Williams-Sonoma(WSM) - 2026 Q2 - Quarterly Report

FORM 10-Q Filing Information This section details the registrant's information and filer status for the Form 10-Q filing Registrant Information Williams-Sonoma, Inc. is a Delaware-incorporated registrant with its principal executive offices in San Francisco, CA. Its common stock trades on the New York Stock Exchange under the symbol WSM - Registrant: WILLIAMS-SONOMA, INC.[2] - State of Incorporation: Delaware[2] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :-------------------------------------- | | Common Stock, par value $.01 per share | WSM | New York Stock Exchange, Inc. | Filer Status The registrant is classified as a large accelerated filer and is not a shell company. As of August 24, 2025, there were 121,790,333 shares of common stock outstanding - The registrant is a large accelerated filer[4] - The registrant is not a shell company[5] - As of August 24, 2025, 121,790,333 shares of the registrant's Common Stock were outstanding[5] PART I. FINANCIAL INFORMATION This section provides unaudited condensed consolidated financial statements and management's discussion and analysis 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 detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items Condensed Consolidated Statements of Earnings This section summarizes the company's net revenues, gross profit, operating income, net earnings, and diluted EPS Key Earnings Data (Thirteen Weeks Ended) | Metric | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | Change (%) | | :-------------------------- | :----------------------------- | :---------------------------- | :--------- | | Net revenues | $1,836,760 | $1,788,307 | 2.7% | | Gross profit | $864,623 | $803,940 | 7.5% | | Operating income | $328,059 | $277,900 | 18.1% | | Net earnings | $247,562 | $216,855 | 14.2% | | Diluted earnings per share | $2.00 | $1.67 | 19.8% | Key Earnings Data (Twenty-six Weeks Ended) | Metric | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | Change (%) | | :-------------------------- | :----------------------------- | :---------------------------- | :--------- | | Net revenues | $3,566,873 | $3,448,655 | 3.4% | | Gross profit | $1,630,432 | $1,599,108 | 2.0% | | Operating income | $618,772 | $595,012 | 4.0% | | Net earnings | $478,825 | $477,271 | 0.3% | | Diluted earnings per share | $3.86 | $3.67 | 5.2% | Condensed Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net earnings and foreign currency translation adjustments for the reported periods Comprehensive Income (Thirteen Weeks Ended) | Metric | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :---------------------- | :----------------------------- | :---------------------------- | | Net earnings | $247,562 | $216,855 | | Foreign currency translation adjustments | $480 | $(49) | | Comprehensive income | $248,042 | $216,900 | Comprehensive Income (Twenty-six Weeks Ended) | Metric | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :---------------------- | :----------------------------- | :---------------------------- | | Net earnings | $478,825 | $477,271 | | Foreign currency translation adjustments | $5,650 | $(1,391) | | Comprehensive income | $484,475 | $475,975 | Condensed Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and stockholders' equity at specific reporting dates Key Balance Sheet Items (in thousands) | Metric | August 3, 2025 | February 2, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :--------------- | :------------ | | Cash and cash equivalents | $985,823 | $1,212,977 | $1,265,259 | | Merchandise inventories, net | $1,433,605 | $1,332,429 | $1,217,693 | | Total current assets | $2,655,520 | $2,754,609 | $2,714,564 | | Total assets | $5,228,368 | $5,301,607 | $5,181,939 | | Total current liabilities | $1,766,309 | $1,911,974 | $1,743,202 | | Total liabilities | $3,078,672 | $3,159,188 | $2,945,849 | | Total stockholders' equity | $2,149,696 | $2,142,419 | $2,236,090 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including net earnings, stock repurchases, dividends, and stock-based compensation Stockholders' Equity Changes (February 2, 2025 to August 3, 2025) | Item | Amount (in thousands) | | :---------------------------------- | :-------------------- | | Balance at February 2, 2025 | $2,142,419 | | Net earnings | $478,825 | | Foreign currency translation adjustments | $5,650 | | Repurchases of common stock | $(291,197) | | Dividends declared | $(164,603) | | Stock-based compensation expense | $46,506 | | Balance at August 3, 2025 | $2,149,696 | Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash flows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Twenty-six Weeks Ended) | Cash Flow Activity | August 3, 2025 (in thousands) | July 28, 2024 (in thousands) | | :---------------------------------- | :----------------------------- | :---------------------------- | | Net cash provided by operating activities | $401,678 | $473,283 | | Net cash used in investing activities | $(111,488) | $(70,959) | | Net cash used in financing activities | $(521,133) | $(398,222) | | Net (decrease) increase in cash and cash equivalents | $(227,154) | $3,252 | | Cash and cash equivalents at end of period | $985,823 | $1,265,259 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION The financial statements are unaudited and include Williams-Sonoma, Inc. and its wholly-owned subsidiaries. The fiscal year ends on the Sunday closest to January 31. An out-of-period freight adjustment of $49.0 million was recorded in Q1 fiscal 2024 to correct prior over-recognition of freight expense. The company is evaluating new FASB ASUs on income tax disclosures and expense disaggregation - The Company's fiscal year ends on the Sunday closest to January 31. Fiscal 2025 is a 52-week year ending February 1, 2026, and fiscal 2024 was a 53-week year ending February 2, 2025[25] - An out-of-period adjustment of $49.0 million was recorded in the first quarter of fiscal 2024 to reduce cost of goods sold and accounts payable, correcting an over-recognition of freight expense from fiscal 2021-2023[27] - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03/2025-01 (Expense Disaggregation Disclosures) on its financial statements[28][29] NOTE B. BORROWING ARRANGEMENTS The company amended its credit facility in June 2025, increasing the unsecured revolving line of credit to $600 million (with an option to increase to $850 million) and extending its maturity to June 26, 2030. No borrowings were outstanding under this facility during the thirteen and twenty-six weeks ended August 3, 2025. The company also maintains $35 million in unsecured letter of credit facilities - In June 2025, the company amended its credit facility, increasing the unsecured revolving line of credit to $600 million, with an option to increase by $250 million to a total of $850 million[30] - The Credit Facility matures on June 26, 2030[31] - As of August 3, 2025, there were no borrowings under the Credit Facility, and $11.9 million in undrawn standby letters of credit were outstanding[31] - The company has three unsecured letter of credit facilities totaling $35 million, with $0.8 million outstanding as of August 3, 2025[34] NOTE C. STOCK-BASED COMPENSATION The company's Long-Term Incentive Plan allows for various stock awards, with approximately 7.7 million shares available for future grants as of August 3, 2025. Stock-based compensation expense recognized in SG&A increased to $26.6 million for the thirteen weeks ended August 3, 2025, and $47.0 million for the twenty-six weeks ended August 3, 2025, compared to prior year periods - As of August 3, 2025, approximately 7.7 million shares were available for future grant under the Amended and Restated 2001 Long-Term Incentive Plan[35] - Stock awards generally vest evenly over four years for service-based awards and three years for performance-based awards[36] Stock-Based Compensation Expense (in thousands) | Period | August 3, 2025 | July 28, 2024 | | :---------------------- | :------------- | :------------ | | Thirteen Weeks Ended | $26,600 | $21,800 | | Twenty-six Weeks Ended | $47,000 | $44,800 | NOTE D. EARNINGS PER SHARE Basic earnings per share is calculated by dividing net earnings by the weighted-average common shares outstanding, while diluted EPS includes the effect of dilutive stock-based awards. Diluted EPS for the thirteen weeks ended August 3, 2025, was $2.00, up from $1.67 in the prior year, and for the twenty-six weeks, it was $3.86, up from $3.67 Earnings Per Share (Thirteen Weeks Ended) | Metric | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Basic earnings per share | $2.03 | $1.69 | | Diluted earnings per share | $2.00 | $1.67 | | Dilutive stock-based awards (shares in thousands) | 1,474 | 1,554 | Earnings Per Share (Twenty-six Weeks Ended) | Metric | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Basic earnings per share | $3.91 | $3.72 | | Diluted earnings per share | $3.86 | $3.67 | | Dilutive stock-based awards (shares in thousands) | 1,549 | 1,769 | NOTE E. SEGMENT REPORTING The company aggregates its operating segments (brands) into a single reportable segment due to similar economic characteristics. The Chief Executive Officer, as the chief operating decision maker, assesses performance based on operating income. Net revenues by brand show Pottery Barn as the largest contributor, with all brands showing growth in the thirteen and twenty-six weeks ended August 3, 2025, compared to the prior year - The company identifies its operating segments by brand and aggregates them into a single reportable segment due to similar economic and qualitative characteristics[40] - The Chief Executive Officer, as the CODM, assesses performance and allocates resources based on operating income[42] Net Revenues by Brand (in thousands) | Brand | Thirteen Weeks Ended Aug 3, 2025 | Thirteen Weeks Ended July 28, 2024 | Twenty-six Weeks Ended Aug 3, 2025 | Twenty-six Weeks Ended July 28, 2024 | | :-------------------- | :------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Pottery Barn | $724,579 | $725,323 | $1,419,671 | $1,402,658 | | West Elm | $468,550 | $458,779 | $905,635 | $889,088 | | Williams Sonoma | $249,053 | $239,867 | $506,546 | $478,106 | | Pottery Barn Kids and Teen | $286,749 | $259,408 | $516,465 | $481,210 | | Other | $107,829 | $104,930 | $218,556 | $197,593 | | Total | $1,836,760 | $1,788,307 | $3,566,873 | $3,448,655 | NOTE F. COMMITMENTS AND CONTINGENCIES The company is involved in various lawsuits, claims, and proceedings in the ordinary course of business. Management believes the ultimate resolution of these current matters will not have a material adverse effect on the condensed consolidated financial statements - The company is involved in lawsuits, claims, and proceedings incident to the ordinary course of business[50] - Management believes the ultimate resolution of these current matters will not have a material adverse effect on the Condensed Consolidated Financial Statements[50] NOTE G. STOCK REPURCHASE PROGRAM AND DIVIDENDS The Board of Directors authorized a $1.0 billion stock repurchase program in September 2024, with $903.4 million remaining as of August 3, 2025. The company repurchased 1.2 million shares for $199.1 million in the thirteen weeks ended August 3, 2025, and 1.8 million shares for $289.1 million in the twenty-six weeks ended August 3, 2025. Cash dividends declared increased to $0.66 per share for the thirteen weeks and $1.32 per share for the twenty-six weeks ended August 3, 2025 - A $1.0 billion stock repurchase program was authorized in September 2024, with $903.4 million remaining as of August 3, 2025[51] Stock Repurchases and Dividends | Metric | Thirteen Weeks Ended Aug 3, 2025 | Twenty-six Weeks Ended Aug 3, 2025 | Thirteen Weeks Ended July 28, 2024 | Twenty-six Weeks Ended July 28, 2024 | | :-------------------------------- | :------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Shares repurchased | 1,227,599 | 1,826,790 | 921,466 | 1,235,264 | | Aggregate cost (excluding excise taxes) | $199.1 million | $289.1 million | $129.8 million | $173.6 million | | Average cost per share | $162.22 | $158.26 | $140.89 | $140.54 | | Cash dividends declared per common share | $0.66 | $1.32 | $0.57 | $1.14 | NOTE H. FAIR VALUE MEASUREMENTS Fair value measurements are categorized into a three-level hierarchy. Cash and cash equivalents use Level 1 inputs. Long-lived assets are measured on a nonrecurring basis using Level 2 and Level 3 inputs, with impairment charges of $0.3 million and $1.3 million recognized for the thirteen and twenty-six weeks ended August 3, 2025, respectively - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[60] - Cash and cash equivalents are based on Level 1 inputs[56] - Long-lived assets are measured at fair value on a nonrecurring basis using Level 2 and Level 3 inputs[57] - Impairment charges of $0.3 million and $1.3 million were recognized for the thirteen and twenty-six weeks ended August 3, 2025, respectively[57][59] NOTE I. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Changes in accumulated other comprehensive income (loss) are primarily driven by foreign currency translation adjustments. The balance improved from $(21.593) million at February 2, 2025, to $(15.943) million at August 3, 2025, largely due to positive foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | Balance at Feb 2, 2025 | Foreign Currency Translation Adjustments (H1 FY25) | Balance at Aug 3, 2025 | | :-------------------------- | :--------------------- | :------------------------------------------------- | :--------------------- | | Foreign Currency Translation | $(21,593) | $5,650 | $(15,943) | | Cash Flow Hedges | $0 | $0 | $0 | | Total | $(21,593) | $5,650 | $(15,943) | NOTE J. REVENUE Revenue from merchandise sales is recognized when control transfers to the customer, either upon in-store pickup or delivery. The company defers revenue for gift cards, customer loyalty programs, and credit card issuer incentives. As of August 3, 2025, the liability for expected sales returns was $30.5 million, and gift card and other deferred revenue totaled $578.2 million - Revenue from merchandise sales is recognized at the point in time when control of merchandise is transferred to the customer[62] - The company defers revenue for gift cards, customer loyalty programs, and incentives from credit card issuers[65] Revenue-Related Liabilities (in thousands) | Metric | August 3, 2025 | February 2, 2025 | July 28, 2024 | | :-------------------------------- | :------------- | :--------------- | :------------ | | Liability for expected sales returns | $30,500 | $42,700 | $32,700 | | Gift card and other deferred revenue | $578,200 | $584,800 | $576,500 | NOTE K. INCOME TAXES The effective tax rate for the first half of fiscal 2025 increased to 24.9% from 23.8% in the prior year, primarily due to lower excess tax benefits from stock-based compensation and changes in earnings mix. The recently enacted One Big Beautiful Bill Act (OBBB) is expected to have a minimal impact on the effective tax rate but result in favorable cash tax impacts in fiscal 2025 - The effective tax rate for the first half of fiscal 2025 was 24.9%, up from 23.8% in the first half of fiscal 2024[70] - The increase in the effective tax rate was primarily driven by lower excess tax benefits from stock-based compensation and the tax effect of changes in earnings mix[70] - The One Big Beautiful Bill Act (OBBB), signed into law in July 2025, is expected to have a minimal impact on the effective tax rate but result in favorable cash tax impacts in fiscal 2025[71] NOTE L. IMMATERIAL CORRECTION OF 2024 INTERIM PERIOD CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The company identified and corrected an immaterial error in its fiscal 2024 interim financial statements related to unrecorded shrink losses and bonus accruals. This correction impacted cost of goods sold, gross profit, SG&A, operating income, net earnings, EPS, merchandise inventories, accrued expenses, income taxes payable, and retained earnings for the affected periods - An immaterial correction was made to the fiscal 2024 interim financial statements for unrecorded shrink losses and bonus accruals[73][74] Impact of Immaterial Correction on Earnings (Thirteen Weeks Ended July 28, 2024, in thousands) | Item | As Previously Reported | Adjustments | As Corrected | | :---------------------------------- | :--------------------- | :---------- | :----------- | | Cost of goods sold | $961,981 | $22,386 | $984,367 | | Gross profit | $826,326 | $(22,386) | $803,940 | | Selling, general and administrative expenses | $536,410 | $(10,370) | $526,040 | | Operating income | $289,916 | $(12,016) | $277,900 | | Net earnings | $225,745 | $(8,890) | $216,855 | | Diluted earnings per share | $1.74 | $(0.07) | $1.67 | Impact of Immaterial Correction on Balance Sheet (As of July 28, 2024, in thousands) | Item | As Previously Reported | Adjustments | As Corrected | | :-------------------------- | :--------------------- | :---------- | :----------- | | Merchandise inventories, net | $1,247,426 | $(29,733) | $1,217,693 | | Accrued expenses | $207,633 | $(11,001) | $196,632 | | Income taxes payable | $53,373 | $(4,592) | $48,781 | | Retained earnings | $1,728,063 | $(14,140) | $1,713,923 | 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 for the second quarter and first half of fiscal 2025 compared to the prior year. It highlights revenue growth driven by strong sales and improved inventory, discusses changes in gross profit and SG&A, and outlines the company's strategic priorities and outlook amidst macroeconomic uncertainties FORWARD-LOOKING STATEMENTS This section cautions readers that the report contains forward-looking statements subject to risks and uncertainties, which could cause actual results to differ materially. These statements cover various aspects of the business, including financial performance, strategic initiatives, market conditions, and regulatory changes - The report contains forward-looking statements regarding business and results of operations, subject to risks and uncertainties[81] - Key areas of forward-looking statements include tax laws, tariffs, strategic priorities, competitive landscape, economic conditions, supply chain, and capital allocation[81] OVERVIEW Williams-Sonoma, Inc. is a digital-first, design-led, and sustainable home retailer operating multiple brands across various channels. The company reported a 2.7% increase in net revenues and 3.7% comparable brand revenue growth in Q2 FY25, driven by strong sales and improved inventory. Diluted EPS grew by 19.8% to $2.00. The company maintains a strong liquidity position but faces macroeconomic headwinds, including increased tariffs - Williams-Sonoma, Inc. is a specialty retailer of high-quality home products, operating as the world's largest digital-first, design-led, and sustainable home retailer[82] - Net revenues in Q2 FY25 increased by $48.5 million (2.7%), with company comparable brand revenue growth of 3.7% (retail +7.3%, e-commerce +2.0%)[84] - Diluted earnings per share grew by 19.8% to $2.00 in Q2 FY25[87] - The company's focus for the remainder of the year includes returning to growth, elevating customer service, and driving earnings, while navigating macroeconomic uncertainties and increased tariffs (doubled from 14% to 28%)[90] NET REVENUES Net revenues primarily consist of merchandise sales through e-commerce, retail stores, and catalogs, including shipping fees and revenues from business-to-business, franchisees, credit card incentives, and gift card breakage. For Q2 FY25, net revenues increased by 2.7% with a 3.7% comparable brand growth, driven by strong furniture and non-furniture sales. For H1 FY25, net revenues increased by 3.4% with a 3.6% comparable brand growth, benefiting from improved in-stock inventory levels - Net revenues for Q2 FY25 increased by $48.5 million (2.7%), with company comparable brand revenue growth of 3.7% (retail +7.3%, e-commerce +2.0%)[92] - Net revenues for H1 FY25 increased by $118.2 million (3.4%), with company comparable brand revenue growth of 3.6% (retail +6.8%, e-commerce +2.0%)[93] Comparable Brand Revenue Growth (YoY) | Brand | Q2 FY25 | Q2 FY24 | H1 FY25 | H1 FY24 | | :-------------------------- | :------ | :------ | :------ | :------ | | Pottery Barn | 1.1% | (7.1)% | 1.5% | (8.9)% | | West Elm | 3.3% | (4.8)% | 1.8% | (4.4)% | | Williams Sonoma | 5.1% | (0.8)% | 6.2% | 0.1% | | Pottery Barn Kids and Teen | 5.3% | 1.5% | 4.6% | 2.1% | | Total | 3.7% | (3.3)% | 3.6% | (4.1)% | STORE DATA As of August 3, 2025, the company operated 509 stores, a slight decrease from 521 stores as of July 28, 2024. Pottery Barn remains the brand with the highest store count and average leased square footage per store Store Count and Average Leased Square Footage | Brand | Store Count (Aug 3, 2025) | Store Count (July 28, 2024) | Average Leased Square Footage Per Store (Aug 3, 2025) | | :-------------------------- | :------------------------ | :-------------------------- | :---------------------------------------------------- | | Pottery Barn | 181 | 185 | 15,000 | | Williams Sonoma | 154 | 158 | 6,900 | | West Elm | 119 | 122 | 13,300 | | Pottery Barn Kids | 44 | 45 | 7,800 | | Rejuvenation | 11 | 11 | 8,100 | | Total | 509 | 521 | 11,400 | - Store selling square footage at period-end was 3,779,000 sq ft as of August 3, 2025, down from 3,855,000 sq ft as of July 28, 2024[97] GROSS PROFIT Gross profit increased by 7.5% in Q2 FY25, with gross margin expanding by 220 basis points to 47.1%, driven by higher merchandise margins and supply chain efficiencies. For H1 FY25, gross profit increased by 2.0%, but gross margin decreased by 70 basis points to 45.7%, primarily due to an out-of-period freight adjustment in the prior year, partially offset by current period supply chain efficiencies and occupancy leverage Gross Profit and Margin (in thousands) | Metric | Q2 FY25 | % Net Revenues Q2 FY25 | Q2 FY24 | % Net Revenues Q2 FY24 | H1 FY25 | % Net Revenues H1 FY25 | H1 FY24 | % Net Revenues H1 FY24 | | :-------------------------- | :------ | :--------------------- | :------ | :--------------------- | :------ | :--------------------- | :------ | :--------------------- | | Gross profit | $864,623 | 47.1% | $803,940 | 44.9% | $1,630,432 | 45.7% | $1,599,108 | 46.4% | - Q2 FY25 gross margin increased by 220 basis points, driven by 190 basis points from higher merchandise margins and 30 basis points from supply chain efficiencies[101] - H1 FY25 gross margin decreased by 70 basis points, primarily due to a 140 basis point impact from an out-of-period freight adjustment in Q1 FY24 and 10 basis points from lower merchandise margins, partially offset by 60 basis points from supply chain efficiencies and 20 basis points from occupancy leverage[102] SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative (SG&A) expenses increased by 2.0% in Q2 FY25 and 0.8% in H1 FY25. As a percentage of net revenues, SG&A leveraged by 20 basis points in Q2 FY25 and 70 basis points in H1 FY25, primarily due to lower advertising and general expenses, partially offset by increased employment expense SG&A Expenses (in thousands) | Metric | Q2 FY25 | % Net Revenues Q2 FY25 | Q2 FY24 | % Net Revenues Q2 FY24 | H1 FY25 | % Net Revenues H1 FY25 | H1 FY24 | % Net Revenues H1 FY24 | | :-------------------------- | :------ | :--------------------- | :------ | :--------------------- | :------ | :--------------------- | :------ | :--------------------- | | Selling, general and administrative expenses | $536,564 | 29.2% | $526,040 | 29.4% | $1,011,660 | 28.4% | $1,004,096 | 29.1% | - Q2 FY25 SG&A as a percentage of net revenues decreased by 20 basis points, driven by lower advertising (80 bps) and general expenses (40 bps), partially offset by increased employment expense (100 bps)[105] - H1 FY25 SG&A as a percentage of net revenues decreased by 70 basis points, driven by lower advertising (70 bps) and general expenses (30 bps), partially offset by increased employment expense (30 bps)[106] INCOME TAXES The effective tax rate for the first half of fiscal 2025 increased to 24.9% from 23.8% in the prior year, mainly due to lower excess tax benefits from stock-based compensation and a change in earnings mix. The recently enacted OBBB Act is expected to have a minimal impact on the effective tax rate but will provide favorable cash tax impacts in fiscal 2025 - The effective tax rate for the first half of fiscal 2025 was 24.9%, compared to 23.8% for the first half of fiscal 2024[107] - The increase in the effective tax rate was primarily driven by lower excess tax benefits from stock-based compensation and the tax effect of the change in earnings mix[107] - The One Big Beautiful Bill Act (OBBB), signed in July 2025, is expected to have a minimal impact on the effective tax rate but will result in favorable cash tax impacts in fiscal 2025[108] LIQUIDITY AND CAPITAL RESOURCES The company expects to maintain adequate liquidity for its operations, dividends, capital expenditures, and stock repurchases for the next 12 months, supported by $985.8 million in cash and cash equivalents and an amended $600 million revolving credit facility. Operating cash flow decreased in H1 FY25 due to higher inventory spending and decreased accrued expenses, while investing and financing activities saw increased cash outflows primarily for property and equipment purchases, stock repurchases, and dividends - The company believes its cash on hand, cash flows from operations, and available credit facilities will provide adequate liquidity for business operations, dividends, capital expenditures, and stock repurchases over the next 12 months[113] - As of August 3, 2025, the company held $985.8 million in cash and cash equivalents[114] - Net cash provided by operating activities for H1 FY25 was $401.7 million, a decrease from $473.3 million in H1 FY24, primarily due to higher spending on merchandise inventories and a decrease in accrued expenses[119] - Net cash used in investing activities for H1 FY25 was $111.5 million, an increase from $71.0 million in H1 FY24, mainly due to purchases of property and equipment[120] - Net cash used in financing activities for H1 FY25 was $521.1 million, an increase from $398.2 million in H1 FY24, primarily driven by increased stock repurchases and dividend payments[121] Seasonality The company's business experiences substantial seasonal variations, with a significant portion of revenues and net earnings historically realized during the peak selling season from October through January, and lower levels from February through September - A significant portion of revenues and net earnings are realized during the peak selling season (October through January), with lower levels from February through September[122] CRITICAL ACCOUNTING ESTIMATES There were no significant changes to the company's critical accounting estimates during the second quarter of fiscal 2025, as discussed in its Annual Report on Form 10-K - No significant changes to critical accounting estimates occurred during the second quarter of fiscal 2025[123] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including interest rate fluctuations, foreign currency exchange rate changes, and inflation. While the impact of these risks has been immaterial to date, the company monitors them, especially as it expands globally and faces heightened global inflationary pressures Interest Rate Risk The company's credit facility has a variable interest rate, but there were no borrowings during Q2 FY25. Investments in money market funds and interest-bearing demand deposit accounts are also subject to interest rate changes - The company's Credit Facility has a variable interest rate, but no borrowings were outstanding during the second quarter of fiscal 2025[125] - Investments in money market funds and interest-bearing demand deposit accounts are affected by changes in market interest rates[126] Foreign Currency Risks The majority of inventory purchases are denominated in U.S. dollars, limiting direct foreign currency impact. While foreign operations in Canada, Australia, and the UK expose the company to exchange rate fluctuations, the impact was not material in Q2 FY25 or Q2 FY24, and a hypothetical 10% change would not materially impact financial statements - The majority of inventory purchases are denominated in U.S. dollars, limiting direct foreign currency impact[127] - Foreign operations in Canada, Australia, and the United Kingdom expose the company to foreign currency exchange rate fluctuations, but the impact was not material in Q2 FY25 or Q2 FY24[128] - A hypothetical 10% change in foreign currency exchange rates would not have a material impact on the company's historical or current Condensed Consolidated Financial Statements[128] Inflation The company has experienced varying levels of inflation, impacting supply chain, shipping, product, and labor costs. While the effects have been immaterial to date, global inflationary pressures are weakening customer sentiment. The company's operating model and pricing power have helped mitigate these increased costs - The company has experienced varying levels of inflation, impacting supply chain, shipping, product, and labor costs[129] - The effects of inflation on financial statements have been immaterial to date, but future material impact is not assured[129] - The company's unique operating model and pricing power helped mitigate increased costs during Q2 FY25 and Q2 FY24[129] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 3, 2025. There were no material changes in internal control over financial reporting during the second quarter of fiscal 2025 Evaluation of Disclosure Controls and Procedures Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 3, 2025 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of August 3, 2025[130] Changes in Internal Control Over Financial Reporting There were no changes in internal control over financial reporting during the second quarter of fiscal 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the second quarter of fiscal 2025[131] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Information regarding legal proceedings is contained in Note F to the Condensed Consolidated Financial Statements and indicates that current matters are not expected to have a material adverse effect - Information on legal proceedings is provided in Note F to the Condensed Consolidated Financial Statements[134] Item 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended February 2, 2025 - No material changes to risk factors were reported in the current quarterly period[135] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Board of Directors authorized a $1.0 billion stock repurchase program in September 2024. During the second quarter of fiscal 2025, the company repurchased 1,227,599 shares of common stock for an aggregate cost of $199.1 million, with $903.4 million remaining under the program - A $1.0 billion stock repurchase program was authorized in September 2024[136] Common Stock Repurchases (Q2 FY25) | Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program | | :-------------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | May 5, 2025 - June 1, 2025 | 754,597 | $164.51 | $978,415,000 | | June 2, 2025 - June 29, 2025 | 473,002 | $158.56 | $903,415,000 | | June 30, 2025 - August 3, 2025 | — | — | $903,415,000 | | Total | 1,227,599 | $162.22 | $903,415,000 | Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not applicable[140] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not applicable[141] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of fiscal 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of fiscal 2025[142] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Ninth Amended and Restated Credit Agreement, Director Compensation Policy, CEO and CFO certifications, and financial statements in Inline XBRL format - Key exhibits include the Ninth Amended and Restated Credit Agreement, Director Compensation Policy, CEO and CFO certifications, and financial statements in Inline XBRL format[143] SIGNATURE The report is duly signed on behalf of Williams-Sonoma, Inc. by Jeffrey E. Howie, Executive Vice President and Chief Financial Officer, and Jeremy Brooks, Senior Vice President and Chief Accounting Officer, on August 29, 2025 - The report was signed by Jeffrey E. Howie, Executive Vice President and Chief Financial Officer, and Jeremy Brooks, Senior Vice President and Chief Accounting Officer[146] - Date of signature: August 29, 2025[146]