"During the first quarter, we substantially improved our customer service by fulfilling customer backorders more quickly than we had expected and improving our recent trends in order fulfillment rates," said Ed Mueller, chief executive officer, in a statement. "The success of this initiative allowed us to realize revenues and earnings in the first quarter that we had not expected to realize until the second quarter."
Net revenues for the first quarter of 2005 increased 12.4% over the first quarter of 2004 to $720.7 million. Retail net revenues in the first quarter of fiscal year 2005 increased 13.1% to $397.2 million from $351.1 million in the same period last year. Executives attributed the increase to a year-over-year increase in retail square footage of 11.1%.
Direct-to-customer net revenues (comprised of both catalog and Internet revenues) in the first quarter of fiscal year 2005 increased 11.6% to $323.5 million versus $289.8 million in the first quarter of fiscal year 2004. Net revenues generated in the Pottery Barn, West Elm, Williams-Sonoma and Pottery Barn Kids brands drove the increased earnings.
Internet revenues in the first quarter increased to $153.5 million, which included the incremental net sales generated by the November 2004 launch of the Hold Everything website. This is a 36% increase from $112.9 million in the first quarter of 2004.
Expressed as s a percentage of net revenues, gross margin in first quarter was reported at 39.5% versus 38.3% in the Q1 of 2004. The company attributes the 120 basis-point increase to expense reductions in shipping costs and a rate reduction in occupancy expenses, partially offset by a furniture-driven rate increase in merchandise cost of goods sold.
The company anticipates Q2 revenues range from $774 million to $790 million, versus previous guidance in the range of $782 million to $798 million. This represents a projected increase in net revenues in the range of 12.2% to 14.6% versus $689.6 million in the second quarter of 2004.
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