WILLIAMS SONOMA INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements related to: our ability to provide sustainable products at competitive prices; changes in U.S. (federal, state and local) and international tax laws and trade policies and regulations; the impact of current and potential future tariffs and our ability to mitigate such impacts; the complementary nature of our e-commerce and retail channels; the plans, strategies, initiatives and objectives of management for future operations; our ability to execute strategic priorities and growth initiatives, including those regarding digital leadership, product and technology innovation, cross-brand initiatives, retail transformation and operational excellence; the strength of our business and our brands; our marketing efforts; our ability to provide world-class customer service via supply chain improvements from reduced out-of-market and multiple shipments, fewer customer accommodations, lower returns and damages, and reduced replacements; our belief that our key differentiators, growth strategies and the efficiencies of our operating model will allow us to reduce costs and manage inventory levels in both the short- and long-term; competition from companies with concepts or products similar to ours; our beliefs about our competitive advantages and areas of potential future growth in the market; the seasonal variations in demand; our ability to recruit, retain and motivate skilled personnel; our ability to protect our intellectual property rights; our ability to comply with the laws, rules and regulations of the U.S. and multiple foreign jurisdictions in which we operate; the impact of general economic conditions, inflationary pressures, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, outbreaks of disease, adverse weather, availability of consumer credit, consumer debt levels, conditions in the housing market, elevated interest rates, sales tax rates and rate increases, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security; the impact of periods of decreased home and home furnishing purchases; our ability to grow our business-to-business division and the challenges we may face executing such growth; our ability to anticipate consumer preferences and buying trends overall and as they apply to specific brands; dependence on timely introduction and customer acceptance of our merchandise; effective inventory management; timely and effective sourcing of merchandise from our foreign and domestic suppliers and delivery of merchandise through our supply chain…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements related to: changes in U.S. (federal, state and local) and international tax laws and trade policies and regulations; the impact of current and potential future tariffs and our ability to mitigate such impacts; the complementary nature of our e-commerce and retail channels; the plans, strategies, initiatives and objectives of management for future operations; our ability to execute strategic priorities and growth initiatives, including those regarding digital leadership, product and technology innovation, cross-brand initiatives, retail transformation and operational excellence; the strength of our business and our brands; our marketing efforts; our ability to provide sustainable products at competitive prices; our ability to provide world-class customer service via supply chain improvements from reduced out-of-market and multiple shipments, fewer customer accommodations, lower returns and damages, and reduced replacements; our belief that our key differentiators, growth strategies and the efficiencies of our operating model will allow us to reduce costs and manage inventory levels in both the short- and long-term; competition from companies with concepts or products similar to ours; our beliefs about our competitive advantages and areas of potential future growth in the market; the seasonal variations in demand; our ability to recruit, retain and motivate skilled personnel; our ability to protect our intellectual property rights; our ability to comply with the laws, rules and regulations of the U.S. and multiple foreign jurisdictions in which we operate; the impact of general economic conditions, inflationary pressures, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, outbreaks of disease, adverse weather, availability of consumer credit, consumer debt levels, conditions in the housing market, elevated interest rates, sales tax rates and rate increases, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security; the impact of periods of decreased home and home furnishing purchases; our ability to grow our business-to-business division and the challenges we may face executing such growth; our ability to anticipate consumer preferences and buying trends overall and as they apply to specific brands; dependence on timely introduction and customer acceptance of our merchandise; effective inventory management; timely and effective sourcing of merchandise from our foreign and domestic suppliers and delivery of merchandise through our supply chain…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended May 4, 2025 (“first quarter of fiscal 2025”), as compared to the thirteen weeks ended April 28, 2024 (“first quarter of fiscal 2024”), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto. All explanations of changes in operational results are discussed in order of magnitude.

Current wording

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended August 3, 2025 (“second quarter of fiscal 2025”), as compared to the thirteen weeks ended July 28, 2024 (“second quarter of fiscal 2024”) and twenty-six weeks ended August 3, 2025 ("first half of fiscal 2025"), as compared to the twenty-six weeks ended July 28, 2024 ("first half of fiscal 2024"), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto. All explanations of changes in operational results are discussed in order of magnitude.

Previous wording

First Quarter of Fiscal 2025 Financial Results

Current wording

Second Quarter of Fiscal 2025 Financial Results

Previous wording

In the first quarter of fiscal 2025, Pottery Barn, our largest brand, saw comparable brand revenue (“brand comp”) growth of 2.0% driven by our seasonal assortments, innovative product lines contributing to furniture growth and effective collaborations. The Pottery Barn Kids and Teen brands saw brand comp growth of 3.8% in the first quarter of fiscal 2025 driven by strength in collaborations as well as new product introductions in our dorm and baby offerings.

Current wording

In the second quarter of fiscal 2025, Pottery Barn, our largest brand, saw comparable brand revenue (“brand comp”) growth of 1.1% driven by increased newness, strong retail performance from design services, and strong collaborations. The Pottery Barn Kids and Teen brands saw brand comp growth of 5.3% in the second quarter of fiscal 2025 driven by strength in our collaborations and dorm offerings.

Previous wording

West Elm saw brand comp growth of 0.2% in the first quarter of fiscal 2025, driven by strength in non-furniture categories, including kids, bath, lighting and textiles as well as new product introductions and collaborations.

Current wording

West Elm saw brand comp growth of 3.3% in the second quarter of fiscal 2025, driven by strength in furniture and non-furniture categories including new product introductions and collaborations.

Previous wording

The Williams Sonoma brand saw brand comp growth of 7.3% in the first quarter of fiscal 2025 with strength in the brand's kitchen business driven by cookware, housewares and entertaining categories as well as improvement in the brand's home business driven by textiles, bedding and certain furniture categories.

Current wording

The Williams Sonoma brand saw brand comp growth of 5.1% in the second quarter of fiscal 2025 with strength in the brand's kitchen business driven by electrics, cookware and housewares, as well as through exclusive partnerships, partially offset by reduced furniture sales in the brand's home business.

Previous wording

As of May 4, 2025, we had $1.0 billion in cash and cash equivalents and generated operating cash flow of $118.9 million in the first quarter of fiscal 2025. In addition to our cash balance, we also ended the first quarter of fiscal 2025 with no outstanding borrowings under our revolving line of credit. This strong liquidity position allowed us to fund the operations of the business, invest $58.3 million in capital expenditures and return $164.6 million through stock repurchases and dividends to stockholders in the first quarter of fiscal 2025.

Current wording

As of August 3, 2025, we had $985.8 million in cash and cash equivalents and generated operating cash flow of $401.7 million in the first half of fiscal 2025. In addition to our cash balance, we also ended the second quarter of fiscal 2025 with no outstanding borrowings under our revolving line of credit. This strong liquidity position allowed us to fund the operations of the business, invest $110.3 million in capital expenditures and return $445.1 million through stock repurchases and dividends to stockholders in the first half of fiscal 2025.

Previous wording

Subsequent to the filing of our fiscal 2023 Form 10-K, in April 2024, we determined that we over-recognized freight expense in fiscal 2021, 2022 and 2023 for a cumulative amount of $49.0 million. We evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. We then evaluated whether the cumulative amount of the over-accrual was material to our projected fiscal 2024 results, and determined the cumulative amount was not material. Therefore, the Condensed Consolidated Financial Statements for fiscal 2024 include an out-of-period adjustment of $49.0 million, recorded in the first quarter of fiscal 2024, to reduce cost of goods sold and accounts payable, which corrected the cumulative error on the Consolidated Balance Sheet as of January 28, 2024.

Current wording

Subsequent to the filing of our fiscal 2023 Form 10-K, in April 2024, we determined that we over-recognized freight expense in fiscal 2021, 2022 and 2023 for a cumulative amount of $49.0 million. We evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated. We then evaluated whether the cumulative amount of the over-accrual was material to our projected fiscal 2024 results, and determined the cumulative amount was not material. Therefore, the Condensed Consolidated Financial Statements for the twenty-six weeks ended July 28, 2024 include an out-of-period adjustment of $49.0 million, recorded in the first quarter of fiscal 2024, to reduce cost of goods sold and accounts payable, which corrected the cumulative error on the Consolidated Balance Sheet as of January 28, 2024.

Previous wording

As we look forward to the balance of the year, our focus will remain on our three key priorities of (i) returning to growth, (ii) elevating our world-class customer service and (iii) driving earnings. We believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability. We believe we have a powerful portfolio of brands, serving a range of categories, aesthetics, and life stages and we have built a strong omni-channel platform and infrastructure, which will position us well for the next stage of growth. However, the current uncertain macroeconomic environment, including the evolving tariff and trade policy landscape, a weak housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could negatively impact our business. For information on risks, please see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 2, 2025.

Current wording

As we look forward to the balance of the year, our focus will remain on our three key priorities of (i) returning to growth, (ii) elevating our world-class customer service and (iii) driving earnings. We believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability. We believe we have a powerful portfolio of brands, serving a range of categories, aesthetics, and life stages and we have built a strong omni-channel platform and infrastructure, which will position us well for the next stage of growth. However, the current uncertain macroeconomic environment, including the evolving tariff and trade policy landscape, a weak housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could negatively impact our business. Since the end of the first quarter of fiscal 2025, the tariff environment has materially evolved. Specifically, our incremental tariff rate has doubled from 14% to 28% since we filed our previous Quarterly Report on Form 10-Q for the thirteen weeks ended May 4, 2025. These tariffs, as well as any future tariffs, are expected to result in increased cost for imported materials and finished goods. While we believe that we can offset a portion of these costs, we do not expect to be able to offset all the additional costs. Our inability to minimize the impact of tariffs on our products, increase prices or find alternative sources for our products may have a material impact on our earnings. For information on risks, please see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 2, 2025.

Previous wording

1 Includes occupancy expenses of $197.7 million and $196.2 million for the first quarter of fiscal 2025 and fiscal 2024, respectively.

Current wording

1 Includes occupancy expenses of $201.4 million and $197.2 million for the second quarter of fiscal 2025 and fiscal 2024, respectively, and $399.0 million and $393.4 million for the first half of fiscal 2025 and fiscal 2024, respectively.

Previous wording

Gross profit decreased $29.4 million, or 3.7%, compared to the first quarter of fiscal 2024. Gross margin decreased to 44.3% from 47.9% in the first quarter of fiscal 2024. This decrease in gross margin of 360 basis points was driven by (i) the out-of-period freight adjustment in the first quarter of fiscal 2024 of 300 basis points and (ii) lower merchandise margins of 220 basis points due to higher input costs, including higher ocean freight and tariff mitigation costs, partially offset by (iii) supply chain efficiencies of 120 basis points, including reductions in returns, accommodations, replacements and damages and (iv) the leverage of occupancy costs of 40 basis points resulting from higher sales.

Current wording

Gross profit increased $31.3 million, or 2.0%, compared to the first half of fiscal 2024. Gross margin decreased to 45.7% from 46.4% in the first half of fiscal 2024. This decrease in gross margin of 70 basis points was driven by (i) the out-of-period freight adjustment in the first quarter of fiscal 2024 of 140 basis points and (ii) lower merchandise margins of 10 basis points, partially offset by (iii) supply chain efficiencies of 60 basis points, including reductions in returns, accommodations, damages and replacements and (iv) the leverage of occupancy costs of 20 basis points resulting from higher sales.

Previous wording

SG&A decreased $3.0 million, or 0.6%, compared to the first quarter of fiscal 2024. SG&A as a percentage of net revenues decreased to 27.5% from 28.8% in the first quarter of fiscal 2024. This leverage of 130 basis points was primarily driven by (i) lower advertising expenses of 60 basis points, (ii) employment leverage of 60 basis points resulting from higher sales and lower performance-based incentive compensation and (iii) general expenses leverage of 10 basis points.

Current wording

SG&A increased $10.5 million, or 2.0%, compared to the second quarter of fiscal 2024. SG&A as a percentage of net revenues decreased to 29.2% from 29.4% in the second quarter of fiscal 2024. This leverage of 20 basis points was primarily driven by (i) lower advertising expenses of 80 basis points and (ii) lower general expenses of 40 basis points, partially offset by (iii) an increase in employment expense of 100 basis points due to higher performance-based incentive compensation.

Previous wording

The effective tax rate was 23.0% for the first quarter of fiscal 2025, compared to 21.8% for the first quarter of fiscal 2024. The increase was primarily driven by (i) lower excess tax benefit from stock-based compensation in first quarter of fiscal 2025 and (ii) the tax effect of the change in earnings mix.

Current wording

The effective tax rate was 24.9% for the first half of fiscal 2025, compared to 23.8% for the first half of fiscal 2024. The increase was primarily driven by (i) lower excess tax benefit from stock-based compensation in the first half of fiscal 2025 and (ii) the tax effect of the change in earnings mix.

Previous wording

Since the Organization for Economic Co-operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (“Framework”) in 2021, a number of countries have begun to enact legislation to implement the OECD international tax framework, including the Pillar Two minimum tax regime.

Current wording

Since the Organization for Economic Co-operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (“Framework”) in 2021, a number of countries have begun to enact legislation to implement the OECD international tax framework, including the Pillar Two minimum tax regime. Our subsidiaries were not subject to Pillar Two minimum tax in the first half of fiscal 2025. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, and monitoring legislative developments by other countries, especially in the regions in which we operate.

Previous wording

See Note G to our Condensed Consolidated Financial Statements, Stock Repurchase Programs and Dividends, within Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

See Note G to our Condensed Consolidated Financial Statements, Stock Repurchase Program and Dividends, within Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

As of May 4, 2025, we held $1.0 billion in cash and cash equivalents, the majority of which was held in money market funds and interest-bearing demand deposit accounts, and of which $96.1 million was held by our international subsidiaries. Consistent with our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

Current wording

As of August 3, 2025, we held $985.8 million in cash and cash equivalents, the majority of which was held in money market funds and interest-bearing demand deposit accounts, and of which $66.9 million was held by our international subsidiaries. Consistent with our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

Previous wording

In addition to our cash balances on hand, we have a credit facility (the “Credit Facility”) which provides for a $500 million unsecured revolving line of credit. Our Credit Facility may be used to borrow revolving loans or to request the issuance of letters of credit. We may, upon notice to the administrative agent, request existing or new lenders, at such lenders’ option, to increase the Credit Facility by up to $250 million to provide for a total of up to $750 million of unsecured revolving credit.

Current wording

In addition to our cash balances on hand, in June 2025, we amended our existing credit facility, which increased our unsecured revolving line of credit to $600 million, amended certain interest rates and extended the maturity date of the facility to June 26, 2030, in addition to other updates (the “Credit Facility”). Our Credit Facility may be used to borrow revolving loans or to request the issuance of letters of credit. We may, upon notice to the administrative agent, request existing or new lenders, at such lenders’ option, to increase the Credit Facility by up to $250 million to provide for a total of up to $850 million of unsecured revolving credit.

Previous wording

During the thirteen weeks ended May 4, 2025 and April 28, 2024, we had no borrowings under our Credit Facility. Additionally, as of May 4, 2025, issued but undrawn standby letters of credit of $11.9 million were outstanding under our Credit Facility. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Current wording

During the thirteen and twenty-six weeks ended August 3, 2025 and July 28, 2024, we had no borrowings under our Credit Facility. Additionally, as of August 3, 2025, issued but undrawn standby letters of credit of $11.9 million were outstanding under our Credit Facility. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Previous wording

We have three unsecured letter of credit facilities for a total of $35 million. Our letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under our letter of credit facilities accrues at a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio. As of May 4, 2025, the aggregate amount outstanding under our letter of credit facilities was $0.7 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. Two of our letter of credit facilities mature on August 18, 2025, and the latest expiration date possible for future letters of credit issued under these facilities is January 15, 2026. One of the letter of credit facilities totaling $5 million matures on September 30, 2026, which is also the latest expiration date possible for future letters of credit issued under the facility.

Current wording

We have three unsecured letter of credit facilities for a total of $35 million. Our letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under our letter of credit facilities accrues at a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio. As of August 3, 2025, the aggregate amount outstanding under our letter of credit facilities was $0.8 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. On August 7, 2025, we renewed two of our letter of credit facilities totaling $30 million on substantially similar terms. The two letter of credit facilities mature on August 18, 2026, and the latest expiration date possible for future letters of credit issued under these facilities is January 15, 2027. One of the letter of credit facilities totaling $5 million matures on June 26, 2030, which is also the latest expiration date possible for future letters of credit issued under the facility.

Previous wording

For the first quarter of fiscal 2025, net cash provided by operating activities was $118.9 million compared to $226.8 million for the first quarter of fiscal 2024, and was primarily attributable to net earnings adjusted for non-cash items, partially offset by accounts payable (as a result of supplier payment timing) and accrued expenses and other liabilities. Net cash provided by operating activities compared to the first quarter of fiscal 2024 decreased primarily due to a decrease in net earnings adjusted for non-cash items, higher spending on merchandise inventories and a decrease in accrued expenses and other liabilities.

Current wording

For the first half of fiscal 2025, net cash provided by operating activities was $401.7 million compared to $473.3 million for the first half of fiscal 2024, and was primarily attributable to net earnings adjusted for non-cash items, partially offset by higher spending on merchandise inventories (as a result of increased tariff costs and timing of receipts) and a decrease in accrued expenses and other liabilities. Net cash provided by operating activities compared to the first half of fiscal 2024 decreased primarily due to higher spending on merchandise inventories, partially offset by an increase in income taxes payable.

Previous wording

For the first quarter of fiscal 2025, net cash used in investing activities was $58.2 million compared to $39.5 million for the first quarter of fiscal 2024, and was primarily attributable to purchases of property and equipment related to technology, supply chain enhancements and store construction.

Current wording

For the first half of fiscal 2025, net cash used in investing activities was $111.5 million compared to $71.0 million for the first half of fiscal 2024, and was primarily attributable to purchases of property and equipment related to technology, store construction and supply chain enhancements.

Previous wording

For the first quarter of fiscal 2025, net cash used in financing activities was $230.0 million compared to $193.7 million for the first quarter of fiscal 2024, primarily driven by repurchases of common stock, payment of dividends and tax withholdings remittance related to stock-based awards. Net cash used in financing activities for the first quarter of fiscal 2025 increased compared to the first quarter of fiscal 2024, primarily due to an increase in repurchases of our common stock.

Current wording

For the first half of fiscal 2025, net cash used in financing activities was $521.1 million compared to $398.2 million for the first half of fiscal 2024, primarily driven by repurchases of our common stock, payment of dividends and tax withholdings remittance related to stock-based awards. Net cash used in financing activities for the first half of fiscal 2025 increased compared to the first half of fiscal 2024, primarily due to an increase in repurchases of our common stock.

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the first quarter of fiscal 2025, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the second quarter of fiscal 2025, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025.