Williams-Sonoma, Inc. (NYSE: WSM) stock fell 0.50% (As on May 24, 11:44:22 AM UTC-4, Source: Google Finance) after the company posted mixed result for the first quarter of FY 23. Comparable brand revenue fell 6% with a 2-year comp growth of 3.5% and a 4-year comp growth of 46.5%. The company has delivered a gross margin of 38.5%, or 38.6% on a non-GAAP basis, deleveraging 520bps on a non-GAAP basis, primarily driven by higher inbound and outbound shipping and freight costs with occupancy deleverage of 170bps. Occupancy costs increased 8.7% to $203 million, or increased 8.6% to $202 million on a non-GAAP basis.  The company has delivered operating income of $199 million, with an operating margin of 11.4%, on a GAAP basis; or $226 million, with an operating margin of 12.9%, on a non-GAAP basis.

The company has maintained strong liquidity position of $297 million in cash at the end of the quarter, with no borrowings outstanding, and $343 million in operating cash flow enabling the company to deliver strong returns to stockholders of $358 million through stock repurchases of $300 million and dividends of $58 million. Meanwhile, the company has recorded a non-recurring charge of $26.2 million for (i) exit costs associated with our West Coast manufacturing facility of $9.3 million, (ii) exit costs associated with Aperture of $8.6 million, and (iii) company-wide reduction-in-force actions of $8.3 million, right-sizing the teams domestically and internationally, primarily focused on corporate non-customer facing positions. Combined, we expect these changes will result in a pre-tax, annualized savings of $40 million.

WSM in the first quarter of FY 23 has reported the adjusted earnings per share of $2.64, beating the analysts’ estimates for the adjusted earnings per share of $2.38. The company had reported the adjusted revenue growth of 35.9 percent to $1.76 billion in the first quarter of FY 23, missing the analysts’ estimates for revenue of $1.8 billion. Pottery Barn ran down slightly with a -0.4% net comp in Q1 but ran 14% on a two-year basis and 54.4% on a four-year basis. The Pottery Barn Children’s business ran a -3.3% comp in Q1.

Management reiterated its fiscal 2023 and long-term guidance. 2023 net revenue growth is expected to range from -3% to +3%, with an operating margin of 14%-15%.

In the long-term, management sees mid-to-high single-digit annual net revenue growth with an operating margin above 15%. The company is  working hard to rebalance inventories to reduce multiple and out-of-market shipments, both of which will improve service levels further and reduce costs.