Williams-Sonoma, Inc. Announces a 4.4% Increase in 2007 Holiday Sales For the 9-Week...

Williams-Sonoma, Inc. Announces a 4.4% Increase in 2007 Holiday Sales For the 9-Week Period Ended December 30, 2007 Versus the 9-Week Period Ended December 31, 2006

SAN FRANCISCO--(Business Wire)--Williams-Sonoma, Inc. (NYSE:WSM) today announced that net revenues
for the 9-week holiday period ended December 30, 2007 increased 4.4%
to $1.021 billion versus the comparable 9-week holiday period ended
December 31, 2006, including a comparable store sales decrease of
0.4%.

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*T
Holiday Net Revenues by Sales Channel
(All Amounts in Millions Except Percentages)

9-Week
Period 9-Week Period
Ended Ended Year-Over-
December December 31, Year %
30, 2007 2006 Increase
----------------------------------------------------------------------
Retail Net Revenues $650.6 $629.6 3.3%
----------------------------------------------------------------------
Direct-to-Customer Net Revenues $370.6 $348.2 6.4%
----------------------------------------------------------------------
Total Net Revenues $1,021.2 $977.8 4.4%
----------------------------------------------------------------------
Comparable Store Sales % Change (0.4%) 0.8%
----------------------------------------------------------
*T

Also during the holiday period, we repurchased and retired
1,516,706 shares of our common stock at a weighted average cost of
$27.49 or $41.7 million. In addition, as announced in a separate press
release this morning, our Board of Directors authorized the repurchase
of an additional $150 million of the company's common stock.

Howard Lester, Chairman and Chief Executive Officer, commented,
"As we indicated in our third quarter earnings release, we entered the
fourth quarter with a heightened sense of caution due to our belief
that the macro environment was weakening and that retail traffic was
slowing. In fact, the macro environment did weaken and traffic slowed
even further than we anticipated, particularly in our home furnishings
businesses. Notwithstanding the softer traffic, however, the strength
of our brands and our ability to serve our customer in three distinct
channels drove a 4.4% increase in year-over-year revenue growth --
with positive growth in all brands and all key merchandising
categories. While this was below our expectations, we were pleased
with this result in comparison to the holiday performance of the
retail sector overall. We are, however, seeing continued weakness in
January and as such, are reducing our fourth quarter net revenue and
diluted earnings per share guidance accordingly. Fourth quarter net
revenue is now expected to be in the range of $1.363 billion to $1.385
billion versus previous guidance of $1.387 billion to $1.417 billion
and diluted earnings per share is expected to be in the range of $1.11
to $1.14 versus previous guidance of $1.19 to $1.25."

OUTLOOK FOR FISCAL YEAR 2008

Mr. Lester continued, "As we look forward to 2008, which will be a
52-week year versus a 53-week year in 2007, we are focused on four key
initiatives: (1) capitalizing on the success of our 2007 key growth
strategies, including the revitalization of the Pottery Barn brand;
(2) driving growth in our core brands through enhanced capabilities in
direct marketing and e-commerce; (3) aggressively identifying real
estate expansion opportunities for the West Elm brand; and (4)
continuing to drive operational efficiencies in our furniture supply
chain - particularly in the area of furniture returns, replacements,
and damages. To support our growth in 2008, we are expecting a
mid-single digit increase in retail leased square footage. Due to
successful direct marketing initiatives, such as catalog versioning,
paid search, and e-mail, we are not planning to increase catalog
circulation in 2008."

Mr. Lester additionally commented, "We do believe, however, that
the macro retail environment is going to be increasingly challenging
in 2008 and are planning our business accordingly. Therefore, our
preliminary estimates for 2008 on a GAAP basis (52 weeks in 2008
versus 53 weeks in 2007) assume a flat to low-single digit decrease in
net revenue and a mid-single to high-single digit decrease in diluted
earnings per share. The loss of the 53rd week in 2008 is negatively
impacting revenue growth by approximately 2% and diluted earnings per
share growth by approximately 3%. On a comparable 52-week to 52-week
basis, our preliminary estimates assume a flat to low-single digit
increase in net revenue and a low-single to mid-single digit decrease
in diluted earnings per share. We will provide updated and more
in-depth guidance for fiscal 2008 when we have more visibility to
post-holiday sales trends and finalize our 2008 business plans."

FOURTH QUARTER 2007 FINANCIAL GUIDANCE

Net Revenues

-- Net revenues for the fourth quarter, a 14-week quarter, are
projected to be in the range of $1.363 billion to $1.385
billion, versus previous guidance in the range of $1.387
billion to $1.417 billion. This represents a projected
increase in net revenues in the range of 8.6% to 10.4% versus
$1.255 billion in the fourth quarter of fiscal year 2006, a
13-week quarter. On a 14-week to 14-week basis, this
represents a projected increase in the range of 2.6% to 4.2%.

-- Retail net revenues for the fourth quarter, a 14-week quarter,
are projected to be in the range of $841.0 million to $853.0
million, versus previous guidance in the range of $861.0
million to $879.0 million. This represents a projected
increase in retail net revenues in the range of 7.0% to 8.6%
versus $785.8 million in the fourth quarter of fiscal year
2006, a 13-week quarter. On a 14-week to 14-week basis, this
represents a projected increase in the range of 2.7% to 4.2%.

-- Change in comparable store sales is projected to be in the
range of (1.5%) to 0.0%, versus previous guidance in the range
of 0.5% to 2.5%. This compares to comparable store sales
growth in the fourth quarter of fiscal year 2006 of (0.6%).
Comparable stores exclude new retail concepts until such time
as we believe that comparable store results in those concepts
are meaningful to evaluating the performance of the retail
strategy. For fiscal year 2007, we expect to continue to
exclude West Elm and Williams-Sonoma Home.

-- Retail leased square footage is projected to increase on a
year-over-year basis in the range of 5.3% to 5.8%, unchanged
from previous guidance. Retail selling square footage is
projected to increase in the range of 5.7% to 6.2%, unchanged
from previous guidance. This compares to retail leased and
selling square footage growth in the fourth quarter of fiscal
year 2006 of 8.3% and 7.9%, respectively.

-- Direct-to-customer net revenues (comprised of both catalog and
Internet revenues) for the fourth quarter, a 14-week quarter,
are projected to be in the range of $522.0 million to $532.0
million, versus previous guidance in the range of $526.0
million to $538.0 million. This represents a projected
increase in direct-to-customer net revenues in the range of
11.3% to 13.4% versus $469.1 million in the fourth quarter of
fiscal year 2006, a 13-week quarter. On a 14-week to 14-week
basis, this represents a projected increase in the range of
2.3% to 4.2%.

Gross Margin

-- Gross margin as a percentage of net revenues in the fourth
quarter of fiscal year 2007 is expected to be in the range of
41.8% to 42.0%, versus previous guidance in the range of 43.0%
to 43.2%.

-- Gross margin as a percentage of net revenues in the fourth
quarter of fiscal year 2006 was 43.2%. The revised 2007
guidance represents a decrease in the gross margin rate in the
range of 120 to 140 basis points.

Selling, General and Administrative Expenses (SG&A)

-- Selling, general and administrative expenses as a percentage
of net revenues in the fourth quarter of fiscal year 2007 are
expected to be in the range of 27.4% to 27.6%, unchanged from
previous guidance.

-- Selling, general and administrative expenses as a percentage
of net revenues in the fourth quarter of fiscal year 2006 were
27.6%. The 2007 guidance represents a projected decrease in
the SG&A expense rate of 20 basis points at the low end of the
range and no change at the high end of the range.

Interest (Income) Expense - Net

-- Interest (Income) Expense - Net in the fourth quarter of
fiscal year 2007 is projected to be interest income in the
range of $0.0 million to $0.5 million, versus previous
guidance in the range of $0.0 to $1.0 million. This compares
to net interest income in the fourth quarter of fiscal year
2006 of $2.1 million.

Income Taxes

-- The income tax rate in the fourth quarter of fiscal year 2007
is projected to be in the range of 38.4% to 38.8%, versus
previous guidance in the range of 38.9% to 39.3%. This
compares to an income tax rate in the fourth quarter of fiscal
year 2006 of 38.6%. The projected income tax rate for the
fourth quarter of fiscal year 2007 includes an approximate 80
basis point increase in the effective income tax rate or
$0.014 per diluted share impact from applying FIN 48 (see Note
5 in Exhibit 1). Throughout the year, we expect that there
could be ongoing variability in our quarterly tax rates as
taxable events occur and exposures are evaluated.

Diluted Earnings Per Share

-- Diluted earnings per share on a GAAP basis in the fourth
quarter of fiscal year 2007, including an approximate 80 basis
point or $0.014 per diluted share increase in the effective
income tax rate related to FIN 48 (see Note 5 in Exhibit 1),
are expected to be in the range of $1.11 to $1.14, versus
previous guidance in the range of $1.19 to $1.25. Diluted
earnings per share in the fourth quarter of fiscal year 2007
on a non-GAAP basis, excluding an approximate 80 basis point
increase in the effective income tax rate or $0.014 per
diluted share related to FIN 48, are expected to be in the
range of $1.12 to $1.15 (see reconciliation below), versus
previous guidance in the range of $1.20 to $1.26.

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*T
Reconciliation of Fourth Quarter GAAP to Non-GAAP Diluted Earnings Per
Share
(See Exhibit 1 for Notes 5 and 6)

Q4 Q4 % YOY
2007 2006 Increase/
Guidance Actual (Decrease)
----------------------------------------------------------------------
GAAP Diluted EPS(a) $1.11 - $1.14 $1.06 4.7% - 7.5%
----------------------------------------------------------------------
Impact of FIN 48 (Note 5) $0.014 - -
----------------------------------------------------------------------
Non-GAAP Diluted EPS Excluding New
Accounting Pronouncements and
Unusual Business Events (Note
6)(a) $1.12 - $1.15 $1.06 5.7% - 8.5%
----------------------------------------------------------------------

(a)Due to rounding to the nearest cent per diluted share, totals may
not equal the sum of the line items in the table above.
*T

-- This reconciliation is being provided to facilitate a
meaningful evaluation of the company's fourth quarter of
fiscal year 2007 diluted earnings per share guidance on a
comparable basis with our 2006 quarterly results.

Merchandise Inventories

-- Merchandise inventories at the end of the fourth quarter of
fiscal year 2007 are projected to be in the range of $665.0
million to $690.0 million, unchanged from previous guidance.
Merchandise inventories were $610.6 million at the end of the
fourth quarter of fiscal year 2006. This represents a
projected increase in merchandise inventories in the range of
8.9% to 13.0%.

Depreciation and Amortization

-- Depreciation and amortization expense in the fourth quarter of
fiscal year 2007 is projected to be in the range of $36.0
million to $37.0 million, unchanged from previous guidance.
Depreciation and amortization was $35.6 million in the fourth
quarter of fiscal year 2006.

Amortization of Deferred Lease Incentives

-- Amortization of deferred lease incentives in the fourth
quarter of fiscal year 2007 is projected to be in the range of
$7.0 million to $8.0 million, unchanged from previous
guidance. Amortization of deferred lease incentives was $7.3
million in the fourth quarter of fiscal year 2006.

FISCAL YEAR 2007 FINANCIAL GUIDANCE (53 WEEKS in 2007 versus 52
WEEKS in 2006)

Net Revenues

-- Net revenues during fiscal year 2007, a 53-week year, are
projected to be in the range of $3.933 billion to $3.955
billion, versus previous guidance in the range of $3.957
billion to $3.987 billion. This represents a projected
increase in net revenues in the range of 5.5% to 6.1%, versus
$3.728 billion during the 52 weeks of fiscal year 2006. On a
53-week to 53-week basis, this represents a projected increase
in the range of 3.4% to 4.0%.

-- Retail net revenues during fiscal year 2007, a 53-week year,
are projected to be in the range of $2.275 billion to $2.287
billion, versus previous guidance in the range of $2.295
billion to $2.313 billion. This represents a projected
increase in retail net revenue in the range of 5.6% to 6.2%
versus $2.154 billion during the 52 weeks of fiscal year 2006.
On a 53-week to 53-week basis, this represents a projected
increase in the range of 4.0% to 4.6%.

-- Change in comparable store sales is projected to be in the
range of (0.3%) to 0.3%, versus previous guidance in the range
of 0.0% to 1.0%. This compares to comparable store sales
growth in fiscal year 2006 of 0.3%. Comparable stores exclude
new retail concepts until such time as we believe that
comparable store results in those concepts are meaningful to
evaluating the performance of the retail strategy. For fiscal
year 2007, we expect to continue to exclude West Elm and
Williams-Sonoma Home.

-- Retail leased square footage is projected to increase on a
year-over-year basis in the range of 5.3% to 5.8%, unchanged
from previous guidance. Retail selling square footage is
projected to increase in the range of 5.7% to 6.2%, unchanged
from previous guidance. This compares to retail leased and
selling square footage growth in fiscal year 2006 of 8.3% and
7.9%, respectively.

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*T
Store Opening and Closing Guidance by Retail Concept

Q4 Q1 and Q2 Q3
2006 2007 2007
Actual Actual Actual
----------------------------------------------------------------------
Concept Total Open Close End Open Close End
----------------------------------------------------------------------
Williams-Sonoma 254 7 (9) 252 7 (4) 255
----------------------------------------------------------------------
Pottery Barn 197 1 (8) 190 8 (2) 196
----------------------------------------------------------------------
Pottery Barn Kids(b) 92 2 (3) 91 3 0 94
----------------------------------------------------------------------
West Elm 22 1 0 23 4 0 27
----------------------------------------------------------------------
Williams-Sonoma Home 7 1 0 8 1 0 9
----------------------------------------------------------------------
Outlets 16 1 (1) 16 0 0 16
----------------------------------------------------------------------
Total 588 13 (21) 580 23 (6) 597
----------------------------------------------------------------------

Q4 FY
2007 2007
Guidance Guidance
-------------------------------------------------------------
Concept Open Close End Open Close
-------------------------------------------------------------
Williams-Sonoma 6 (6) 255 20 (19)(a)
-------------------------------------------------------------
Pottery Barn 6 (2) 200 15 (12)(a)
-------------------------------------------------------------
Pottery Barn Kids(b) 1 (1) 94 6 (4)(a)
-------------------------------------------------------------
West Elm 0 0 27 5 0
-------------------------------------------------------------
Williams-Sonoma Home 0 0 9 2 0
-------------------------------------------------------------
Outlets 0 0 16 1 (1)
-------------------------------------------------------------
Total 13 (9) 601 49 (36)
-------------------------------------------------------------

(a) Fiscal year 2007 total store opening and closing numbers for
Williams-Sonoma, Pottery Barn and Pottery Barn Kids include 14
stores, 8 stores and 1 store, respectively, for temporary closures
due to remodeling. Remodeled stores are defined as those stores
temporarily closed and subsequently reopened due to square footage
expansion, store modification, or relocation. Consistent with our
definition of comparable stores, remodeled stores are removed from
the comparable store base upon closure if the gross square footage
changes by more than 20% or if the store is closed for seven or more
consecutive days.

(b) Included in the table above are two "test" stores for Pottery Barn
Kids Baby Clothing & Gifts ("Threads"). These stores are
approximately 1,300 selling square feet (2,200 leased square feet)
each. One store opened during the third quarter and the other opened
in the fourth quarter.
*T

-- Direct-to-customer net revenues (comprised of both catalog and
Internet revenues) are projected to be in the range of $1.658
billion to $1.668 billion during fiscal year 2007, a 53-week
year, versus previous guidance in the range of $1.662 billion
to $1.674 billion. This represents a projected increase in
direct-to-customer net revenue in the range of 5.3% to 6.0%
versus $1.574 billion during the 52 weeks of fiscal year 2006.
On a 53-week to 53-week basis, this represents a projected
increase in the range of 2.7% to 3.3%.

-- Catalog circulation is projected to increase in the range of
3.0% to 4.0%, unchanged from previous guidance. Pages
circulated are projected to increase in the range of 8.0% to
9.0%, unchanged from previous guidance. This compares to an
approximate 1.6% decrease in catalog circulation and a 3.2%
increase in pages circulated in fiscal year 2006. Excluding
the circulation for the Hold Everything catalog in fiscal year
2006, catalog and page circulation in fiscal year 2007 is
expected to increase in the range of 5.0% to 6.0% and 9.0% to
10.0%, respectively, unchanged from previous guidance.

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*T
Quarterly Net Revenue Guidance by Operating Segment
(All Amounts in Millions, Except Percentages)

Q1 2007 Q2 2007 Q3 2007
Actual Actual Actual Q4 2007 FY 2007
(13 (13 (13 Guidance Guidance
Weeks) Weeks) Weeks) (14 Weeks) (53 Weeks)
----------------------------------------------------------------------
Total Net
Revenue $816 $859 $895 $1,363 - $1,385 $3,933 - $3,955
----------------------------------------------------------------------
% Growth 2.7% 4.1% 5.0% 8.6% - 10.4% 5.5% - 6.1%
----------------------------------------------------------------------
% Growth
(53-week to
53-week
basis) - - - 2.6% - 4.2% 3.4% - 4.0%
----------------------------------------------------------------------

----------------------------------------------------------------------
Retail Net
Revenue $453 $487 $494 $841 - $853 $2,275 - $2,287
----------------------------------------------------------------------
% Growth 4.5% 5.1% 5.0% 7.0% - 8.6% 5.6% - 6.2%
----------------------------------------------------------------------
% Growth
(53-week to
53-week
basis) - - - 2.7% - 4.2% 4.0% - 4.6%
----------------------------------------------------------------------
Comparable
Store Sales (0.8%) 1.2% 1.1% (1.5%) - 0.0% (0.3%) - 0.3%
----------------------------------------------------------------------

----------------------------------------------------------------------
Direct-to-
Customer Net
Revenue $363 $372 $401 $522 - $532 $1,658 - $1,668
----------------------------------------------------------------------
% Growth 0.6% 2.8% 5.0% 11.3% - 13.4% 5.3% - 6.0%
----------------------------------------------------------------------
% Growth
(53-week to
53-week
basis) - - - 2.3% - 4.2% 2.7% - 3.3%
----------------------------------------------------------------------
*T

Gross Margin

-- Gross margin as a percentage of net revenues in fiscal year
2007 is expected to be in the range of 39.0% to 39.1%, versus
previous guidance in the range of 39.4% to 39.6%.

-- Gross margin as a percentage of net revenues in fiscal year
2006 was 39.9%, including the $2.7 million or approximately 10
basis point impact of unusual business events. The revised
2007 guidance represents a projected decrease in the gross
margin rate in the range of 80 to 90 basis points.

-- Gross margin as a percentage of net revenues in fiscal year
2006, excluding the $2.7 million or approximately 10 basis
point impact of unusual business events, was 40.0%. The
revised 2007 guidance represents a projected decrease in the
gross margin rate on a comparable year-over-year basis in the
range of 90 to 100 basis points. This is a non-GAAP
comparison.

Selling, General and Administrative (SG&A) Expenses

-- Selling, general and administrative expenses as a percentage
of net revenues in fiscal year 2007 are expected to be in the
range of 31.1% to 31.2%, versus previous guidance in the range
of 31.0% to 31.2%.

-- Selling, general and administrative expenses as a percentage
of net revenues in fiscal year 2006, including the $8.6
million or approximately 20 basis point net benefit from
unusual business events, were 31.1%. The revised 2007 guidance
represents no change in the SG&A expense rate at the low end
of the guidance range and a projected increase of 10 basis
points at the high end of the range.

-- Selling, general and administrative expenses as a percentage
of net revenues in fiscal year 2006, excluding the $8.6
million or approximately 20 basis point net benefit from
unusual business events, were 31.3%. The revised 2007 guidance
represents a projected decrease in the SG&A expense rate on a
comparable year-over-year basis in the range of 10 to 20 basis
points. This is a non-GAAP comparison.

Interest (Income) Expense - Net

-- Interest (Income) Expense - Net for fiscal year 2007 is
projected to be interest income in the range of $2.1 million
to $2.6 million, versus previous guidance in the range of $2.0
million to $3.0 million. This compares to net interest income
in fiscal year 2006 of $9.7 million.

Income Taxes

-- The income tax rate for fiscal year 2007 is projected to be in
the range of 39.0% to 39.3%, versus previous guidance in the
range of 39.3% to 39.6%. This compares to an income tax rate
in fiscal year 2006 of 38.1%. The projected income tax rate
for fiscal year 2007 includes an approximate 100 basis point
increase in the effective income tax rate or $0.03 per diluted
share impact from applying FIN 48 (see Note 5 in Exhibit 1).
Throughout the year, we expect that there could be ongoing
variability in our quarterly tax rates as taxable events occur
and exposures are evaluated.

Diluted Earnings Per Share

-- Diluted earnings per share on a GAAP basis, including an
approximate 100 basis point or $0.03 per diluted share
increase in the effective income tax rate related to FIN 48
(see Note 5 in Exhibit 1), are expected to be in the range of
$1.72 to $1.75, versus previous guidance in the range of $1.81
to $1.87. Diluted earnings per share in fiscal year 2007 on a
non-GAAP basis are expected to be in the range of $1.75 to
$1.78, excluding an approximate 100 basis point or $0.03 per
diluted share increase in the effective income tax rate
related to FIN 48 (see reconciliation below), versus previous
guidance in the range of $1.84 to $1.90.

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*T
Reconciliation of Fiscal Year GAAP to Non-GAAP Diluted Earnings Per
Share
(See Exhibit 1 for Notes 1 through 6)

---------------------------------------
FY FY % YOY
2007 2006 Increase/
Guidance Actual (Decrease)
----------------------------------------------------------------------
GAAP Diluted EPS(a) $1.72 - $1.75 $1.79 (3.9%) - (2.2%)
----------------------------------------------------------------------
Impact of Hold Everything
Transition Charge (Note 1) - $0.023 -
----------------------------------------------------------------------
Impact of CEO Departure
Charge (Note 2) - $0.023 -
----------------------------------------------------------------------
Benefit of Unredeemed Gift
Certificate Income (Note 3) - ($0.065) -
----------------------------------------------------------------------
Benefit of Visa/MasterCard
Litigation Settlement (Note
4) - ($0.011) -
----------------------------------------------------------------------
Subtotal of Unusual
Business Events - ($0.030) -
----------------------------------------------------------------------
Non-GAAP Diluted EPS Excluding
Unusual Business Events (Note
6)(a) $1.72 - $1.75 $1.76 (2.3%) - (0.6%)
----------------------------------------------------------------------
Impact of FIN 48 (Note 5) $0.03 - -
----------------------------------------------------------------------
Non-GAAP Diluted EPS Excluding
New Accounting Pronouncements
and Unusual Business Events
(Note 6)(a) $1.75 - $1.78 $1.76 (0.6%) - 1.1%
----------------------------------------------------------------------

(a)Due to rounding to the nearest cent per diluted share, totals may
not equal the sum of the line items in the table above.
*T

-- This reconciliation is being provided to facilitate a
meaningful evaluation of the company's fiscal year 2007
diluted earnings per share guidance on a comparable basis with
our 2006 fiscal year results.

Merchandise Inventories

-- Merchandise inventories at the end of fiscal year 2007 are
projected to be in the range of $665.0 million to $690.0
million, unchanged from previous guidance. This represents a
projected increase in the range of 8.9% to 13.0%, versus
$610.6 million at the end of fiscal year 2006.

Capital Spending

-- Fiscal year 2007 capital spending is projected to be in the
range of $210.0 million to $220.0 million, versus previous
guidance in the range of $220.0 million to $240.0 million.
This compares to capital spending of $191.0 million in fiscal
year 2006.

Depreciation and Amortization

-- Depreciation and amortization expense in fiscal year 2007 is
projected to be $139.0 million, versus previous guidance in
the range of $139.0 million to $140.0 million. Depreciation
and amortization was $135.0 million in fiscal year 2006.

Amortization of Deferred Lease Incentives

-- Amortization of deferred lease incentives in fiscal year 2007
is projected to be in the range of $29.0 million to $30.0
million, unchanged from previous guidance. Amortization of
deferred lease incentives was $28.7 million in fiscal year
2006.

SEC REGULATION G -- NON-GAAP INFORMATION

This press release includes non-GAAP net revenue and revenue
growth percentages, non-GAAP gross margin percentages, non-GAAP
selling, general and administrative expenses, and non-GAAP diluted
earnings per share. These non-GAAP financial measures exclude the
impact of the Hold Everything consolidation charge, the impact of the
CEO departure charge, the benefit of unredeemed gift certificate
income, and the benefit of the VISA/MasterCard litigation settlement
in fiscal year 2006. They also exclude the accounting impact of the
implementation of FIN 48 in fiscal year 2007. We have reconciled these
non-GAAP financial measures with the most directly comparable GAAP
financial measures in the text of this release and in Exhibit 1. We
believe that these non-GAAP financial measures provide meaningful
supplemental information for investors regarding the performance of
our business and facilitate a meaningful evaluation of our quarterly
results and fiscal year 2007 guidance on a comparable basis with our
2006 quarterly and fiscal year results. Our management uses these
non-GAAP financial measures in order to have comparable financial
results to analyze changes in our underlying business from quarter to
quarter. These non-GAAP measures should be considered as a supplement
to, and not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they
do not fully materialize or prove incorrect, could cause our results
to differ materially from those expressed or implied by such
forward-looking statements. Such forward-looking statements include
statements relating to our future financial guidance and results,
increases in retail leased square footage, the macro economic
environment for 2008 and our stock repurchase program.

The risks and uncertainties that could cause our results to differ
materially from those expressed or implied by such forward-looking
statements include accounting adjustments as we close our books for
the fourth quarter of 2007; new interpretations of current accounting
rules; our ability to successfully transition the Hold Everything
merchandise strategies; changes to current accounting rules; changes
in tax laws applicable to cash dividends or share repurchases; our
ability to anticipate consumer preferences and buying trends;
dependence on timely introduction and customer acceptance of our
merchandise; construction and other delays in store openings;
competition from companies with concepts or products similar to our
concepts and products; timely and effective sourcing of merchandise
from our foreign and domestic vendors and delivery of merchandise
through our supply chain to our stores and customers; effective
inventory management commensurate with customer demand; our ability to
anticipate and manage customer returns; successful catalog management,
including timing, sizing and merchandising; uncertainties in Internet
marketing, infrastructure and regulation; changes in consumer spending
based on weather, economic, political, competitive and other
conditions beyond our control; construction delays on infrastructure
projects based on weather or other events; multi-channel and
multi-brand complexities; our ability to introduce new brands and
brand extensions; dependence on external funding sources for operating
capital; our ability to control employment, occupancy and other
operating costs; our ability to improve and control our systems and
processes; changes to our information technology infrastructure;
general political, economic and market conditions and events,
including war, conflict or acts of terrorism; and other risks and
uncertainties described more fully in our public announcements,
reports to shareholders and other documents filed with or furnished to
the Securities and Exchange Commission, including our Annual Report on
Form 10-K for the fiscal year ended January 28, 2007, all quarterly
reports on Form 10-Q for the following fiscal quarters, and all
subsequent current reports on Form 8-K. All forward-looking statements
in this press release are based on information available to us as of
the date hereof, and we assume no obligation to update these
forward-looking statements.

ABOUT WILLIAMS-SONOMA

Williams-Sonoma, Inc. is a nationwide specialty retailer of high
quality products for the home. These products, representing six
distinct merchandise strategies -- Williams-Sonoma, Pottery Barn,
Pottery Barn Kids, PBteen, West Elm and Williams-Sonoma Home -- are
marketed through 597 stores, seven mail order catalogs and six
e-commerce websites.

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*T
Exhibit 1

Reconciliation of 2007 and 2006 GAAP to Non-GAAP Diluted Earnings Per
Share
(Totals Rounded to the Nearest Cent Per Diluted Share)

----------------------------------------
Q1 2007 Q2 2007 Q3 2007
Actual Actual Actual Q4 2007
(13 (13 (13 Guidance(a)
Weeks) Weeks) Weeks) (14 Weeks)
----------------------------------------------------------------------
2007 GAAP Diluted EPS $0.16 $0.23 $0.25 $1.11 - $1.14
----------------------------------------------------------------------
Impact of FIN 48 (Note 5) $0.005 $0.006 $0.005 $0.014
----------------------------------------------------------------------
Non-GAAP Diluted EPS Excluding
New Accounting Pronouncements
(Note 6) $0.17 $0.24 $0.25 $1.12 - $1.15
----------------------------------------------------------------------

----------------------------------------
Q1 2006 Q2 2006 Q3 2006
Actual Actual Actual Q4 2006
(13 (13 (13 Actual
Weeks) Weeks) Weeks) (13 Weeks)
----------------------------------------------------------------------
2006 GAAP Diluted EPS $0.20 $0.30 $0.25 $1.06
----------------------------------------------------------------------
Impact of Hold Everything
Transition Charge (Note 1) $0.017 $0.005 $0.002 -
----------------------------------------------------------------------
Impact of CEO Departure
Charge (Note 2) - $0.023 - -
----------------------------------------------------------------------
Benefit of Unredeemed Gift
Certificate Income (Note 3) - ($0.065) - -
----------------------------------------------------------------------
Benefit of Visa/MasterCard
Litigation Settlement (Note
4) - ($0.011) - -
----------------------------------------------------------------------
Subtotal of Unusual
Business Events $0.017 ($0.048) $0.002 -
----------------------------------------------------------------------
2006 Non-GAAP Diluted EPS
Excluding Unusual Business
Events (Note 6) $0.21 $0.25 $0.25 $1.06
----------------------------------------------------------------------

----------------------------------------
Q1 2007 Q2 2007 Q3 2007 Q4 2007
Actual Actual Actual Actual
----------------------------------------------------------------------
2007 % Increase / (Decrease)
in GAAP Diluted EPS (20.0%) (23.3%) 0.0% 4.7% - 7.5%
----------------------------------------------------------------------
2007 % Increase / (Decrease)
in Non-GAAP Diluted EPS
Excluding Unusual Business
Events (Note 6)(b) (23.8%) (8.0%) 0.0% 4.7% - 7.5%
----------------------------------------------------------------------
2007 % Increase / (Decrease)
in Non-GAAP Diluted EPS
Excluding New Accounting
Pronouncements and Unusual
Business Events (Note 6)(b) (19.0%) (4.0%) 0.0% 5.7% - 8.5%
----------------------------------------------------------------------

-------------------------------
FY 2007 FY 2007
Weighted Share Guidance(a)
Effect(a) (53 Weeks)
-------------------------------------------------------------
2007 GAAP Diluted EPS ($0.03) $1.72 - $1.75
-------------------------------------------------------------
Impact of FIN 48 (Note 5) - $0.03
-------------------------------------------------------------
Non-GAAP Diluted EPS Excluding
New Accounting Pronouncements
(Note 6) ($0.03) $1.75 - $1.78
-------------------------------------------------------------

-------------------------------
FY 2006 FY 2006
Weighted Share Actual(b)
Effect(b) (52 Weeks)
-------------------------------------------------------------
2006 GAAP Diluted EPS ($0.02) $1.79
-------------------------------------------------------------
Impact of Hold Everything
Transition Charge (Note 1) - $0.023
-------------------------------------------------------------
Impact of CEO Departure
Charge (Note 2) - $0.023
-------------------------------------------------------------
Benefit of Unredeemed Gift
Certificate Income (Note 3) - ($0.065)
-------------------------------------------------------------
Benefit of Visa/MasterCard
Litigation Settlement (Note
4) - ($0.011)
-------------------------------------------------------------
Subtotal of Unusual
Business Events - ($0.030)
-------------------------------------------------------------
2006 Non-GAAP Diluted EPS
Excluding Unusual Business
Events (Note 6) ($0.01) $1.76
-------------------------------------------------------------

-------------------------------
Weighted Share FY 2007
Effect Guidance
-------------------------------------------------------------
2007 % Increase / (Decrease)
in GAAP Diluted EPS - (3.9%) - (2.2%)
-------------------------------------------------------------
2007 % Increase / (Decrease)
in Non-GAAP Diluted EPS
Excluding Unusual Business
Events (Note 6)(b) - (2.3%) - (0.6%)
-------------------------------------------------------------
2007 % Increase / (Decrease)
in Non-GAAP Diluted EPS
Excluding New Accounting
Pronouncements and Unusual
Business Events (Note 6)(b) - (0.6%) - 1.1%
-------------------------------------------------------------

(a) Due to the effect that the timing of share repurchases can have on
the quarterly and year-to-date weighted average share count
calculations, the company expects the fourth quarter year-to-date
calculations of GAAP and non-GAAP diluted earnings per share in
fiscal year 2007 to be approximately $0.03 less than the sum of the
diluted earnings per share by quarter. Also, due to quarterly
rounding to the nearest cent per diluted share, the sum of the
quarters at the end of any quarter during the year may not equal the
year-to-date total.

(b) Due to the effect that the timing of share repurchases had on the
quarterly and year-to-date weighted average share count calculations,
the year-to-date calculation of GAAP and non-GAAP diluted earnings
per share in fiscal year 2006 is less than the sum of the diluted
earnings per share by quarter.

Note 1: Hold Everything Transition Charge - On January 12, 2006,
we announced our decision to transition the merchandising
strategies of our Hold Everything brand into our other
existing brands by the end of 2006. We also announced
that we expected to incur an accounting charge of $0.09
to $0.10 per diluted share related to this decision, of
which $0.07 was incurred in the fourth quarter of fiscal
year 2005. In fiscal year 2006, we incurred charges of
$0.023 per diluted share, of which $0.014 per diluted
share was included in cost of goods sold - negatively
impacting gross margin - and $0.009 per diluted share in
selling, general and administrative expenses. We closed
our last eight Hold Everything stores at the end of the
first quarter of 2006 and ceased our direct-to-customer
operations at the end of the second quarter of 2006. See
table above for quarterly expenses.

Note 2: CEO Departure Charge - On July 11, 2006, we announced the
departure of the company's CEO and a severance charge of
approximately $0.029 per diluted share, which we incurred
in the second quarter of 2006. Partially offsetting this
charge was a $0.006 per diluted share benefit associated
with the forfeiture of the CEO's stock options in
accordance with FAS 123R. Therefore, the net charge for
the CEO departure was $0.023 per diluted share, which
consisted of $0.018 per diluted share of share-based
payment expense and $0.005 per diluted share of cash
severance and other costs. Both amounts were included in
SG&A expenses.

Note 3: Unredeemed Gift Certificate Income - During the second
quarter of 2006, we completed an analysis of our
historical gift certificate and gift card redemption
patterns, which included an independent actuarial study
based on our historical redemption data. Based on this
analysis, we concluded that the likelihood of our gift
certificates and gift cards being redeemed beyond four
years from the date of issuance is remote. As a result,
we changed our estimate of the elapsed time for recording
income associated with unredeemed gift certificates and
gift cards to four years from our prior estimate of seven
years. This change in estimate resulted in income
recognition of $0.065 per diluted share in the second
quarter of fiscal year 2006 and was included as an offset
in SG&A expenses.

Note 4: VISA/MasterCard Litigation Settlement - During the second
quarter of 2006, we received our share of the
VISA/MasterCard antitrust litigation settlement. This
settlement (a benefit) totaled approximately $0.011 per
diluted share and was included as an offset in SG&A
expenses.

Note 5: FASB Interpretation No. 48 - Accounting for Uncertainty in
Income Taxes ("FIN 48") - On January 29, 2007, we
implemented FIN 48 which resulted in a negative
cumulative effect adjustment to retained earnings of
$11.7 million and an approximate 200 basis point increase
in the effective income tax rate or $0.005 per diluted
share in the first quarter of fiscal year 2007, an
approximate 160 basis point increase in the effective
income tax rate or $0.006 per diluted share in the second
quarter of fiscal year 2007, and an approximate 120 basis
point increase in the effective income tax rate or $0.005
per diluted share in the third quarter of fiscal year
2007. Due to the seasonality of taxable income and the
timing associated with taxable events, we expect the
application of FIN 48 to negatively impact our 2007
quarterly effective income tax rates in the range of 80
to 200 basis points, with an expected full year rate
impact of approximately 100 basis points or $0.03 per
diluted share.

Note 6: SEC Regulation G - Non-GAAP Information - This table
includes two non-GAAP financial measures. The first non-
GAAP measure is the 2007 Diluted Earnings Per Share
Excluding New Accounting Pronouncements. The second non-
GAAP measure is the 2006 Diluted Earnings Per Share
Excluding Unusual Business Events. We believe that these
non-GAAP financial measures provide meaningful
supplemental information for investors regarding the
performance of our business and facilitates a meaningful
evaluation of our quarterly and fiscal year 2007 diluted
earnings per share guidance on a comparable basis with
our 2006 quarterly and fiscal year results. Our
management uses these non-GAAP financial measures in
order to have comparable financial results to analyze
changes in our underlying business from quarter to
quarter. These non-GAAP financial measures should be
considered as a supplement to, and not as a substitute
for, or superior to, financial measures calculated in
accordance with GAAP.
*T

Williams-Sonoma, Inc.
Sharon L. McCollam, 415-616-8775
Executive Vice President, COO and CFO
Stephen C. Nelson, 415-616-8754
Director, Investor Relations
Erica Gutierrez, 415-616-8332
Investor Relations Administration

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