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Williams-Sonoma, Inc. net up 12% in Q2

Plans to expand into Philippines

Williams-Sonoma, Inc. announced operating results for its fiscal second quarter 2013, and announced plans to expand Williams-Sonoma, Greensboro, N.C.its brands in its next international market - the Philippines.

For the 13 weeks ended August 4, 2013, profits grew 12.3% to $982 million versus $874 million for the 13 weeks ended July 29, 2012. Retail growth was driven primarily by Pottery Barn, West Elm and international franchise operations offsetting a modest decline at Williams-Sonoma stores.

According to a report in the Wall Street Journal, the company's shares were halted briefly in regular-session trading Wednesday after the second quarter financials were released erroneously and reported by financial news outlets. A company spokesperson said they were looking into how the release became public as Williams-Sonoma had been expected to release results after the market closed on Wednesday.

Laura Alber, president and CEO said, "Our second quarter results demonstrate the strong demand for our brands and the profitability of our multi-channel, multi-brand platform. We generated a 12% increase in revenue and a 14% increase in diluted EPS over last year. We achieved sales and profit levels that exceeded our expectations while making investments in our growth objectives and in the infrastructure to support them."

Direct-to-customer (catalog, internet) net revenues increased 15.3% to $478 million from $414 million in Q2 12, primarily driven by Pottery Barn, West Elm, PBteen and Pottery Barn Kids. DTC net revenues generated 49% of total company net revenues in Q2 13, compared to 47% in Q2 12.

Retail net revenues in Q2 13 increased 9.7% to $505 million from $460 million in Q2 12, driven primarily by Pottery Barn, West Elm and international franchise operations, partially offset by a decrease in Williams-Sonoma. Including three net new stores within Q2 13, retail leased square footage increased 2% from the end of Q2 12.

Operating margin in Q2 13 was 8.0%, equal to Q2 12.

"Longer term, we remain confident in our ability to continue to grow sales, maximize profitability and capture market share as we build on our successes across brands and geographies," Alber said.

The company also announced this week a multi-year franchise agreement with Stores Specialists, Inc. for Williams-Sonoma's brands in the Philippines.

Pottery Barn and Pottery Barn Kids will be the first brands to debut and are expected to open in Manila in early 2014 at Bonifacio High Street, the first main street retail concept in the Philippines. The agreement with SSI includes development rights in the Philippines for all brands in the Williams-Sonoma, Inc. portfolio including: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen and West Elm.

In the past year, Williams-Sonoma, Inc. has made multiple announcements surrounding its global expansion strategy including the expansion of its Middle East retail footprint with M.H. Alshaya Company, as well as new company-owned stores in Australia and the United Kingdom. In May 2013, the company introduced its first Australia stores in Sydney with the opening of Williams-Sonoma, Pottery Barn, Pottery Barn Kids and West Elm at Bondi Junction. Additional West Elm store openings are expected in Melbourne and London later this year.

"We believe there is a significant opportunity to extend the reach of our brands globally," Alber said. "The Philippines is a natural market for us, with a strong, steadily growing economy and consumer interest in high-quality, stylish home products. We are pleased to partner with SSI, a company with demonstrated success developing well-known brands in the Philippines and a deep understanding of the local customer base. We are confident they are the right partner to introduce our brands to the Philippines market and deliver on our company promise to enhance customers' lives at home."

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