Pottery Barn 2014 Annual Report Download - page 40

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition, results of operations, and liquidity and capital
resources for the 52 weeks ended February 1, 2015 (“fiscal 2014”), the 52 weeks ended February 2, 2014 (“fiscal
2013”), and the 53 weeks ended February 3, 2013 (“fiscal 2012”) should be read in conjunction with our
Consolidated Financial Statements and notes thereto. All explanations of changes in operational results are
discussed in order of magnitude.
OVERVIEW
In fiscal 2014, our net revenues increased 7.1% to $4,698,719,000, compared to $4,387,889,000 in fiscal 2013,
with comparable brand revenue growth of 7.1%. Diluted earnings per share increased to $3.24 in fiscal 2014
(including a $0.04 benefit from our share of the VISA/MasterCard antitrust litigation settlement), versus $2.82 in
fiscal 2013 (including a $0.02 charge related to the retirement of one of our former brand presidents), and we
returned $350,135,000 to our stockholders through stock repurchases and dividends.
E-commerce net revenues in fiscal 2014 increased by $255,672,000, or 12.1%, compared to fiscal 2013, with
increases across all brands, led by West Elm, Pottery Barn and Williams-Sonoma. E-commerce net revenues
generated more than 50% of our total company net revenues in fiscal 2014 versus 48% in fiscal 2013.
Retail net revenues in fiscal 2014 increased by $55,158,000, or 2.4%, compared to fiscal 2013, led by West Elm
and Pottery Barn, partially offset by a decrease in Williams-Sonoma due to store closures at the end of fiscal
2013.
During fiscal 2014, we had net revenue growth in all of our brands and across channels. In Pottery Barn, our
largest brand, comparable brand revenues increased 5.8% in fiscal 2014, on top of an increase of 10.4% in fiscal
2013. This growth was primarily driven by our upholstery and leather furniture collections. In the Williams-
Sonoma brand, comparable brand revenues increased 3.8% in fiscal 2014 compared to fiscal 2013, with solid
performance across our cookware, food, entertaining and tabletop product categories. In West Elm, comparable
brand revenues grew 18.2% in fiscal 2014, on top of an increase of 17.4% in fiscal 2013. Growth in the brand
was broad-based across all categories. In Pottery Barn Kids, comparable brand revenues increased 5.9% in fiscal
2014 compared to fiscal 2013, led by our nursery, furniture, seasonal and school gear collections. In PBteen,
comparable brand revenues increased 5.7% in fiscal 2014, on top of an increase of 14.1% in fiscal 2013, driven
by our textiles and furniture collections.
In fiscal 2014, we made progress against our long-term strategic growth initiatives, including strengthening our
brands; laying the foundation for global expansion and new business development; investing in our supply chain
to reduce cost and improve service; and investing in e-commerce, as well as the technologies and infrastructure
underlying all of our initiatives.
As we look to fiscal 2015, we plan to invest in those areas where we see sustainable, long-term returns for our
stockholders by making investments in: our e-commerce platform; our supply chain initiatives; new stores,
particularly in the West Elm brand; and our longer-term growth initiatives, including our newer businesses and
global expansion. Looking ahead, we see opportunities for continued growth and believe we are well positioned
to deliver on all of our long-term strategic growth initiatives.
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