Williams-Sonoma(WSM) - 2025 Q3 - Quarterly Report

FORM 10-Q Filing Information This section provides essential filing details for Williams-Sonoma, Inc., including registrant information, filer status, and shares outstanding Registrant Information This section provides essential identification details for Williams-Sonoma, Inc., including its legal name, state of incorporation, principal executive offices, and stock exchange listing - Registrant: WILLIAMS-SONOMA, INC.[3] - State of Incorporation: Delaware[3] - Trading Symbol: WSM[4] - Exchange: New York Stock Exchange, Inc.[4] Filer Status and Shares Outstanding Williams-Sonoma, Inc. is designated as a large accelerated filer and has confirmed compliance with SEC filing requirements. The report also states the number of common shares outstanding as of November 17, 2024 - Filer Status: Large accelerated filer[5] - Compliance: Filed all required reports in the preceding 12 months and subject to filing requirements for the past 90 days[4] - Shares Outstanding (as of November 17, 2024): 123,099,943 shares of Common Stock[6] PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Williams-Sonoma, Inc., including statements of earnings, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with accompanying notes detailing accounting policies, significant transactions, and financial instrument disclosures Condensed Consolidated Statements of Earnings This statement provides a summary of the company's revenues, gross profit, operating income, and net earnings for the reported periods | Metric (in thousands, except per share) | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:----------------------------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Net revenues | $1,800,668 | $1,853,650 | $5,249,323 | $5,471,715 | | Gross profit | $841,715 | $822,360 | $2,470,556 | $2,254,986 | | Operating income | $320,643 | $315,077 | $934,387 | $786,102 | | Net earnings | $248,953 | $237,285 | $740,364 | $595,323 | | Basic earnings per share | $1.99 | $1.85 | $5.81 | $4.60 | | Diluted earnings per share | $1.96 | $1.83 | $5.74 | $4.56 | Condensed Consolidated Statements of Comprehensive Income This statement details net earnings and other comprehensive income components, such as foreign currency translation adjustments, for the reported periods | Metric (in thousands) | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:----------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Net earnings | $248,953 | $237,285 | $740,364 | $595,323 | | Comprehensive income | $248,940 | $233,221 | $739,055 | $590,528 | - Foreign currency translation adjustments resulted in a loss of $13 thousand for the 13 weeks ended October 27, 2024, and a loss of $1,404 thousand for the 39 weeks ended October 27, 2024[12] Condensed Consolidated Balance Sheets This statement presents the company's financial position, including assets, liabilities, and stockholders' equity, at specific points in time | Metric (in thousands) | Oct 27, 2024 | Jan 28, 2024 | Oct 29, 2023 | |:----------------------|:-------------|:-------------|:-------------| | Total current assets | $2,486,781 | $2,719,797 | $2,347,335 | | Total assets | $4,968,340 | $5,273,548 | $4,883,769 | | Total current liabilities | $1,845,310 | $1,880,315 | $1,788,986 | | Total liabilities | $3,061,731 | $3,145,687 | $3,070,535 | | Total stockholders' equity | $1,906,609 | $2,127,861 | $1,813,234 | - Cash and cash equivalents decreased to $826.8 million as of October 27, 2024, from $1,262.0 million as of January 28, 2024[15] - Merchandise inventories, net, increased to $1,450.1 million as of October 27, 2024, from $1,246.4 million as of January 28, 2024[15] Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income | Metric (in thousands) | Balance at Jan 28, 2024 | Balance at Oct 27, 2024 | |:----------------------|:------------------------|:------------------------| | Common Stock Amount | $1,284 | $1,239 | | Additional Paid-in Capital | $587,960 | $545,205 | | Retained Earnings | $1,555,595 | $1,377,461 | | Accumulated Other Comprehensive Income (Loss) | $(15,552) | $(16,861) | | Treasury Stock | $(1,426) | $(435) | | Total Stockholders' Equity | $2,127,861 | $1,906,609 | - Net earnings contributed $248.95 million to retained earnings for the period ending October 27, 2024[18] - Repurchases of common stock for the period from July 28, 2024, to October 27, 2024, amounted to $539.1 million[18] Condensed Consolidated Statements of Cash Flows This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the reported periods | Cash Flow Activity (in thousands) | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:----------------------------------|:----------------------------|:----------------------------| | Net cash provided by operating activities | $726,743 | $1,005,413 | | Net cash used in investing activities | $(153,994) | $(134,428) | | Net cash used in financing activities | $(1,007,071) | $(538,680) | | Net (decrease) increase in cash and cash equivalents | $(435,223) | $331,463 | | Cash and cash equivalents at end of period | $826,784 | $698,807 | - The decrease in operating cash flow was primarily due to higher spending on merchandise inventories and a decrease in accounts payable and income taxes payable[83] - Cash used in financing activities significantly increased due to higher common stock repurchases[86] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the accounting policies, significant transactions, and other disclosures supporting the financial statements NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, including the company's fiscal year definition, the retroactive adjustment for a 2-for-1 stock split, an out-of-period adjustment for over-recognized freight expense, and the assessment of recently issued accounting pronouncements - Fiscal Year: Ends on the Sunday closest to January 31. Fiscal 2024 is a 53-week year ending February 2, 2025[27] - Common Stock Split: A 2-for-1 stock split was effected on July 9, 2024, retroactively adjusting historical share and per share amounts[28] - Out-of-Period Adjustment: A $49.0 million over-recognition of freight expense from fiscal years 2021-2023 was corrected in Q1 fiscal 2024, reducing cost of goods sold and accounts payable[29] - Recently Issued Accounting Pronouncements: The company is assessing the impact of ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), and ASU 2024-03 (Expense Disaggregation Disclosures) on its financial statements[29][31] NOTE B. BORROWING ARRANGEMENTS This note details the company's credit facility and letter of credit facilities, highlighting no outstanding borrowings under the revolving line of credit and compliance with financial covenants as of October 27, 2024 - Credit Facility: $500 million unsecured revolving line of credit (Revolver), expandable up to $750 million[32] - Borrowings: No borrowings under the Revolver during the thirteen and thirty-nine weeks ended October 27, 2024[32] - Standby Letters of Credit: $12.1 million outstanding as of October 27, 2024, primarily for workers' compensation and insurance programs[32] - Compliance: In compliance with all financial covenants under the Credit Facility as of October 27, 2024[32] - Letter of Credit Facilities: Three unsecured facilities totaling $35 million, with $0.8 million outstanding as of October 27, 2024[33] NOTE C. STOCK-BASED COMPENSATION This note describes the company's equity award programs, including the types of stock awards granted, their vesting schedules, and the stock-based compensation expense recognized during the reporting periods - Equity Award Programs: Grants include stock options, stock appreciation rights, restricted stock awards, and restricted stock units, with approximately 9.4 million shares available for future grant as of October 27, 2024[34] - Vesting: Service-based awards generally vest evenly over four years; performance-based awards vest three years from grant date[36] | Stock-Based Compensation Expense (in millions) | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:-----------------------------------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Total expense | $21.3 | $22.2 | $66.1 | $66.4 | NOTE D. EARNINGS PER SHARE This note provides the reconciliation of net earnings and shares used in the calculation of basic and diluted earnings per share for the thirteen and thirty-nine weeks ended October 27, 2024, and October 29, 2023 | Metric | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:-------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Basic EPS | $1.99 | $1.85 | $5.81 | $4.60 | | Diluted EPS | $1.96 | $1.83 | $5.74 | $4.56 | | Basic Shares (in thousands) | 125,333 | 128,285 | 127,334 | 129,436 | | Diluted Shares (in thousands) | 126,892 | 129,549 | 129,019 | 130,596 | NOTE E. SEGMENT REPORTING This note clarifies that the company aggregates its operating segments (brands) into a single reportable segment due to similar economic and qualitative characteristics. It also provides a breakdown of net revenues by brand and long-lived assets by geographic location - Single Reportable Segment: All operating segments (brands) are aggregated into one reportable segment[40] | Brand (in thousands) | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:---------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Pottery Barn | $718,240 | $777,475 | $2,120,898 | $2,331,497 | | West Elm | $450,490 | $466,360 | $1,339,578 | $1,402,859 | | Williams Sonoma | $252,125 | $252,408 | $730,231 | $736,342 | | Pottery Barn Kids and Teen | $287,259 | $276,715 | $768,469 | $748,923 | | Other | $92,554 | $80,692 | $290,147 | $252,094 | | Total | $1,800,668 | $1,853,650 | $5,249,323 | $5,471,715 | | Long-lived Assets (in thousands) | Oct 27, 2024 | Jan 28, 2024 | Oct 29, 2023 | |:---------------------------------|:-------------|:-------------|:-------------| | U.S. | $2,212,022 | $2,273,905 | $2,285,829 | | International | $70,569 | $79,720 | $85,256 | | Total | $2,282,591 | $2,353,625 | $2,371,085 | NOTE F. COMMITMENTS AND CONTINGENCIES This note addresses the company's involvement in lawsuits, claims, and proceedings, stating that while these disputes are increasing, their ultimate resolution is not expected to have a material adverse effect on the condensed consolidated financial statements - Legal Proceedings: Involved in lawsuits, claims, and proceedings incident to the ordinary course of business, which are increasing in number[42] - Loss Contingency Reserves: Reserves are established when a liability is probable and estimable[42] - Materiality: The ultimate resolution of current matters is not expected to have a material adverse effect on the financial statements[42] NOTE G. STOCK REPURCHASE PROGRAMS AND DIVIDENDS This note details the company's stock repurchase activities and dividend declarations, including the shares repurchased, the remaining authorization under current programs, and the cash dividends paid per common share | Stock Repurchases | 13 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 27, 2024 | |:------------------|:----------------------------|:----------------------------| | Shares Repurchased | 3,929,491 | 5,164,755 | | Aggregate Cost | $533.9 million | $707.5 million | | Average Cost per Share | $135.86 | $136.98 | - Stock Repurchase Authorization: $292.5 million remaining under the March 2024 program, plus a new $1.0 billion program authorized in September 2024, totaling approximately $1.3 billion[43] | Dividends Declared | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:-------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Per Common Share | $0.57 | $0.45 | $1.71 | $1.35 | NOTE H. FAIR VALUE MEASUREMENTS This note outlines the company's approach to fair value measurements, categorizing inputs into a three-level hierarchy. It specifically details the nonrecurring measurement of long-lived assets for impairment, including the significant unobservable inputs used and the impairment charges recognized during the reporting periods - Fair Value Hierarchy: Uses Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[47] - Long-lived Assets Impairment: Property and equipment measured using Level 3 inputs; right-of-use assets using Level 2 or Level 3 inputs. Impairment charges recognized for underperforming stores[48] | Impairment Charges (in millions) | 13 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 29, 2023 | |:---------------------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Total Impairment Charges | $1.6 | $2.9 | $1.6 | $13.0 | NOTE I. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This note presents the changes in accumulated other comprehensive income (loss) by component, net of tax, for the periods ended October 27, 2024, and October 29, 2023, primarily reflecting foreign currency translation adjustments and changes in the fair value of derivative financial instruments | Component (in thousands) | Balance at Jan 28, 2024 | Balance at Oct 27, 2024 | |:-------------------------|:------------------------|:------------------------| | Foreign Currency Translation | $(15,457) | $(16,861) | | Cash Flow Hedges | $(95) | $0 | | Total AOCI (Loss) | $(15,552) | $(16,861) | - Foreign currency translation adjustments contributed a loss of $1,342 thousand in the first quarter of fiscal 2024 and a loss of $13 thousand in the third quarter of fiscal 2024[50] NOTE J. REVENUE This note details the company's revenue recognition policies for merchandise sales, gift cards, customer loyalty programs, and incentives from credit card issuers. It also provides information on deferred revenue balances and sales returns - Merchandise Sales: Revenue recognized when control is transferred to the customer, either upon in-store pickup or delivery completion[52] - Sales Returns: Estimated based on historical trends, with a liability of $29.2 million and a corresponding asset of $7.2 million as of October 27, 2024[52] - Gift Card and Other Deferred Revenue: Increased to $583.0 million as of October 27, 2024, from $528.4 million as of October 29, 2023, primarily due to advance payments on certain product categories[52] - Customer Loyalty Programs: Points earned are considered a separate performance obligation, with revenue recognized upon certificate redemption[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and liquidity, discussing net revenues, gross profit, operating expenses, income taxes, and cash flows for the third quarter and first thirty-nine weeks of fiscal 2024 compared to prior periods. It also outlines future priorities and acknowledges macroeconomic challenges FORWARD-LOOKING STATEMENTS This section contains cautionary statements regarding future expectations, subject to various risks and uncertainties, and disclaims any obligation to update them - This section contains forward-looking statements subject to risks and uncertainties, including economic conditions, inflation, tariffs, consumer preferences, competition, supply chain issues, and global conflicts[54] - The company assumes no obligation to update these statements, which are based on information available as of the report date[54] OVERVIEW Williams-Sonoma, Inc. is a specialty retailer of home products across nine brands, operating through e-commerce, catalogs, and retail stores globally. The company reported a 2.9% decrease in net revenues for Q3 FY24, primarily due to customer hesitancy in furniture purchases, offset by strength in emerging brands and children's home furnishings. The company maintains a strong liquidity position and is focused on returning to growth, elevating customer service, and driving earnings amidst an uncertain macroeconomic environment - Company Profile: Specialty retailer of high-quality sustainable home products across nine brands, marketed through e-commerce, direct-mail catalogs, and retail stores[55] - Q3 FY24 Net Revenues: Decreased by $53.0 million or 2.9%, with comparable brand revenue decline of 2.9%, primarily due to reduced furniture sales[55] - Q3 FY24 Diluted EPS: $1.96, up from $1.83 in Q3 FY23[57] - Liquidity: $827 million in cash and cash equivalents and $726.7 million in operating cash flow for the first thirty-nine weeks of fiscal 2024, with no outstanding borrowings on the revolving line of credit[57] - Future Priorities: Focused on returning to growth, elevating customer service, and driving earnings, while acknowledging macroeconomic uncertainties[59] NET REVENUES Net revenues primarily consist of merchandise sales through various channels, shipping fees, and incentives from credit card issuers. For Q3 FY24, net revenues decreased by 2.9% and for the first thirty-nine weeks of FY24, they decreased by 4.1%, both driven by customer hesitancy in furniture purchases. Comparable brand revenue showed declines across most major brands, with Pottery Barn Kids and Teen being an exception with growth - Revenue Sources: Merchandise sales (e-commerce, retail, catalogs, B2B, franchisees), shipping fees, credit card issuer incentives, and stored-value card breakage income[60] | Metric | Q3 FY24 | Q3 FY23 | 39 Weeks FY24 | 39 Weeks FY23 | |:-------|:--------|:--------|:--------------|:--------------| | Net Revenues Change | -2.9% | N/A | -4.1% | N/A | | Company Comp Decline | -2.9% | N/A | -3.7% | N/A | - Primary Driver of Decline: Continuing customer hesitancy towards furniture purchases, partially offset by strength in emerging brands and children's home furnishings[60] | Comparable Brand Revenue Growth (Decline) | 13 Weeks Ended Oct 27, 2024 | 13 Weeks Ended Oct 29, 2023 | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:------------------------------------------|:----------------------------|:----------------------------|:----------------------------|:----------------------------| | Pottery Barn | (7.5)% | (16.6)% | (8.4)% | (9.7)% | | West Elm | (3.5)% | (22.4)% | (4.1)% | (19.8)% | | Williams Sonoma | (0.1)% | (1.9)% | 0.0% | (2.3)% | | Pottery Barn Kids and Teen | 3.8% | (6.9)% | 2.7% | (6.7)% | | Total | (2.9)% | (14.6)% | (3.7)% | (11.1)% | | Store Data | Oct 27, 2024 | Oct 29, 2023 | |:-----------|:-------------|:-------------| | Total Stores | 525 | 533 | | Store Selling Square Footage | 3,886,000 | 3,905,000 | | Store Leased Square Footage | 5,972,000 | 6,061,000 | GROSS PROFIT Gross profit increased for both the third quarter and the first thirty-nine weeks of fiscal 2024, with significant improvements in gross margin. This was primarily driven by higher merchandise margins and supply chain efficiencies, including reductions in returns and shipping costs, partially offset by deleveraged occupancy costs in some periods - Cost of Goods Sold Components: Includes cost of merchandise, inbound/freight-to-store expenses, other inventory costs, occupancy expenses (rent, property taxes, utilities, depreciation), and shipping costs[65] | Metric | Q3 FY24 | Q3 FY23 | Q3 FY22 | |:-------|:--------|:--------|:--------| | Gross Profit (in thousands) | $841,715 | $822,360 | $910,526 | | Gross Margin (%) | 46.7% | 44.4% | 41.5% | - Q3 FY24 Gross Margin Increase: Up 230 basis points (YoY), driven by 130 bps from higher merchandise margins and 100 bps from supply chain efficiencies[68] | Metric | 39 Weeks FY24 | 39 Weeks FY23 | 39 Weeks FY22 | |:-------|:--------------|:--------------|:--------------| | Gross Profit (in thousands) | $2,470,556 | $2,254,986 | $2,667,883 | | Gross Margin (%) | 47.1% | 41.2% | 42.9% | - 39 Weeks FY24 Gross Margin Increase: Up 590 basis points (YoY), driven by 330 bps from higher merchandise margins, 170 bps from supply chain efficiencies, and 100 bps from an out-of-period freight adjustment, partially offset by 10 bps deleverage in occupancy costs[70] SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, General and Administrative (SG&A) expenses increased for both the third quarter and the first thirty-nine weeks of fiscal 2024, primarily due to higher employment expenses from performance-based incentive compensation and increased advertising costs. SG&A as a percentage of net revenues also rose in both periods - SG&A Components: Non-occupancy related costs for retail stores, distribution/manufacturing, customer care, supply chain operations, and corporate functions, including employment, advertising, and credit card processing[74] | Metric (in thousands) | Q3 FY24 | % Net Revenues | Q3 FY23 | % Net Revenues | |:----------------------|:--------|:---------------|:--------|:---------------| | SG&A Expenses | $521,072 | 28.9% | $507,283 | 27.4% | - Q3 FY24 SG&A Increase: Up $13.8 million or 2.7% (YoY), with SG&A as a percentage of net revenues increasing by 150 basis points, driven by higher employment expense (160 bps) and advertising (20 bps)[75] | Metric (in thousands) | 39 Weeks FY24 | % Net Revenues | 39 Weeks FY23 | % Net Revenues | |:----------------------|:--------------|:---------------|:--------------|:---------------| | SG&A Expenses | $1,536,169 | 29.3% | $1,468,884 | 26.8% | - 39 Weeks FY24 SG&A Increase: Up $67.3 million or 4.6% (YoY), with SG&A as a percentage of net revenues increasing by 250 basis points, driven by higher employment expense (150 bps) and advertising (110 bps), partially offset by non-recurring exit costs and reduction-in-force initiatives from FY23[75] INCOME TAXES The effective tax rate decreased to 24.3% for the first thirty-nine weeks of fiscal 2024 from 25.8% in the prior year, primarily due to higher excess tax benefits from stock-based compensation and changes in earnings mix. The company is evaluating the potential impact of the OECD Pillar Two minimum tax regime, which has been implemented in several operating regions but does not currently apply to its subsidiaries under Safe Harbor rules | Metric | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:-------|:----------------------------|:----------------------------| | Effective Tax Rate | 24.3% | 25.8% | - Decrease in Effective Tax Rate: Primarily due to higher excess tax benefit from stock-based compensation and the tax effect of earnings mix change[76] - Pillar Two Minimum Tax: Implemented in Canada, UK, Netherlands, Italy, and Vietnam effective January 1, 2024. Company subsidiaries are not subject to it in the first thirty-nine weeks of fiscal 2024 under Safe Harbor rules[76] LIQUIDITY AND CAPITAL RESOURCES The company's liquidity position is strong, with $826.8 million in cash and cash equivalents and an undrawn $500 million revolving credit facility. Cash flows from operating activities decreased year-over-year due to higher inventory spending and changes in payables. Investing activities increased due to capital expenditures, while financing activities saw a significant increase in cash usage primarily from common stock repurchases. The company anticipates adequate liquidity for future operations and shareholder returns, noting the seasonal nature of its cash balances - Liquidity Outlook: Expects adequate liquidity for business operations, stock repurchases, dividends, and capital expenditures over the next 12 months[80] - Cash and Cash Equivalents: $826.8 million as of October 27, 2024, with $82.7 million held by international subsidiaries[81] - Credit Facility: $500 million unsecured revolving line of credit, with no borrowings outstanding during the reporting periods[81] | Cash Flow Activity (in millions) | 39 Weeks Ended Oct 27, 2024 | 39 Weeks Ended Oct 29, 2023 | |:---------------------------------|:----------------------------|:----------------------------| | Operating Activities | $726.7 | $1,005.4 | | Investing Activities | $(154.0) | $(134.4) | | Financing Activities | $(1,007.1) | $(538.7) | - Seasonality: A significant portion of revenues and net earnings are historically realized from October through January, leading to higher cash balances in the fourth quarter[87] CRITICAL ACCOUNTING ESTIMATES This section states that there were no significant changes to the company's critical accounting estimates during the third quarter of fiscal 2024, as previously discussed in its Annual Report on Form 10-K - No significant changes to critical accounting estimates during the third quarter of fiscal 2024[88] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate fluctuations, foreign currency exchange rates, and inflation. It notes that while the company has variable interest rate exposure and international operations, the impact of these risks has been immaterial to date, and strategies are in place to mitigate potential adverse effects Interest Rate Risk This section addresses the company's exposure to interest rate fluctuations, primarily from its revolving credit facility and short-term investments - Exposure: Variable interest rate on the Revolver, though no borrowings were outstanding in Q3 FY24[90] - Investments: Short-term investments (cash and cash equivalents) are in interest-bearing demand deposit accounts and money market funds, stated at cost approximating fair value[90] Foreign Currency Risks This section discusses the company's exposure to foreign currency exchange rate fluctuations, particularly concerning inventory purchases and international operations - Inventory Purchases: Majority from non-U.S. suppliers, primarily denominated in U.S. dollars, limiting direct foreign currency impact[91] - Indirect Exposure: A decline in the U.S. dollar could increase purchasing costs from suppliers[91] - Foreign Operations: Businesses in Canada, Australia, and the UK, and operations in Asia and Europe, expose the company to exchange rate fluctuations, though the impact has been immaterial to date[91] Inflation This section details the impact of inflation on the company's costs and consumer demand, along with mitigation strategies and future risks - Impact: Experienced varying levels of inflation, affecting shipping, transportation, product, and labor costs[92] - Mitigation: Unique operating model and pricing power helped mitigate increased costs in Q3 FY24 and Q3 FY23[92] - Risk: Global inflationary pressures are weakening customer sentiment and slowing demand, which could materially impact future results[92] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of October 27, 2024, based on an evaluation by management, including the CEO and CFO. It also states that there were no material changes in internal control over financial reporting during the third quarter of fiscal 2024 Evaluation of Disclosure Controls and Procedures This section confirms that management, including the CEO and CFO, evaluated and concluded on the effectiveness of disclosure controls and procedures - Effectiveness: Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of October 27, 2024[94] Changes in Internal Control Over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the third quarter of fiscal 2024 - No material changes in internal control over financial reporting occurred during the third quarter of fiscal 2024[94] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section refers to Note F of the Condensed Consolidated Financial Statements for information regarding legal proceedings, indicating that details on commitments and contingencies are provided there - Information on legal proceedings is contained in Note F to the Condensed Consolidated Financial Statements[97] Item 1A. Risk Factors This section directs readers to the company's Annual Report on Form 10-K for a description of business risks and uncertainties, stating that no material changes to these risk factors occurred during the current quarterly reporting period - No material changes to risk factors were reported in the current quarterly period[98] - For a full description of risks, refer to Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended January 28, 2024[98] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on common stock repurchases made during the third quarter of fiscal 2024 under the March 2024 stock repurchase program. It also announces a new $1.0 billion stock repurchase program authorized in September 2024, bringing the total remaining authorization to approximately $1.3 billion | Fiscal Period (July 29, 2024 - Oct 27, 2024) | Total Number of Shares Purchased | Average Price Paid Per Share | |:---------------------------------------------|:---------------------------------|:-----------------------------| | Total | 3,929,491 | $135.86 | - Remaining Authorization: $292.5 million under the March 2024 program as of October 27, 2024[100] - New Program: A new $1.0 billion stock repurchase program was authorized in September 2024, effective upon full utilization of the March 2024 program[100] - Total Authorization: Approximately $1.3 billion remaining under all programs[100] Item 3. Defaults Upon Senior Securities This section states that there are no applicable defaults upon senior securities for the reporting period - Not applicable[103] Item 4. Mine Safety Disclosures This section indicates that there are no applicable mine safety disclosures for the reporting period - Not applicable[104] Item 5. Other Information This section discloses insider trading arrangements adopted or terminated during the third quarter of fiscal 2024, specifically detailing Rule 10b5-1 trading arrangements for the CEO and CFO for the sale of common stock Insider Adoption or Termination of Trading Arrangements This section details Rule 10b5-1 trading arrangements adopted by the CEO and CFO for the sale of common stock during the reporting period | Name & Title | Date Adopted | Character of Trading Arrangement | Aggregate Number of Shares to be Purchased or Sold | |:-------------|:-------------|:---------------------------------|:---------------------------------------------------| | Laura Alber, Director, President and CEO | September 10, 2024 | Rule 10b5-1 Trading Arrangement | Up to 270,000 shares to be sold | | Jeff Howie, EVP and CFO | August 26, 2024 | Rule 10b5-1 Trading Arrangement | Up to 78,724 shares to be sold | - No other directors or officers adopted or terminated trading arrangements during the third quarter of fiscal 2024[106] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate bylaws, director compensation policy, CEO and CFO certifications, and financial statements formatted in Inline XBRL - Key Exhibits: Amended and Restated Bylaws, Director Compensation Policy, CEO and CFO Certifications (pursuant to Rule 13a-14(a), Rule 15d-14(a), and 18 U.S.C. Section 1350), and financial statements in Inline XBRL format[108] SIGNATURE This section contains the duly authorized signatures of Williams-Sonoma, Inc.'s Executive Vice President and Chief Financial Officer, Jeffrey E. Howie, and Senior Vice President and Chief Accounting Officer, Jeremy Brooks, certifying the report on November 22, 2024 - Signed by Jeffrey E. Howie, Executive Vice President and Chief Financial Officer, and Jeremy Brooks, Senior Vice President and Chief Accounting Officer[112] - Date of Signature: November 22, 2024[113]