and evolve into an even more attractive business for our stakeholders during and post-pandemic. Before I turn the call over to Julie, I want to thank our team. We have been operating in this challenging environment for more than 8 months now, and our team has been an unwavering source of energy, creativity and determination. We are deeply appreciative of their remarkable performance. And with that, I'd like to pass the call over to Julie to discuss our financial results for Q3 and our outlook for Q4 and beyond. -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Laura, and good afternoon, everyone. We are pleased to report another quarter of record growth and profitability. It is clear our mission and value proposition are increasingly more relevant, and our growth strategies are continuing to gain traction. And this, combined with our world-class platform that we have been investing in overtime, the agility and strong execution from our team and a culture of strong financial discipline has enabled us to capture market share and expand profitably. We are so proud that our ongoing financial strength has allowed us to continue to take care of our stakeholders, our associates, our customers, our communities and our shareholders during this unprecedented time. Turning to the third quarter financial results. Net revenues grew 22.4% year-over-year to $1.765 billion, with net comp growth accelerating to 24.4%. This strong performance was driven by all of our brands and at a higher margin than we have seen as we have been materially shifting away from promotions. Our demand comp, which includes orders placed but not yet filled in the quarter, was again higher at almost 31% as sales continue to outpace our expectations. Our accelerated growth was driven by a 49.3% comp in e-commerce and a material improvement in our retail revenues. All brands sequentially improved to strong double digits this quarter. Williams-Sonoma delivered another record net comp of 30.4%. Pottery Barn accelerated to a net comp of 24.1%, the Pottery Barn Kids and Teens business grew at a net comp of 23.8%. West Elm delivered a comp of 21.8% on top of 14.1% last year. And our emerging brands, Rejuvenation and Mark and Graham, delivered another quarter of strong double-digit growth. Moving down the income statement. Gross margin expanded 400 basis points to 40% in the third quarter. This was driven by higher merchandise margins and occupancy leverage. Higher merchandise margins resulted from reduced promotional activity as we continue to shift to a content-led marketing strategy that focuses on the overall value creation of our high-quality, sustainable products. Occupancy leverage was driven by higher sales and an almost 3% or $5 million reduction in year-over-year occupancy costs, which includes the impact of reduced rent and operating costs from fewer stores. And this resulted in occupancy leverage of approximately 250 basis points at $174 million or 9.9% of revenues this year as compared to $179 million or 12.4% last year. This occupancy leverage, combined with our merchandise margin expansion, was partially offset by higher shipping costs year-over-year, driven by the substantial shift to e-commerce sales in the quarter as well as shipping surcharges from our third-party shippers. We were pleased to see that even with these higher shipping costs, our selling margins, which include our merchandise margins and shipping, expanded 150 basis points. And this, plus our occupancy leverage, allowed us to deliver our highest ever third quarter gross margin rate. SG&A leveraged 410 basis points to 24.3% of net revenues compared to 28.4% of net revenues last year. This was primarily driven by significant advertising leverage as we further optimize our digital spend on those initiatives that drove high returns in traffic and conversion, employment leverage and other leverage throughout SG&A from higher top line performance, lower variable store payroll and ongoing strong financial discipline. These results led to another quarter of record profitability with operating income growth of 152% to $277 million and operating margin expansion of 810 basis points to 15.7%. This resulted in diluted earnings per share of $2.56, which grew 151% or more than double that of last year at $1.02. We are proud to achieve these levels of profitability, while continuing to take care of our associates with heightened safety protocols, such as personal protective equipment, frequent cleaning and COVID testing as well as higher employment costs from providing pandemic bonuses for our store associates and increased hourly wages for our distribution center associates. On the balance sheet, we ended the quarter with a strong cash balance of $773 million compared to $155 million last year. This reflects the strength of our cash balance as we entered 2020 as well as the resilience of our business during this pandemic, generating positive operating cash flow of almost $727 million year-to-date. Our strong liquidity position allowed us to fund the operations of the business to invest nearly $125 million in capital expenditures in support of our future growth, and to return nearly $117 million in the form of continued quarterly dividend payments to our shareholders. Additionally, this quarter, as previously announced, we also repaid in full our short-term borrowings under our $500 million revolver, reinstated our share repurchase program, repurchasing $109 million this quarter alone, and we also committed to a quarterly dividend increase of 10% effective with our next dividend payment in the fourth quarter. These decisions reflect our confidence in the long-term growth and profitability trajectory of our business, and our commitment to maximizing returns for our shareholders. Moving down the balance sheet. Merchandise inventories were $1.125 billion for a decrease of 10.6% year-over-year versus a 12.2% decline in the second quarter. As Laura said, we have been working closely with our vendor partners to manage through the COVID disruptions and to expand capacity. But given the ongoing elevated demand in our high back orders, we do not expect to be fully back in stock until the second quarter of next year. What this means is that we have 700 basis points of demand sales from Q3 that we expect to fill in future quarters when the inventory is available and delivered to the customer. We are pleased that our customers have continued to want their orders delivered even if they have slight delays. Turning to our outlook for the rest of the fiscal year. It is clear from the latest surge in COVID infection rates across the country and globally that there is still, unfortunately, significant uncertainty related to this pandemic. As a result, we will not be providing specific sales and earnings guidance for fiscal 2020. But directionally, I can tell you our business continues to be strong across all brands 3 weeks into the fourth quarter. The momentum in our business is continuing. From a gross margin perspective, with lower levels of planned promotions, we expect merchandise margins to continue to expand year-over-year. We also expect occupancy leverage to continue, driven by the cost savings from the leases that we have already renegotiated year-to-date as well as the closure of unprofitable stores and final rent abatement negotiations. This will be partially offset by higher shipping costs that will continue to be a headwind in Q4 given the anticipated elevated levels of e-commerce sales and peak surcharges that will come into effect during the holiday peak selling season. In terms of SG&A, we expect to incur incremental costs associated with keeping our people and customers safe during the pandemic as well as additional supply chain employment costs. At the same time, we will continue to exercise strong cost discipline in all areas of nonessential spend to ensure that we can remain resilient during this period of uncertainty. As a result, on the year, we remain confident in our ability to drive substantial operating margin expansion versus last year due to our strong performance to date and the likely continuation of robust e-commerce trends through the balance of the year. With regards to capital allocation, in addition to the increased quarterly dividend and reinstated share buyback program, we have increased our capital investments in high-returning initiatives that focus on digital to drive our long-term growth. We expect our total CapEx this year to be back relatively in line with historical levels. As far as our longer-term outlook, we remain confident in our ability to drive strong top line results, while continuing to deliver operating margin expansion. It was clear pre-pandemic that our strategies for growth were working with accelerated comps through 2019 and an almost 10% comp heading into March before the pandemic accelerated. And these successful growth strategies, combined with our strong new customer count and growing loyalty customer base, the fundamental shift of business online as well as our leadership in sustainability, which has become increasingly more important to the consumer, reinforces our ability to continue to drive strong top line growth post-pandemic, and we expect to deliver this growth with further operating margin expansion. As you know, we have a highly profitable e-commerce business with an operating margin that, over the last 10 years alone, has averaged over 21%. Unlike many retailers who are still in the process of scaling their online business, we have already made the significant investments in our e-commerce platform over many years, which enables us to drive significant leverage throughout as we further scale our e-commerce business. This is a significant competitive advantage that speaks to the earnings power of our digital-first model. As we continue to prioritize e-commerce growth and structurally shift the channel mix of our business, we will drive material occupancy leverage as we renegotiate more favorable leases and close unprofitable stores. We have half of our leases coming up for renewal in the next 3 years, and we'll be looking at each lease and keep only those stores where the economics of the deal makes sense and where they are brand enhancing. Our plan, currently, is to close approximately 40 stores this year. Stores continue to be a competitive advantage as people like to see merchandise in-person. However, we are anticipating a future with fewer, better, more profitable stores. We are also planning for merchandise margin expansion by not only continuing to deliver more relevant content-led marketing, but by also building more value into our product line, which will enable us to be less promotional. Our strong product line and loved brands gives us pricing power that others don't have because their products are undifferentiated. This is very important as we expect costs globally to increase over the next several years. Another important driver of long-term operating margin expansion is SG&A leverage. And while there may be some increases in some lines, our shift to digital gives us confidence that we will be able to leverage throughout SG&A and to deliver operating margin expansion post-pandemic. In summary, our third quarter results continue to demonstrate the power of our distinctive position and driving strong profitable growth. Customers come to us for our in-house design products that are high quality, sustainably made and have the best value in the market. They come to us for our brands that serve a wide range of aesthetics and price points. They come to us for our inspiring content that is engaging and speaks to their needs. And they come to us for the convenience that we offer with our omnichannel model. These competitive advantages, combined with our long-term growth strategies and proven execution, give us the confidence that we'll continue to drive long-term strong sales and earnings growth and further returns for our shareholders, both this year and post-pandemic. And now I would also like to thank our associates. Without their unwavering commitment to all our stakeholders, none of this would be possible. I would now like to open the call for questions. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And first, we'll go to Oliver Wintermantel, Evercore ISI. -------------------------------------------------------------------------------- Oliver Wintermantel, Evercore ISI Institutional Equities, Research Division - MD & Fundamental Research Analyst [2] -------------------------------------------------------------------------------- Congratulations on this -- performance this quarter, again. I had a question, Julie, you mentioned shipping costs are staying high because of the shift to e-commerce, but then also for the rates of shippers. Do you expect that to actually increase in the fourth quarter versus the third quarter? And how do you plan to offset that? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [3] -------------------------------------------------------------------------------- We do because there's peak charges that come in -- surcharges that come in during the holiday selling season. But what I will say is that our supply team has done an unbelievable job of coming up with alternative carriers that we can use to help take care of the capacity constraints we have as well as the higher prices. And so it won't be a full offset, but they certainly are doing everything they can to help mitigate it. And then, of course, along with the merchandise margin expansion, the occupancy leverage, we should still see gross margin expansion regardless of the shipping costs. -------------------------------------------------------------------------------- Oliver Wintermantel, Evercore ISI Institutional Equities, Research Division - MD & Fundamental Research Analyst [4] -------------------------------------------------------------------------------- Got it. And in relation to that, if I may. Your COGS shipments from Asia, and I know you brought some of the production back into the U.S. Could you maybe update us how much of your sales are now coming from -- or for your COGS are coming from Asia? And how much is produced in the U.S.? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [5] -------------------------------------------------------------------------------- I don't think we've ever disclosed that. I think what we've said in the past is that we've been moving goods out of China to other locations, other Southeast Asian locations. And so our goal was to get the amount that we had produced in China down by about 50% by the end of this year, and we're still on target to do that. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Next up is Kate McShane, Goldman Sachs. -------------------------------------------------------------------------------- Katharine Amanda McShane, Goldman Sachs Group, Inc., Research Division - Equity Analyst [7] -------------------------------------------------------------------------------- A big question last quarter was the difference between the demand comp and the comp that you reported. And just what the demand comp would look like over time? Or what it could contribute to comp over time? So now that we are a quarter in here, I wondered if there was a way to quantify what the gap or what the demand comp, what part of it was made up, if you will, during the third quarter? Was it a big contributor to the acceleration in the comp that you saw from Q2 to Q3? And if not, just what was the unlock for the meaningful acceleration in your comp in Q3 versus Q2? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [8] -------------------------------------------------------------------------------- The comp is driven by the strength across all brands. I mean the products are selling. Our performance is on fire from that perspective. When you look back to the last quarter, we had about -- I think it's an 800 basis point differential between demand and net. In this quarter, 700. So as products come in, as long as we're accelerating our performance on the top line, it's going to be a little bit of a leapfrog as we go through by each quarter. The teams have been working very aggressively on partnership with our vendors, and we have great relationships with our vendors to get back in stock as quickly as possible. But obviously, given this incredible demand that we're seeing from our customers, it's going to take a little while longer than we expected, mostly into Q2 of next year. But we haven't seen -- the customer has been (technical difficulty) we let them know of these delays. And so that's the great news that we expect this delta between demand and net to effectively come in the future quarters. -------------------------------------------------------------------------------- Katharine Amanda McShane, Goldman Sachs Group, Inc., Research Division - Equity Analyst [9] -------------------------------------------------------------------------------- My follow-up question to that is, is there a potential for furniture mix to be higher in Q4? Just again, with some of these delays in the order as things get pulled or pushed back, could you see more furniture mix in Q4? And would that be any kind of headwind in addition to maybe the higher surcharges you would see in the fourth quarter? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- It's not a -- this is Laura. Usually, when we're talking demand comp in Q4, the nonfurniture, as a percent of total, comes up a bit as we do more gifting, and we have more Williams-Sonoma. However, you're right that we have a lot of net new furniture coming in, and hopefully, we'll fill a bunch of that. So it should not affect -- it shouldn't be a headwind. Furniture is a very profitable and great business for us. And we are just thrilled to be able to serve our customers and get the product in for them. And it doesn't matter what quarter that is. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- (Operator Instructions) We'll go next to Chuck Grom, Gordon Haskett. -------------------------------------------------------------------------------- Charles P. Grom, Gordon Haskett Research Advisors - MD & Senior Analyst of Retail [12] -------------------------------------------------------------------------------- Great quarter here. My question is on the margins and the outlook and the opportunity. You've got really 3 big buckets, reduced promotions, lower occupancy dollars and more efficient ad spend. So when you think ahead, and this isn't really about fourth quarter, but really more in the next couple of years. How would you rank those opportunities? What has you most excited? What categories do you think you have the most visibility on? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [13] -------------------------------------------------------------------------------- Well, I mean, quite honestly, I think it's across the board. I mean the most -- the thing that we're excited about is this fundamental shift in our business going online, and I think that's a trend that's across the industry. And so as that shifts to e-commerce, and you combine that with the fact that we have many new customers in e-commerce, those 2 combined is going to allow our e-commerce business to thrive. And as that continues to happen, again, if you go back and look at our op margins from the last 10 years, they've averaged above 21%. So just that alone will drive significant op margin expansion going forward. Then you layer in the fact that we are feeling very good about our merchandise margins and our ability to pull back on promotions with our content-led marketing strategy, and we expect that to continue. If you layer on the occupancy leverage that we're going to have from all these leases that we're renegotiating, they're coming up for renewal over the next 3 years and the stores that we may close if they're unprofitable, or we're going to keep the great ones and make sure that they have the profitability levels that we want, which we've set a higher bar. And so occupancy leverage will continue. And then, again, with that shift to e-commerce, the rest of the SG&A just leverages beautifully. So we think it's a huge opportunity going forward to be able to drive this business profitably. And the inflection point is the fact that we've shifted significantly to e-commerce, and we don't think that's going to change. -------------------------------------------------------------------------------- Charles P. Grom, Gordon Haskett Research Advisors - MD & Senior Analyst of Retail [14] -------------------------------------------------------------------------------- That's helpful. And then just maybe -- I just do 1 quick follow-up. One of the pushbacks on the story is just the sustainability of some of the trends that you're seeing today. So I guess I'm curious how you'd rank them in order of staying power over the next couple of years, the trends that are driving the strong demand you're seeing? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Sure. This is Laura. I want to remind everybody that pre-pandemic, we were running close to a 10% comp. And we saw great opportunity in our business, and we're very bullish actually about what we had in front of us. And so we've benefited clearly from the stay-at-home trend. But the bigger even pre-pandemic trends that were in our favor with industry consolidation away from brick-and-mortar. Previous to the pandemic, 80% was done in retail stores, and we knew that wasn't going to stay the same. And so as people shift to online and younger customers have a lot more purchasing power, we knew that we would be one of the people who would pick up that big market share. And then as I keep saying, we have such a competitive advantage with our distinctive positioning. There's a lot of people online, but we serve a wide variety of customers across esthetics and price points. And our brands, as you know, are loved by our consumers, and we design our own products. And that's a big difference between us and a lot of other big players who will also, by the way, be successful. It's not an either/or, but people are going to come to us because we have unique products that are accessible and that are sustainable and that are designed in-house and you can't buy elsewhere. And that is very powerful as our values really resonate with the consumers and the future consumers to be. So we're very optimistic about consumers shopping with us. And then, of course, from a financial profile, we've talked about the pieces of our business that are leverageable and that are real and substantive. And we've been investing in e-commerce for so long that our platform is able to hold a lot more volume without these huge step-up investments that other retailers who've had only 10% to 20%, took time to invest. So we fully see ourselves in the digital-first business with great stores, more profitable stores than ever. We see us 70%, upwards to 70% e-commerce, and that is big time for the financial profile of our company. Just -- those are the things I'm excited about. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Next from Morgan Stanley is Simeon Gutman. -------------------------------------------------------------------------------- Simeon Ari Gutman, Morgan Stanley, Research Division - Executive Director [17] -------------------------------------------------------------------------------- Nice quarter. Laura, and I'll ask this in 2 parts. First, can you -- you talked about acquiring customers, and that should help you going forward. Can you talk about what you're learning now from an operating perspective, whether it's inventory management, maybe markdown management, movement of product that makes you stronger post-pandemic? And then, Julie, you mentioned, I think, the demand versus actual comp but narrowed by 1 point. Should we look at that, first of all, as a just a nonevent? Or does this mean that the supply chain is catching up or the demand is slow to tick? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [18] -------------------------------------------------------------------------------- What was the last thing you said? Demand has slowed, or what did you say? -------------------------------------------------------------------------------- Simeon Ari Gutman, Morgan Stanley, Research Division - Executive Director [19] -------------------------------------------------------------------------------- So with the spread between the actual comp and the demand comp. If it narrowed by 1 point, it could just be a nonevent. But let's say, if we see that narrow by a few points going forward, can you attribute it more to the supply chain catching up to the demand? Or does that mean the demand slows a little? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [20] -------------------------------------------------------------------------------- Okay. I understand you now. Thank you. Okay. So it's always the toughest times that make you strongest, I think. And you have to really go back and look at what you're going to invest in. And what we've been doing is investing in the things that matter most to our customers and realizing the power of the people. You take care of your people and they do amazing things for you. And that's -- it's an operating principle that we know. But it's been really brought home through this, and we made those decisions early on to keep paying our people, not furlough them. And we made that decision. I've never seen anything as powerful as that decision for our store associates. And you go into our stores now, and there's so -- there's -- it's such a different experience than so many other places in the malls because of that relationship with them and how close we are with supporting each other. In terms of inventory management, we -- look, who would have called what's going to happen when it first came down. And I'm just impressed with the flexibility of the team in chasing products and getting us back in stock. And also, what we're doing now is just trying to quote the customer the best date we can the first time. So they see the delay in the beginning and it doesn't push out again. There's a big difference between if I know I'm waiting a certain amount of time for a sofa and if you push it out over and over. It's very different in how you feel about that delivering whether you, as a customer, considered on time. So we're building those delays as much as we can into our quote times now. I'll just, since I'm talking, take the last question. To me, the net comp has always been something we look at. It's -- we have never seen this kind of big gap between them. And that was because we had the slowed -- the stores closed and then this huge spike and inventory low. And of course, that's what happens the first time and you catch up. As we continue to accelerate sales, you can continue to see this longer because you have to build the inventory back to be in better stock. So demand could go -- net coming in certainly may cut the amount. But this will -- this is a thing that will, on the P&L, be a benefit to the future, as much as we hate it. We'd rather have it in stock for the customer. That's the way we're trying to operate the business, and that's what we're going to go for when we get the inventory back in stock. But it will give us more sales in the future because the net will come in on the previously very high demand. Thanks for the questions. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Next up is Brian Nagel, Oppenheimer. -------------------------------------------------------------------------------- Brian William Nagel, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [22] -------------------------------------------------------------------------------- First off, congrats on a really nice quarter. Nice work. So the question I want to ask, look, with regard to the gross margin expansion, you talked about the shift in marketing to more of a content strategy away from promotions. So I mean just a couple of questions within that. One is, is there a way to kind of size the benefit of that to margins here in the quarter? And then more strategically, clearly here, while demand was accelerating pre-pandemic, demand has turned even better here for the Williams-Sonoma family of companies through the crisis. Are you confident that the strategy of -- this content-driven strategy will yield the same type of results as demand trends potentially normalize back to what they may have been pre-pandemic? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [23] -------------------------------------------------------------------------------- I have Felix on the phone. Let me start the question, and then I'll pass it over to Felix. We're -- if anything, we've learned that we have to be the most adaptable to our current situation. I think when something like this pandemic takes you off your feet, you try new things, and we really decided that we -- people needed relevancy. They needed content that was inspiring. We're all busy staring at the screen. And that's much more exciting to hear about new things to cook at home with your family than it is to hear about the next 20% offer. And so we are always testing new things. We may find something else that's even better next year. But we're using our multiple brands to test different things in different brands and then roll them out. And so we don't take a huge risk with any given strategy. And so we've been -- at the same time, as we've been pulling down our promotions, we have been also really working on our value. So if you go back to scripts in the past, you'll hear me talking about value, everyday value as a key part of our strategy, opening price point in Pottery Barn. That Pottery Barn apartment strategy is exactly that, to make sure that we're getting the new customers in. And of course, West Elm is a growing brand. So we're going to continue to push value. It's not about price increases, it's about less promotions, less markdown inventory. We've now cleared the markdown substantially from where they were a year ago. Julie, do you want -- can we give him that number? You want to go ahead with that? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [24] -------------------------------------------------------------------------------- It's down 37%. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [25] -------------------------------------------------------------------------------- Our clearance inventory. -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [26] -------------------------------------------------------------------------------- Clearance inventory. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [27] -------------------------------------------------------------------------------- Yes. And Felix, do you want to add anything to this? -------------------------------------------------------------------------------- Felix Carbullido, Williams-Sonoma, Inc. - Executive VP & CMO [28] -------------------------------------------------------------------------------- Yes. Sure. I think it's a great question. So a couple of proof points when we look at the business is, in terms of -- is the content-led messaging cutting through. I look at the growth in our active 12-month customers. I see growth in customers who we haven't seen in over a year and that have returned to make a purchase. And our continued double-digit growth in new customers. So we like to see growth amongst all 3 cohorts. And then in terms of what it means for the future growth, the new -- the trends in new customers are incredibly encouraging. Number we really haven't seen before. And I'm talking about higher retention rates for new customers and higher rates of cross-brand purchasing. So we believe those are strong indicators of their value over time. So those are some of the proof points I look at when is the message resonating. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Our next question is Brad Thomas, KeyBanc Capital Markets. -------------------------------------------------------------------------------- Bradley Bingham Thomas, KeyBanc Capital Markets Inc., Research Division - Director and Equity Research Analyst [30] -------------------------------------------------------------------------------- Let me add my congratulations on some great results here. I was hoping to follow-up on the topic of margins, and it does seem that there are some structural changes that support this breakout to new record highs for margins and a number of drivers for you going forward. I was hoping we could just talk maybe about some of the other side of the ledger here as we -- to keep us from maybe getting too far ahead of ourselves. Could you help us think about some of the dynamics like the record low clearance activity you're seeing, some of the increases in raw materials and transportation and labor costs? And maybe how we might think about factoring those in as we fine-tune our models for 2021? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [31] -------------------------------------------------------------------------------- Yes. I think -- I mean, as we've said before, we still expect to have strong gross margins regardless of some of those headwinds that you've laid out. Obviously, the team has been very aggressive at working through that and thinking through what those costs could be like. But obviously, because we design and engineer our product, that gives us a price point strength that we can then create the right price for any of those headwinds in the raw materials or transportation that you spoke to. Transportation, we do think, will continue to be a headwind. But as I mentioned earlier, the supply chain team has done a phenomenal job, sort of navigating through this. They acted quickly, aggressively to come up with alternative carriers. And so we're managing through that to see how we can mitigate the cost on that go forward. So even with those, again, the substantial tailwind we get by shifting to e-commerce and the flow-through that, that provides, as you've seen, to your point, in this quarter, we think that's going to be very helpful, along with the merchandise margins, along with the occupancy leverage to be able to drive significant op margin expansion going forward. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- Adrienne Yih from Barclays is up next. -------------------------------------------------------------------------------- Adrienne Eugenia Yih-Tennant, Barclays Bank PLC, Research Division - MD, Senior eCommerce & Brand Retailing Analyst [33] -------------------------------------------------------------------------------- I will add my congratulations. Laura, I wanted to -- very well done, and the promotions, the content-led marketing is actually really coming through. It's very obvious. So kudos on that. But Laura, I wanted to ask you, as we go into -- kind of the big question of next year is how do you comp the comp? A lot of it comes from sort of new customers, new product lines, or customers -- same customers buying more of products. So one of the ones that really interested me here was your B2B comment. What is the size of that now? Can you give us some of the metrics of I mean -- and forgive me if I'm ignorant on this, but is it a wholesale transaction? Is it a discounted retail price point, but give us some metrics on that and how we see that unfolding over time? And then, Julie, on the long-term target, the mid- to high-single-digit top line, how should we think about that in EPS? And if I may, one last one. 70% e-commerce, stores will open again next year. So should we still think about that penetration as being 70%? And the ROIC aspect of it when you move to e-commerce truly is improving the cash flow. So I totally agree in that regard. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [34] -------------------------------------------------------------------------------- Great. Thank you for the question on B2B. So we decided for the first time to give you guys the number. So I think you probably might have missed it in the script, we're going to be over $300 million this year. And so it's been sizable. And we really are continuing to see even stronger strength. We passed our first $100 million milestone in a single quarter for the first time. And our growth was really driven by, in B2B, our internal program improvements and execution on our key strategies with a continued push to diversify our business pipeline across various industry verticals. And we're acquiring new customers. Average order size is improving at double-digit rate, and we're also seeing consistent build in sales volume each month. In terms of strategic initiatives, we're aggressively expanding our contract deployment. So really converting our products to be contract grade. And to build brand awareness, we have transitioned to a virtual digital marketing and engagement platform. And for example, this is fun, we partnered with Interior Design Magazine this quarter to take part in a series of live interviews as well as an Instagram takeover featuring all of our brands. We're also expanding our B2B offering with Contract in virtual events such as cooking classes, which have been sell-out for us. We are charging for these virtual events, very interesting business opportunity that we're thinking about in a big way for the future. So industry -- the industry, believe it or not, continues to show positive signs for recovery, and we're seeing the Marriott pipeline continue. And there is a lot of -- the hotel occupancy rates, believe it or not, are rebounding from the industry lows. And the renovations were heavily impacted from COVID and then I'm moving forward again. So we're seeing good internal indicators that the pipeline is only going to get stronger, and we've built the foundation so that we can handle these big orders. It's depending on what it is. It's a discount on retail, how big it is, and that's how we run it. So -- and as I mentioned earlier, usually, people have to go to 10 different suppliers to furnish these hotels or these projects, and they can just come to us and we can do the whole thing. And we can do -- made-to-size made-to-order products for them as well, which a lot of people can't do. So that's, I think -- in addition to our great sales team, I think that's why we're winning. So I'll hand it over to Julie on the comps for the future and what that means for EPS, although we're not giving you that. But I'm going to let her comment about that. -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [35] -------------------------------------------------------------------------------- Yes. So we haven't disclosed that. But I think, obviously, you can translate, from a mathematical perspective, if you make your assumptions as to where it will fall. On the revenue side, clearly, we're leaning towards the higher end of that. And what kind of operating margin expansion could occur when you factor in the shift to e-commerce and you factor in the merch margin expansion and you also factor in the occupancy leverage continuing. And then clearly, I mean, it's kind of a nonanswer here, but it's -- let you do the math and you can come up with EPS. The bottom line is we expect strong growth in EPS. There's no reason from a translation from the op margin down to EPS at this time, that there would be any sort of reason that would cause it to be disconnected. If anything, interest expense would probably be coming down next year, since we would be in the line and things like that. So, sorry, it's kind of a nonanswer, but hopefully it helps. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- (Operator Instructions) We'll go next to Anthony Chukumba, Loop Capital Markets. -------------------------------------------------------------------------------- Anthony Chinonye Chukumba, Loop Capital Markets LLC, Research Division - MD [37] -------------------------------------------------------------------------------- I just had a quick question. So Julie, you mentioned fourth quarter surcharges for deliveries. And I know that's a seasonal thing, but I just want to make sure I understand. Is that -- are you seeing higher surcharges than you normally would in the fourth quarter? Or are you just sort of mentioning there are these surcharges you need to be aware of from a shipping cost perspective? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [38] -------------------------------------------------------------------------------- Yes. No, it definitely will be higher. I think -- I'm sure people saw the EPS release, I think it was last quarter, where they indicated that for all retailers, they're passing along the cost. So we're not alone. But I think the difference is, as I say over and over, our phenomenal supply chain team has really done a great job. They've acted quickly and aggressively. And as you know, that's sort of our company culture. And so we moved on it immediately to be able to try to mitigate that as best we can, both from a capacity standpoint and from a pricing standpoint, and they have done a phenomenal job, coupled with the tech team to make it all possible. And so it doesn't mean we're not going to have these incremental costs or surcharges. But certainly, compared to others, we're going to be in a much better spot. So... -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [39] -------------------------------------------------------------------------------- And UPS is a great partner of ours, and they've been a good partner. But the truth is there's a lot more cost with COVID in the supply chain. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question is Steven Forbes, Guggenheim Securities. -------------------------------------------------------------------------------- Steven Paul Forbes, Guggenheim Securities, LLC, Research Division - Analyst [41] -------------------------------------------------------------------------------- I wanted to follow-up on the customer cohorts, right, and maybe specifically focus on the active 12-month customer base. I'm really just curious if you can expand on how that cohort has engaged with the portfolio of brands during 2020, right, maybe relative to '19? Any context there? And whether you have seen any change in behavior, right? Whether it's opting out or any sort of behavioral change, right, as the business has migrated, right, more towards this content-led and less promotional activity, right? As we think about your conviction behind ongoing growth and market share gains. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [42] -------------------------------------------------------------------------------- I'm going to let Felix take that. -------------------------------------------------------------------------------- Felix Carbullido, Williams-Sonoma, Inc. - Executive VP & CMO [43] -------------------------------------------------------------------------------- Yes. Sure. Thank you for the question. I guess I'll start with -- it's a record high number of active customers. So -- and that's driven both by the existing customer base and new customers coming in, especially in the D2C channel. So I look at that number and I say, "okay, well, the message that we're giving is clearly resonating." I think about e-mail metrics, including engagement, open rates. I look at our social engagement, those are record high numbers that we've seen. So the message is clearly cutting through. In terms of the makeup of the customers, I mean, Laura mentioned, we're starting to see more millennials into our customer base at a greater rate than we ever have before. And that -- as we all know, that's a huge generation. It's the biggest generation we've seen in our lifetime. So that gives us promise for all of 2021 and further on getting those customers now as they move into household formation. And then I think, lastly, the majority of our customers, our new customers are now members of The Key, our cross-brand loyalty program. So we've seen Key members have higher repeat rates and higher retention rates than non-Key members. So all of that means our active customer base is well suited for growth for next year. Did that answer your question? -------------------------------------------------------------------------------- Steven Paul Forbes, Guggenheim Securities, LLC, Research Division - Analyst [44] -------------------------------------------------------------------------------- Yes, it did. And I don't know -- I don't think we've got an update on The Key members in some time, and given that you mentioned. Is that something you can provide today as well? -------------------------------------------------------------------------------- Felix Carbullido, Williams-Sonoma, Inc. - Executive VP & CMO [45] -------------------------------------------------------------------------------- Sure. Yes, we have over 11 million members, and as I mentioned, most of our new customers are now enrolled. And The Key, which is our loyalty program, as you know, it's a very cost-efficient way for us to drive incremental sales. And I'm proud to say that year-to-date, we now have more cross-brand customers than we ever had in our company. So that we know is an incremental opportunity for all of us. And clearly, much more efficient way to drive sales with existing customers than acquiring new ones. So again, gives us confidence in advertising efficiency going forward. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- Our next question is Marni Shapiro, Retail Tracker. -------------------------------------------------------------------------------- Marni Shapiro, The Retail Tracker - Co-Founder [47] -------------------------------------------------------------------------------- Congratulations. So I'm going to move on past COVID. I'm tired are talking about it to the post-COVID world. Laura, you've talked a lot about your point of differentiation and your brands and everything that you guys do internally. You've also, for quite some time now, focused your company on sustainability and organic products. And things that, I think, millennials and Gen Z are very interested in. So can you think, in 2021 as everybody has discovered that home is a great business, how do you think about marketing sustainability and this part of the business to keep your positioning and kind of even better position you guys for the future? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [48] -------------------------------------------------------------------------------- Thank you so much for the question. It's so important to us, and we will continue to pursue sustainability programs that are strategic and material to our business and important to our customers. We're going to lead here. We're going to lead in ethical production, we're going to lead in worker well-being, and we'll build out our environmental commitments. We put out our report in October. And for next year, we're going to -- for climate and energy. We're going to build on this year's Scope 3 footprint and CDP disclosure to develop and set a science-based target for reduction. And responsibly materials and finishes, we're going to continue our leadership in Cottonwood and GreenGuard. And we're going to expand our commitments around lower-impact alternatives like recycled polyester. And in waste and circularity, we're going to build off of our scale and our successful circular pilots. And across all these ESG areas, we'll continue to disclose and measure and track our progress. For example, this year, in our corporate responsibility report, we made public our commitment to diversity inclusion with our equity action plan and our first-ever data on gender and ethnicity representation. We are committed to our mantra of good by design, and our pillars are people, planet and purpose. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Next up is Seth Basham, Wedbush. -------------------------------------------------------------------------------- Seth Mckain Basham, Wedbush Securities Inc., Research Division - MD Of Equity Research [50] -------------------------------------------------------------------------------- Congrats as well. My question is really a clarifying one. Julie, I think you mentioned that you expect operating margin expansion post-pandemic. Should we take that to mean after we get a virus, you still expect operating margins to rise from whatever trailing 12-month level they're at for the next 12 months? And after we get a vaccine, I should say? -------------------------------------------------------------------------------- Julie P. Whalen, Williams-Sonoma, Inc. - Executive VP & CFO [51] -------------------------------------------------------------------------------- Yes. We do expect ongoing operating margin expansion because our expectation is that top line is going to continue to thrive, especially in e-commerce, as I mentioned. And all the things that we're doing from a margin expansion perspective and occupancy leverage, all of that will continue. And so we do expect it to expand above where we're landing on this year. -------------------------------------------------------------------------------- Seth Mckain Basham, Wedbush Securities Inc., Research Division - MD Of Equity Research [52] -------------------------------------------------------------------------------- Fantastic. And then secondly, as we just think about some of the shipping dynamics one more time, what are you doing in terms of shipping fees that you're charging customers to mitigate some of the higher costs that you're incurring? -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [53] -------------------------------------------------------------------------------- We haven't changed our model. It's the same shipping model that we have. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Ladies and gentlemen, that is all the time we have for questions today. I'd like to hand the conference back to Laura for any additional or closing remarks. -------------------------------------------------------------------------------- Laura J. Alber, Williams-Sonoma, Inc. - President, CEO & Director [55] -------------------------------------------------------------------------------- Sure. Thank you all for joining us today, and I really, sincerely wish you a wonderful and safe Thanksgiving with your friends or probably just your family, but maybe your friends, if I assume. So we'll be talking to you soon and look forward to it. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- Once again, everyone, that does conclude today's conference. Thank you all for your participation. You may now disconnect.