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We delivered an annual operating margin of 16.4% with full year earnings per share of $14.85, feeding our 2023 comp guidance of negative 10% to negative 12% and hitting our operating margin range of 16% to 16.5%. I think it's worth putting these results in context. Four years ago, the global pandemic changed how we worked and lived as most of us began to spend an unprecedented amount of time in our homes and interest rates were historical lows. As a result of these two dynamics, the demand for home furnishing surged. Our company was well positioned to meet this demand with its compelling product assortment, supply chain capabilities and the experience of our tenured management team. But the demand of the pandemic came with complications, including supply chain inefficiencies and higher vendor costs.

Despite these increased costs and complexities, we stayed focused on innovating our proprietary products, running a full price business and managing ad costs and employment expenses. As we came out of the record year in 2022, we started to see slowing in our sales trend as interest rates increased and home sales declined. Decreases in furniture demand continued to put pressure on our top line. But again, we stayed focus on transforming our operations, cutting costs and improving supply chain inefficiencies, all which drove us to nearly double our profitability compared to pre-pandemic. Our exceptional results in 2023 were driven by strong operational execution in a challenging environment for home furnishings. While the data suggested that consumers were resilient, they shifted away from home into experiences in entertainment and they have been hesitant on furniture purchases.

Nonetheless, we have continued to drive results. From pre-pandemic, through the pandemic and till today, we have navigated, learned, optimized and built all in preparation for our next chapter of growth. We have developed a strong omnichannel platform and have invested in a distribution network with additional capacity. Going forward, we see another growth opportunity on the horizon for our company, resulting from a more normalized interest rate environment, improved home sales and our strategy. As we look to next year and beyond, we are focused on three key priorities. First, returning to growth; second, elevating our world-class customer service; and three, driving margins. Our growth will be driven by our business strategies in each of our core businesses; our B2B program, our emerging brands and our global business.

We will continue to improve our world-class customer service by driving supply chain improvements from reduced out-of-market and multiple shipments, fewer customer accommodations, lower returns and damages and reduced replacements. These improvements will continue to contribute meaningfully to our profitability in 2024 and beyond. And we see opportunity to drive margin by continuing our focus on full price selling and cost negotiations. As it relates to other cost efficiencies, we will maintain our employment cost savings that we achieved last year following our comprehensive review of our organization structure. Regarding marketing, we continue to increase our spend and we are seeing very effective returns on our paid marketing and on our social strategy.

This investment will both drive sales and help us acquire new customers. Our in-house marketing expertise and performance-driven approach continues to serve as a differentiator between us and our peers. Also, our ongoing investment in our proprietary e-commerce technology continues to improve our online experience. We are focused on offering customers inspiring content and dynamic tools to assist with design projects and AI is accelerating these efforts. We see many opportunities for our business from developments in AI, and we believe our leadership in this area will be yet another competitive advantage. As focused as we are on our digital and e-commerce capabilities, we remain passionate about our best-in-class retail business. We continue to improve our in-store experiences with inspirational products and next-level design services.

I truly believe our teams are the best in the industry. And our continued retail optimization efforts have transformed our fleet to be positioned in the most profitable, inspiring and strategic locations. On the sustainability front, in Q4, we are proud to be the only home furnishings retailer included in the 2023 Dow Jones Sustainability North America Index. And we started 2024 by being named one of Barron's 100 Most Sustainable Companies. Our commitment to value is embedded in our company strategy, and we are proud of our recognition as a leader in sustainable home furnishings. Now I'd like to spend a few minutes talking about our brands. Pottery Barn ran a negative 9.6% comp in Q4 and ran a negative 3.8% on a two-year basis and positive 38.1% on a four-year basis.

The comp improved sequentially from Q3, but still ran negative due to the pullback in consumer spending and furniture. During the holiday season, we saw strength in seasonal decor, entertaining and home textiles. The brand experienced a strong customer response over the Black Friday, Cyber Monday period, and we continue to reduce discounting and strengthen our merchandise margins. The brand benefited from a Q4 launch of the Pottery Barn mobile shopping and design app. This new app allows customers to shop full room designs, share their favorite products and connect with a design expert all through the convenience of their phone or tablet. We anticipate the continued customer adoption of this app will drive conversion for Pottery Barn in 2024 and beyond.

As we launch our exclusive spring product collections, we're seeing continued strength in fashion bedding, home furnishings and botanicals. Customers are continuing to gravitate towards easy updates with color, print and pattern. The Pottery Barn children business ran a negative 2.5% comp in Q4 and was 1.5% positive on a two-year basis and 21.1% positive on a four-year basis. We continue to be focused on delivering compelling innovation and evolving the customer experience, and we are pleased to see improvement in the comp. Our baby business continued to be very strong and represents a sizable opportunity. We have been delivering growth in registry with our curated assortment, easy-to-use mobile app and in-store baby experts. We've also introduced new products that are both high in quality and innovation, such as our Dream Deluxe Power Swivel Recliner with heat and massage.

Also, we're proud of our collaborations, and we just launched Aerin Lauder, who is making her debut line for baby with whimsical design and keepsake quality. Also in Q4, we saw a strong consumer response to our expanded seasonal offerings that range from baby's first Christmas to Grinch-themed bedding for teens. We saw customers return to us for Valentine's Day and Easter with a strong response to our new collaborations, including an expanded collection of Hello Kitty. We're also seeing a particularly strong trend with our NFL offering in teens. And finally, we're seeing strength in nursery furniture, a purchase that is less dependent on new home sales. Moving to West Elm. West Elm is the brand that has been the most impacted by the consumer pullback in furniture.

In Q4, West Elm ran a negative 15.3% and was negative 26% on a two-year basis and positive 17.5% on a four-year basis. However, what I'm excited about are our new product sales from this year's holiday assortment, which has strong growth to last year across all categories. The customer responded positively to fresh designs in furniture, textiles and decorative accessories. We also saw strong sales in holiday decor. And as we move into 2024, newness continues to accelerate and is performing well. Given these positive trends in newness, we continue to see a sizable opportunity in West Elm, as it rebalances more inventory into these new products. The Williams-Sonoma brand ran a positive 1.6% comp in Q4. On a two-year basis, the brand was negative 0.9% and was positive 29.8% on a full year basis.

In Q4, the Williams-Sonoma Kitchen business ran a positive comp for the third consecutive quarter, and our Williams-Sonoma Home business meaningfully improved. Retail has been very strong, with inspiring in-store events and dramatically improved in-stocks. Our seasonal categories grew double digits and we saw strength in core businesses like cookware and bakeware, as customers gravitated towards gifting and entertaining at home. Throughout the quarter, collaborations like our cookware partnership with GreenPan and Stanley Tucci and the launch of a partnership with one of Netflix most watched shows, Bridgerton continued to drive sales, buzz and new customer acquisition. Now I would like to update you on our other initiatives. Business-to-business ended the year strong with Q4 at positive 5%, bringing the total year to a positive 1%, coming in just under $1 billion.

The contract business exceeded expectations at positive 31% on the year, fueled by continued strength in the hospitality and residential sectors along with early traction in developing segments such as health care, gaming and senior living. Flagship projects in the back half of the year range from providing furnishings from medical office providers across the country as well as entertainment venues like Dave & Buster's. Our B2B team also provided guest room furniture for the new Fontainebleau hotel that recently opened in Vegas. Now I'd like to talk about our global business. While macroeconomic pressures continue to affect our global business, we are pleased with our performance in India, Mexico and Canada. In India, we are seeing growth from strong marketing and brand awareness campaigns across the brands with a high penetration of our Design Crew business.

In Mexico, the market continues to show strength driven by improved in-stocks and a strong holiday season. The Canada business continues to build momentum, fueled by our commitment to enhance the customer experience, both online and in retail. Our digital initiatives in the Canadian market continue to gain new customers and drive results for our brands. And we are pleased with the initial positive response to the recent launches of Rejuvenation, Mark and Graham and Williams-Sonoma Home in Canada. As we continue to expand our omnichannel presence around the globe, India, Mexico and Canada remain our key strategic growth markets. Lastly, I'd like to update you on our emerging brands. Rejuvenation delivered a strong quarter with a double-digit positive comp, driven by success in our remodel product categories and new growth initiatives.

We continue to see strength in both consumer and B2B sales. Rejuvenation continues to establish itself as a destination for home projects by providing products with great function, high-quality and timeless design details. We're excited about the momentum in the brand and the growth potential in 2024 and beyond and believe Rejuvenation can be our next billion-dollar brand. Mark and Graham, our high-quality gifting business saw strong growth this year with a single -- high single-digit positive comp in the quarter. Our monogramming capabilities, coupled with unique high-quality gifts and the brand's, curated online gift shops, make it easy for customers to find a perfect gift and finally, our startup GreenRow. We continue to gain momentum in this new brand, which utilizes sustainable materials and manufacturing practices, to create colorful heirloom quality products.

We remain optimistic about the potential of this brand and it's aesthetic. In 2024, we are planning to grow GreenRow, with substantial increases in product assortment. These successful and exciting emerging brands demonstrate our ability to develop new businesses that expand our portfolio and address white space in the market. In summary, we're extremely proud of our accomplishments and financial results this year. We outperformed in 2023, despite the slowest housing market in several decades and massive geopolitical unrest. Although this pressured our top line trend, we stayed focused on full price selling, supply chain efficiencies and best-in-class customer service. We have transformed our business model, and as a result, we delivered an operating margin well above our guidance and well ahead for pre-pandemic operating margin.

We have a powerful portfolio of brands, serving a range of categories, aesthetics and life stages, and we have built a strong omnichannel platform and infrastructure, which positions us well for the next stage of growth. It is early, but our reads on Q1 is strong, and we are optimistic about the opportunities that exist ahead. With that, I'll turn it over to Jeff, to walk you through the numbers and our outlook in more detail.

Jeff Howie: Thank you, Laura, and good morning, everyone. As Laura said, we're pleased to deliver a strong finish to fiscal year 2023 with Q4 and full year 2023 earnings, significantly exceeding expectations. We delivered these earnings despite a challenging backdrop for home furnishings, pressuring our top line. Our strong profitability in this environment demonstrates the durability of our operating margin. Our results once again reinforced the theme, we consistently communicated in 2023. First, our steadfast commitment to maintain price integrity and not run site-wide promotions; second, our first half supply chain cost pressures became tailwinds in the second half. And third, our discipline to control costs and manage inventory levels.

Given the strength of our earnings through this challenging period for home furnishings, we're confident we can deliver long-term growth and even stronger earnings, as the customer shifts back to home. Now, let's dive into the numbers. I'll start with our Q4 results, followed by our full fiscal year 2023 results, then provide guidance for 2024.Q4 net revenues finished at 2.28 billion. Our revenues came in at the high end of our expectations, driven by strong holiday performance across our portfolio of brands, partially offset by ongoing customer hesitancy towards big ticket expenditures. During the quarter, we continued our commitment to maintain price integrity and we reduced our overall level of promotions. Our Q4 comps came in at negative 6.8%, with our two-year comp at negative 7.4% and our full year comp to 2019, at plus 29.1%.From a cadence perspective, our comps reflect a strong Black Friday to Christmas holiday period, book ended by inconsistent and choppy sales on both ends.

Moving down the income statement. Q4 gross margin improved 480 basis points over last year to 46% as higher selling margins more than offset the impact of higher occupancy costs. Q4 selling margin at 55.1% were 560 basis points higher than last year, reflecting the full impact to our profitability of the supply chain tailwinds we've been guiding for several quarters. Our higher Q4 selling margins were driven by both higher merchandise margins, and lower costs from supply chain efficiencies. Q4 merchandise margins contributed about half the increase in selling margins, driven by lower input costs, and our focus on full price selling. The balance sheet improvement came directly from supply chain efficiencies, which drove an improved customer experience and lower costs.

We're proud to see our focus on execution and investment in supply chain paying off. Key metrics, including out-of-market shipping, multiple deliveries per order, returns, accommodations, damages and replacements are all performing at pre-pandemic levels, if not better. Our higher Q4 selling margins more than offset the 2% growth in Q4 occupancy costs to 208 million or 9.1% of net revenues, up 80 basis points from last year. Turning now to SG&A. Our Q4 SG&A expense of 591 million, grew 13% and ran at 25.9% of revenues, deleveraging 460 basis points. As a reminder, our Q4, '22 SG&A results benefited from favorable items that we guided would not repeat in Q4 2023.Excluding the favorable items from last year, our SG&A dollars decreased 4%. Q4 employment was 300 basis points higher year-over-year, driven by higher performance-based incentive compensation in fiscal year 2023 than last year.

In Q4, we continued to manage variable employment costs in accordance with top-line trends. Q4 advertising expense was 60 basis points higher year-over-year as we took advantage of opportunities to invest into higher levels of advertising spend. As Laura mentioned, we continue to increase our spend as we are seeing very effective returns on this investment. Our ability to invest in these opportunities is an example of the competitive advantage of our agile, performance-driven marketing organization. Our in-house capabilities, first-party data and multi-brand platform continue to drive efficient advertising spend. Q4 general expenses drove the balance of the increase as we lapped a favorable insurance settlement received in fiscal year '22. On the bottom-line, our Q4 earnings significantly exceeded expectations.

Q4 operating income came in at 458 million and operating margin at 20.1%, 20 basis points above last year, with Q4 diluted earnings per share of $5.44. Turning now to our full year results, which again exceeded expectations. Full year net revenues finished at 7.75 billion. Our full year revenues reflect a larger home furnishings backdrop and our commitment to maintain price integrity even if it meant for growing some revenues in the short-term. Our full year comp ran down 9.9% with our two-year comp at negative 3.4%, and our full year comp to 2019 at plus 35.6%. Full year gross margin ended at 42.7%, a 30 basis point improvement over last year as our first half supply chain headwinds turned into even stronger tailwinds in the back half. Full year selling margins at 53.2% were 170 basis points over last year and our highest ever selling margin rate driven by a nearly equal mix of higher merchandise margins and supply chain efficiencies, these higher selling margins more than offset the 4% increase in our full year occupancy costs to 814 million.

Full year SG&A expense decreased 5.8% to 2.04 billion. This decrease was driven by employment reductions taken in Q1 and Q2, our management of variable employment in line with top line trends and a 20 basis point reduction in advertising on the full year. Full year SG&A deleverage of 140 basis points was primarily driven by lapping the favorable items recognized in Q4 '22 that I discussed earlier. On the bottom line, full year operating income finished at 1.27 billion, and operating margin at 16.4%, significantly above our pre-COVID levels and the 15% operating margin floor we established at the start of the year. Full year diluted earnings per share ended at $14.85.On the balance sheet, we ended the year with a cash balance of 1.26 billion with no debt outstanding.

This was after we invested 188 million in capital expenditures supporting our long-term growth, and we returned over 545 million to our shareholders through share repurchases and quarterly dividends. Year-end merchandise inventories stood at 1.25 billion, down 14.4% to last year. At these levels, we are well positioned to maintain our price integrity as we proactively managed our inventory levels in line with our top line trends. We generated a record level of free cash flow in 2023 at 1.49 billion, driven by the strength of our earnings, proactive inventory management and financial discipline. Speaking of financial discipline, a prime example is our fiscal year 2023 return on invested capital of 45%. This is among the best in the retail industry.

Summing up our 2023 results, we're proud to have delivered earnings substantially exceeding expectations. As Laura said, these results reflect the efforts of the entire team at Williams-Sonoma, Inc. And I'd like to thank our talented team for delivering these outstanding results in a challenging environment. Now, let's turn to our 2024 outlook. First, let me point out that 2024 is a 53-week year for Williams-Sonoma Inc. So the fourth quarter will consist of 14 weeks. We will report comps on a 53-week versus 53-week comparable basis. All other year-over-year compares will be 53 weeks versus 52 weeks. We anticipate the additional week will contribute 150 basis points to revenue growth and 10 basis points to operating margins, both of which are embedded in our guidance.

We anticipate 2024 will be a year of continued macroeconomic uncertainty. Lower interest rates could spur the housing market and shift consumer spending back to home, but timing is hard to predict. And there is also the election and global geopolitical tension. With this in mind, we are providing a wide range of guidance for '24. '24 net revenues are expected to be in the range of down 3% to up 3% with comps between down 4.5% to up 1.5% and operating margins between 16.5% and 16.8%. On the top line, we anticipate sequential improvement across the year. With the first half tougher than the second half, as our top line comparisons get easier. On the bottom line, we expect our supply chain tailwinds will continue through at least the first half of '24, but will be partially offset by higher advertising spend.

In the back half, we anticipate our operating margins will be in line with '23 results. Our capital allocation plans for '24 prioritize funding our business operations and investing in long-term growth. We expect to spend 225 million in capital expenditures to invest in the long-term growth of our business. 75% of this capital spend will be dedicated to drive our e-commerce leadership and supply chain efficiency. We expect to continue to return excess cash to our shareholders in the form of increased quarterly dividend payouts and ongoing share repurchases. For dividends, today, we announced an increase in our quarterly dividend payout of 26% or $0.23 to $1.13 per share. Fiscal year 2024 will be the 15th consecutive year of increased dividend payouts, which we are both proud of and remain committed to.

For share repurchases, today, we also announced our Board has approved a new $1 billion share repurchase authorization, replacing previous authorizations and under which we will opportunistically repurchase our stock to deliver returns to our shareholders. Combined, our dividend increase and new share repurchase authorization continue our commitment to return excess cash to our shareholders. In fact, we've returned over 3.8 billion to our shareholders over the last six years. As we look further into the future beyond 2024, we are reiterating our long-term top line guidance of mid-to high single-digit revenue growth. And in the long term, we now believe we can sustain operating margins in the mid to high-teen. We're confident we'll continue to outperform our peers and deliver shareholder growth for these reasons.

Our ability to gain market share in the fragmented home furnishings industry, the strength of our in-house proprietary design, the competitive advantage of our digital first but not digital-only channel strategy, the ongoing strength of our growth initiatives and the resiliency of our fortress balance sheet. With that, I'll open the call for questions.

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