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What changed in Williams-Sonoma, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Williams-Sonoma, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+285 added−276 removedSource: 10-K (2023-03-24) vs 10-K (2022-03-28)

Top changes in Williams-Sonoma, Inc.'s 2023 10-K

285 paragraphs added · 276 removed · 213 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also support organizations and partners, such as Good360 and Habitat for Humanity, who assist those with damaged or lost homes, or those seeking decent, affordable housing. We give charitable grants, donate our merchandise, donate proceeds from the sale of certain products, and provide matching grants for charitable donations made by our associates. Our Williams-Sonoma, Inc.
Biggest changeJude-designated product sales where a portion of the sale was donated, employee donations, and donations from the Company. We also support organizations and partners, such as Good360 and Habitat for Humanity, who assist those with damaged or lost homes, or those seeking decent, affordable housing.
Our e-commerce websites, direct-mail catalogs and retail stores compete with other retailers, including e-commerce retailers, large department stores, discount retailers, other specialty retailers offering home-centered assortments and other direct-mail catalogs.
Our e-commerce websites, retail stores and direct-mail catalogs compete with other retailers, including e-commerce retailers, large department stores, discount retailers, other specialty retailers offering home-centered assortments and other direct-mail catalogs.
We are also a member of CEO Action for Diversity & Inclusion, in which we pledged a goal to “identify and establish associate networks for underrepresented communities to promote diversity and inclusion throughout the Company.” In furtherance of our stated goal, we have developed associate equity networks including an LGBTQ+ Network, Black Associate Network, Veterans Appreciation Network, Hispanic/LatinX Associate Network, Asian WSI Network, and a Disability, Education & Advocacy Network.
We are also a member of CEO Action for Diversity & Inclusion, in which we pledged a goal to “identify and establish associate networks for underrepresented communities to promote diversity and inclusion throughout the Company.” In furtherance of our stated goal, we have developed associate equity networks including an LGBTQIA+ Network, Black Associate Network, Veterans Appreciation Network, Hispanic/LatinX Associate Network, Asian WSI Network, and a Disability, Education & Advocacy Network.
In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,” “potterybarnteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, patents, copyrights, trade dress rights, domain names, trade secrets and other proprietary technology that we hold are of material importance to us.
In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,” “potterybarnteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, patents, copyrights, trade dress rights, domain names, trade secrets and other intellectual property and proprietary technology that we hold are of material importance to us.
In preparation for and during our fiscal 2021 holiday selling season, we hired a substantial number of part-time and seasonal employees, primarily in our retail stores, distribution facilities and customer care centers. None of our employees are represented by a collective bargaining agreement. We have three key ESG pillars as key areas of focus for our Company.
In preparation for and during our fiscal 2022 holiday selling season, we hired a substantial number of part-time and seasonal employees, primarily in our retail stores, distribution facilities and customer care centers. None of our employees are represented by a collective bargaining agreement. We have three key ESG pillars as key areas of focus for our Company.
We believe volunteering deepens our presence in the community, enhances our relationships with customers and strengthens employee engagement. ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS We believe that strategies that support the health of our planet, the well-being of our people and a shared sense of purpose drive long-term, sustainable growth for the Company.
We believe volunteering deepens our presence in the community, enhances our relationships with customers and strengthens employee engagement. ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS We believe that strategies that support the health of our planet, the well-being of our people and a shared sense of purpose foster long-term, sustainable growth for the Company.
The Nominations, Corporate Governance and Social Responsibility Committee oversees corporate policies and programs that speak to long-standing commitments to our employees, supply chain, environment, health and safety, human rights, cybersecurity and ethics. These policies and programs are relevant to our business, critical to our employees, and important to our customers.
The Nominations, Corporate Governance and Social Responsibility Committee oversees corporate policies and programs that speak to long-standing commitments to our associates, supply chain, environment, health and safety, human rights, cybersecurity and ethics. These policies and programs are relevant to our business, critical to our associates, and important to our customers.
We require our vendors to adhere to the standards outlined in our Vendor Code of Conduct and accompanying Implementation Standards, which are informed by the conventions of the International Labor Organization (ILO) and the UN’s Guiding Principles on Business and Human Rights.
We require our vendors to adhere to the standards outlined in our Vendor Code of Conduct and accompanying implementation standards, which are informed by the conventions of the International Labour Organization (ILO) and the UN’s Guiding Principles on Business and Human Rights.
We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, Mexico, South Korea and India that currently operate 139 franchised locations as well as e-commerce websites in certain locations.
We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, Mexico, South Korea and India that currently operate 138 franchised locations as well as e-commerce websites in certain locations.
The continued shift to e-commerce has encouraged the entry of many new competitors, including discount retailers selling undifferentiated products at reduced prices, new business models and has resulted in increased competition from established companies.
The continued shift to e-commerce has encouraged the entry of many new competitors, including discount retailers selling undifferentiated products at reduced prices, new business models and increased competition from established companies.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Williams-Sonoma, Inc. and other companies that file materials electronically with the SEC. Our annual reports, Forms 10-K, Forms 10-Q, Forms 8-K and proxy and information statements are also available, free of charge, on our website at www.williams-sonomainc.com.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Williams-Sonoma, Inc. and other companies that file materials electronically with the SEC. Our annual reports, Forms 10-K, Forms 10-Q, Forms 8-K and proxy and information statements, and any amendments thereto, are also available, free of charge, on our website at www.williams-sonomainc.com.
Depending on position and location, associates may be eligible for: 401(k) plan and other investment opportunities; paid vacations, holidays and other time-off programs; health, dental and vision insurance; health and dependent care tax-free spending accounts; medical, family and bereavement leave; paid maternity/primary caregiver benefits; tax-free commuter benefits; wellness programs including telehealth visits; time off to volunteer, and matching donations to qualifying nonprofit organizations.
Depending on position and location, associates may be eligible for: 401(k) plan and other investment opportunities; paid vacations, holidays and other time-off programs; health, dental and vision insurance; health and dependent care tax-free spending accounts; 5 Table of Contents medical, family and bereavement leave; paid maternity/primary caregiver benefits; tax-free commuter benefits; wellness programs including telehealth visits; time off to volunteer, and matching donations to qualifying nonprofit organizations.
OPERATIONS As of January 30, 2022, we had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation and Mark and Graham, which sell our products through our e-commerce websites, direct-mail catalogs and retail stores.
OPERATIONS As of January 29, 2023, we had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation and Mark and Graham, which sell our products through our e-commerce websites, retail stores and direct-mail catalogs.
SUPPLIERS We purchase most of our merchandise from numerous foreign and domestic manufacturers and importers, the largest of which accounted for approximately 3% of our purchases during fiscal 2021. Approximately 65% of our merchandise purchases in fiscal 2021 were sourced from foreign vendors, predominantly in Asia and Europe.
SUPPLIERS We purchase most of our merchandise from numerous foreign and domestic manufacturers and importers, the largest of which accounted for approximately 3% of our purchases during fiscal 2022. Approximately 67% of our merchandise purchases in fiscal 2022 were sourced from foreign vendors, predominantly in Asia and Europe.
In June 2020, we established an Equity Action Plan and formed an Equity Action Committee, including a diverse group of executives and associates, to drive positive change in the fight for racial justice, and in 2021 we continued our commitment to equity through our partnership and donation support with our racial equity and justice non-profit partners such as the NAACP, the Jackie Robinson Foundation and the National Urban League.
In June 2020, we established an Equity Action Plan and formed an Equity Action Committee, including a diverse group of executives and associates, to drive positive change in the fight for racial justice, and in 2022 we continued our commitment to equity through our partnership and donation support with our racial equity and justice non-profit partners such as the NAACP, the Jackie Robinson Foundation, the National Urban League, and Asian Americans Advancing Justice—Asian Law Caucus.
MD&A for further discussion on the effect the global supply chain disruption has had on our results of operations. COMPETITION AND SEASONALITY The specialty e-commerce and retail businesses are highly competitive.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on the effect the global supply chain disruption has had on our results of operations. COMPETITION AND SEASONALITY The specialty e-commerce and retail businesses are highly competitive.
We audit hundreds of factories annually to ensure compliance with our standards relating to labor practices, health and safety, environmental protection, ethical conduct, sub-contracting, management systems, and transparency. Using a continuous improvement model, we work alongside factories to improve working conditions.
Hundreds of factories in our audit scope are audited annually by independent third-party audit firms to ensure compliance with our standards relating to labor practices, health and safety, environmental protection, ethical conduct, sub-contracting, management systems, and transparency. Using a continuous improvement model, we work alongside factories to improve working conditions.
These brands are also part of The Key Rewards, our free-to-join loyalty program that offers members exclusive benefits across the Williams-Sonoma family of brands.
These brands are also part of The Key Rewards, our loyalty and credit card program that offers members exclusive benefits across the Williams-Sonoma family of brands.
In preparation for and during our holiday selling season, we hire a substantial number of additional temporary employees, primarily in our retail stores, distribution facilities and customer care centers. 4 Table of Contents HUMAN CAPITAL MANAGEMENT As of January 30, 2022, we had approximately 21,000 employees, of whom approximately 12,200 were full-time.
In preparation for and during our holiday selling season, we hire a substantial number of additional temporary employees, primarily in our retail stores, distribution facilities and customer care centers. 4 Table of Contents HUMAN CAPITAL MANAGEMENT As of January 29, 2023, we had approximately 21,100 employees, who we refer to as associates, of whom approximately 12,500 were full-time.
With design, manufacturing and distribution facilities in Portland, Oregon, Rejuvenation offers a wide assortment of made-to-order lighting, hardware, furniture and home décor inspired by history, designed for today and made to last for years to come. 3 Table of Contents Mark and Graham Launched in 2012, Mark and Graham is designed to be a premier online destination for personalized gift buying.
With design, manufacturing and distribution facilities in Portland, Oregon, Rejuvenation offers a wide assortment of made-to-order lighting, hardware, furniture and home décor inspired by history, designed for today and made to last for years to come. 3 Table of Contents Mark and Graham Established in 2012, Mark and Graham is a leading monogrammed lifestyle brand that offers thoughtfully designed personalized products and custom gifts.
We offer shipping from many of our brands to countries worldwide, while our catalogs reach customers throughout the U.S. The e-commerce business complements the retail business by building brand awareness and acting as an effective advertising vehicle.
We offer shipping from many of our brands to countries worldwide, while our catalogs reach customers throughout the U.S. The e-commerce and retail businesses complement each other by meeting the customers where they are; building brand awareness and acting as effective advertising vehicles.
These marks include our core brand names as well as brand names for selected products and services. Our core brand names, including “Williams Sonoma,” “Pottery Barn,” “pottery barn kids,” “Pottery Barn Teen,” “west elm,” “Williams Sonoma Home,” “Rejuvenation” and “Mark and Graham” are of material importance to us.
Our 6 Table of Contents core brand names, including “Williams Sonoma,” “Pottery Barn,” “pottery barn kids,” “Pottery Barn Teen,” “west elm,” “Williams Sonoma Home,” “Rejuvenation” and “Mark and Graham” are of material importance to us.
Substantially all of these purchases were negotiated and paid for in U.S. dollars. In addition, we manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, California, Oregon and Mississippi.
Substantially all of these purchases were negotiated and paid for in U.S. dollars. In addition, we manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, California, Oregon and Mississippi. The current macroeconomic environment is uncertain and we continue to incur increased costs across our global supply chain.
As a multinational retailer with a global supply chain, we are committed to environmentally sustainable practices across our business—from designing and sourcing responsible products and reducing waste to working with suppliers to lower emissions and adopt sustainable business practices.
As a multinational retailer with a global supply chain, we are committed to responsible practices across our business—from designing and sourcing responsible products, to reducing waste, to working with suppliers to lower emissions and adopt sustainable business practices. We amplified our climate work in the past year, making progress towards our Science-Based Target for emissions reduction across our value chain.
We also own numerous copyrights and trade dress rights for our products, product packaging, catalogs, books, publications, website designs and store designs, among other things, which are used by our subsidiaries and franchisees under license. As of January 30, 2022, we own or have applied to register approximately 300 patents in connection with certain product designs, inventions and proprietary technology.
We also own numerous patents, copyrights and trade dress rights for our products, proprietary designs, product packaging, catalogs, website designs and store designs, among other things, which are used by our subsidiaries and franchisees under license.
In addition, consistent with our commitment to diversity and inclusion, we have expanded our benefit offerings to include coverage for transgender-inclusive services, including gender confirmation surgery and hormone therapy. During fiscal 2021, we also raised our Company minimum wage to $15 per hour for US-based hourly associates across all workforces.
In addition, consistent with our commitment to diversity and inclusion, we have expanded our benefit offerings to include coverage for transgender-inclusive services, including gender confirmation surgery and hormone therapy.
We hold our suppliers to high ethical standards, and we are committed to integrity and honesty throughout all aspects of our business.
We continued to divert products from landfill into donation streams and to identify opportunities for waste reduction. We hold our suppliers to high ethical standards, and we are committed to integrity and honesty throughout all aspects of our business.
We own and/or have applied to register our key brand names in the U.S. as well as in approximately 95 additional jurisdictions. Generally, exclusive rights to the trademarks and service marks are held by Williams-Sonoma, Inc. and are used by our subsidiaries and franchisees under license.
Generally, exclusive rights to the trademarks and service marks are held by Williams-Sonoma, Inc. and are used by our subsidiaries and franchisees under license. These marks include our core brand names as well as brand names for selected products and services.
We are focused on increasing the representation of minority talent through hiring and career development.
We were also included in the 2023 Bloomberg Gender-Equality Index, which tracks public companies’ commitment to gender equality. We are focused on increasing the representation of minority talent through hiring and career development.
Compensation and Benefits We offer a benefits package designed to put our associates’ health and well-being, and that of their families, at the forefront.
Our efforts include: • Incident and hazard reporting; • Standard operating procedures aimed at reducing risk of injury; • Associate and management training; • Promotion of best practices; and • Measurement of key safety metrics. Compensation and Benefits We offer a benefits package designed to put our associates’ health and well-being, and that of their families, at the forefront.
We have a company-wide Advisor Program, which matches associates in a Manager and above role with non-managers to form advisor/advisee relationships to provide career guidance and receive support in working through career and development challenges. Additionally, our LEAD program — Leadership Education and Development — provides a leadership training program for nominated Directors and Vice Presidents.
We have a company-wide Advisor Program, which matches associates in a manager-and-above role with an associate in a lower-level role to form advisor/advisee relationships to provide career guidance and receive support in working through career and development challenges. We created new learning programs to further build skills and career opportunities for associates, notably focused on design and core retail skills.
We operate 544 stores, which include 502 stores in 41 states, Washington, D.C. and Puerto Rico, 20 stores in Canada, 19 stores in Australia and 3 stores in the United Kingdom.
Our retail stores serve as billboards for our brands, which we believe inspires new and existing customers to also shop online. We operate 530 stores, which include 489 stores in 41 states, Washington, D.C. and Puerto Rico, 20 stores in Canada, 19 stores in Australia and 2 stores in the United Kingdom.
Patents in the U.S. are generally valid for 14 to 20 years as long as their registrations are properly maintained.
As of January 29, 2023, we own or have applied to register approximately 370 patents in connection with certain product designs, inventions and proprietary technology. Patents in the U.S. are generally valid for 15 to 20 years as long as their registrations are properly maintained.
As of the end of fiscal 2021, approximately 67% of our total workforce identified as female and approximately 43% identified as in an ethnic minority group. Additionally, approximately 54% of our Vice Presidents and above identified as female. We were also included in the 2022 Bloomberg Gender-Equality Index, which tracks public companies’ commitment to gender equality, for the first time.
We have several systems under which associates can report incidents or discrimination confidentially or anonymously and without fear of reprisal. As of the end of fiscal 2022, approximately 67.4% of our total workforce identified as female and approximately 43.7% identified as an ethnic minority group. Additionally, approximately 54.8% of our Vice Presidents and above identified as female.
In 2021, we expanded our audit program scope, auditing a higher volume of our product purchases and covering more risks. INTELLECTUAL PROPERTY As of January 30, 2022, we own and/or have applied to register approximately 200 unique trademarks or service marks.
INTELLECTUAL PROPERTY As of January 29, 2023, we own and/or have applied to register approximately 210 unique trademarks or service marks. We own and/or have applied to register our key brand names in the U.S. as well as in approximately 96 additional jurisdictions.
Foundation also provides need-based grants to our associates directly impacted by the COVID-19 pandemic and other federally-declared disasters. We also support our communities through our associates’ time and leadership, and we provide 8 hours of paid Community Involvement Time each year to our eligible associates.
We also support our communities through our associates’ time and leadership, and we provide 8 hours of paid Community Involvement Time each year to our eligible associates. Additionally, we brought back opportunities for associates to volunteer their time and talents with curated in-person events that support our local and national nonprofit partners.
We have also set goals for responsibly sourced materials and practices across all our brands, and we are aligning our responsible materials work with our climate strategy, using materials as part of our efforts to reach our Science-Based Target.
Building on the progress of our cotton and wood goals, we are aligning our preferred materials work with our climate strategy, using materials as part of our efforts to reach our Science-Based Target. In 2022, we drove progress towards our landfill diversion goal with stores implementing waste reduction initiatives, such as backhauling of expanded polystyrene foam.
Management of ESG is led by our Executive Vice President of Sourcing, Quality Assurance, and Sustainable Development, who coordinates a cross-functional team of subject matter experts, as well as a dedicated, global team of sustainability professionals.
The Executive Vice President leads both the organization’s dedicated global team of sustainability professionals as well as a working group of cross-functional leaders.
With hundreds of monograms and font types to choose from, a Mark and Graham purchase is uniquely personal. The brand’s product lines include women’s and men’s accessories, travel, entertaining, bar, home décor and seasonal items. Outward In 2017, we acquired Outward, Inc., a 3-D imaging and augmented reality platform for the home furnishings and décor industry.
The digitally native brand is known for high quality collections, ranging from home gifts to luggage to handbags, designed in-house that can be personalized with more than 50 exclusive monograms. Outward In 2017, we acquired Outward, Inc., a 3-D imaging and augmented reality platform for the home furnishings and décor industry.
As of the end of fiscal 2021, nearly all of our posted roles have a diverse slate of candidates, and we have seen improvement in the diversity of our new hires since we launched our Equity Action Plan.
We are currently building relationships with approximately 180 organizations, universities, colleges and networks to expand our reach to potential candidates. We continue to ensure we bring forward a diverse slate of candidates for all of our corporate roles posted externally, and have seen improvement in both overall representation and hire rate since we launched our Equity Action Plan.
Jude Children’s Research Hospital during the 2021 St. Jude Thanks and Giving Campaign, which included donations from our customers at time of purchase, special St. Jude-designated product sales where a portion of the sale was donated, employee donations, and donations from the Company.
Jude Children’s Research Hospital, No Kid Hungry, The Trevor Project, AIDS Walk, Canada Children’s Hospitals and the Arbor Day Foundation. We raised $4.0 million for St. Jude Children’s Research Hospital during fiscal 2022, which included donations from our customers at time of purchase, special St.
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Growth across our portfolio has been fueled by three areas of strategic investment: brand experimentation and innovation, for a best-in-class approach to omni-channel retail experiences; operational excellence across the enterprise, from quality product and sourcing, to efficient manufacturing and supply chain; and culture and corporate social responsibility, from commitments to foster women in leadership and embrace diversity, to a healthy impact on our community and environment.
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Growth across our portfolio has been fueled by our three key differentiators - our in-house design, our digital-first channel strategy, and our values. Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, sustainable products at competitive prices.
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We believe that our e-commerce websites and our direct-mail catalogs act as a cost-efficient means of testing market acceptance of new products and new brands. Leveraging these insights and our omni-channel positioning, our marketing efforts, including digital advertising and the circulation of catalogs, are targeted toward driving sales to each of our channels.
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Through our e-commerce platform, our in-house customer relationship management and data analytic teams optimize our digital spend and customer connections. We have expanded our in-store services to include ship-to-store as we transition our stores to not only provide an exceptional customer service experience but to also serve as design centers and omni-fulfillment hubs.
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Consistent with our published privacy policies, we send our catalogs to addresses from our proprietary customer list, as well as to addresses from lists of other mail order direct marketers, magazines and companies with which we establish a business relationship. In accordance with prevailing industry practice and our privacy policies, we may also rent our list to select mailers.
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Our ability to leverage insights from both these channels, our omni-channel positioning and our marketing efforts, focused on digital advertising complemented by targeted catalogs, drive sales to each of our channels.
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Our customer mailings are continually updated to include new prospects and to eliminate non-responders. In addition, the retail business complements the e-commerce business by building brand awareness and attracting new customers to our brands. Our retail stores serve as billboards for our brands, which we believe inspires our customers to also shop online and through our catalogs.
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Consistent with our published privacy policies, we leverage our proprietary customer file which is a unified view of customers across brands and channels, for digital, email, and catalog marketing purposes, augmented by our propensity to buy models developed by our in-house analytics team.
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The global supply chain experienced numerous challenges and disruptions during fiscal 2021, including material and labor shortages, port congestion and capacity constraints, which has had, and is continuing to have, wide-ranging effects across multiple industries, including ours. Refer to Item 1A. Risk Factors and to Part II, Item 7.
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It is hard to predict with certainty when these supply chain challenges will be fully resolved, and we currently expect these supply chain challenges to negatively impact our cost of goods sold into 2023. Additionally, we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as increasing labor costs and union organizing activity.
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We also have several systems under which associates can report incidents or discrimination confidentially or anonymously and without fear of reprisal. We are currently building relationships with approximately 180 organizations, universities, colleges and networks to expand our reach to potential candidates.
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Despite these challenges, we believe our key differentiators, growth strategies and the efficiencies of our operating model to reduce costs and manage inventory levels leave us well-positioned to mitigate these costs in both the short- and long- term. Refer to Item 1A. Risk Factors and to Part II, Item 7 .
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Our efforts include: • Incident and hazard reporting; • Standard operating procedures aimed at reducing risk of injury; • Associate and management training; • Promotion of best practices; and • Measurement of key safety metrics. 5 Table of Contents To address the safety, health and well-being of our workforce due to the ongoing COVID-19 pandemic, we implemented a number of safety-related protocols and enhanced benefits, including: • Continuing strict safety protocols and procedures company-wide, including social distancing measures, enhanced sanitization, daily wellness checks and supplying personal protective gear such as masks and gloves; • Creating and refining protocols to address actual and suspected COVID-19 cases and potential exposure of our team members, customers, and trade partners; • Creating a dedicated associate hotline to provide real time support for any COVID-19-related issues; • Providing a vaccine incentive to encourage front-line hourly workers to receive a COVID-19 vaccine; • Hosting several onsite COVID-19 vaccination clinics at our supply chain facilities and corporate offices; • Continuing telehealth support and employee assistance programs; and • Providing special wellness resources and tools.
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As we strive to keep health care affordable and inclusive, we minimized cost increases to associates and, for a large portion of the associate population, decreased the cost of health care while adding offerings to support mental health and well-being.
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Community Involvement Since 2017, we have donated over $85 million in corporate, customer and associate donations. Our partners include organizations that promote and strengthen the well-being of children, women, families and LGBTQ+ communities, including St. Jude Children’s Research Hospital, No Kid Hungry, The Trevor Project, AIDS Walk and Canada Children’s Hospitals. We raised over $5 million for St.
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During fiscal 2022, we also raised our Company minimum wage to $16 per hour for U.S.-based hourly associates across our retail store, corporate, and supply chain workforce. Community Involvement Through online and in-store donations, special product collaborations, and national and local fundraising, we give back to the communities we serve. We remain committed to our partnerships with St.
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Management provides reports and updates on our ESG initiatives to the Nominations, Corporate Governance and Social Responsibility Committee on a quarterly basis and to the full Board at least annually.
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We give charitable grants, donate our merchandise, donate proceeds from the sale of certain products, and provide matching grants for charitable donations made by our associates. Our Williams-Sonoma, Inc. Foundation also provides need-based grants to our associates directly impacted by federally-declared disasters.
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We amplified our climate work in the past year, moving from a year-over-year reduction strategy to a 10-year, industry leading public goal aligned with climate science, and in 2021, we set a Science-Based Target for emissions reduction across our value chain.
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Our work continued to earn recognition across our industry. We were included in Barron’s 100 Most Sustainable Companies for five years running, recognized as Sustainable Furnishings Council Top Scoring global company for sustainable wood furniture for the past five years, and were included in the Dow Jones Sustainability North America Index for the first time.
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In 2021, we drove progress in our retail operations towards our landfill diversion goal with stores implementing waste reduction initiatives, such as backhauling of expanded polystyrene foam, and batteries and lightbulb recycling at all store locations. 6 Table of Contents We continued to divert products from landfill into donation streams, implementing a new system to maximize recovery of product returns.
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The Board of Directors’ oversees environmental and social matters through updates from WSI’s Executive Vice President of Sourcing, Quality Assurance, and Sustainable Development and annual updates from the organization’s dedicated sustainability team. The sustainability team presents to the full Board at least once a year to monitor and review existing and proposed strategy, goals and targets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business • We are unable to control many of the factors affecting consumer spending, and declines in consumer spending on home furnishings and kitchen products in general could reduce demand for our products. • If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory commensurate with customer demand, our sales levels and operating results may decline. • Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise to our stores and customers. • Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results . • Our business has been and may continue to be materially impacted by the COVID-19 pandemic, and the duration and extent to which this will impact our future financial performance remains uncertain. • We must protect and maintain our brand image and reputation. • Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. • Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters, adverse weather conditions, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results. • Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. • If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed. • Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our common stock. • Our failure to successfully manage the costs and performance of our catalog mailings might have a negative impact on our business. • If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business. • A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. • Our inability or failure to protect our intellectual property would have a negative impact on our brands, reputation and operating results. • We outsource certain aspects of our business to third-party vendors and are in the process of insourcing certain business functions from third-party vendors. • If we fail to attract and retain key personnel, our business and operating results may be harmed. • If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing brands, our business and operating results may be negatively impacted. • We may be subject to legal proceedings that could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources.
Biggest changeRisks Related to Our Business • We are unable to control many of the factors affecting consumer spending, and declines in consumer spending on home furnishings and kitchen products in general could reduce demand for our products. • If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand, our sales levels and operating results may decline. • Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise to our stores and customers. • Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results . • We must protect and maintain our brand image and reputation. • Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. • Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters, adverse weather conditions, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results. • Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. • Our business is subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks. • Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business • If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed. • Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our common stock. • Our business has been and may continue to be materially impacted by the COVID-19 pandemic, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. • Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business. • If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business. • A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. • Our inability or failure to adequately protect or enforce our intellectual property could negatively impact our business. • We outsource certain aspects of our business to third-party vendors and are in the process of insourcing certain business functions from third-party vendors. • If we fail to attract and retain key personnel, our business and operating results may be harmed. • If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing brands, our business and operating results may be negatively impacted. • We may be subject to legal proceedings that could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. 8 Table of Contents Risks Related to Technology • We may be exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. • We receive, process, store, use and share data, some of which contains personal information, which subjects us to complex and evolving governmental regulation and other legal obligations. • We are undertaking certain systems changes that might disrupt our business operations.
For example, certain of our vendors have experienced work disruptions or stoppages, or transportation or other restrictions, due to the COVID-19 pandemic, which has negatively impacted our ability to acquire merchandise, which has had an adverse effect on our results of operations.
For example, certain of our vendors have experienced work disruptions or stoppages, or transportation or other restrictions, due to the COVID-19 pandemic, which negatively impacted our ability to acquire merchandise, which has had an adverse effect on our results of operations.
If our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and analysts, our stock price may decline.
If our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and analysts, our stock price may decline.
Our ability to open additional stores or close existing stores successfully will depend upon a number of factors, including: • general economic conditions; • our identification of, and the availability of, suitable store locations; • our success in negotiating new leases and amending, subleasing or terminating existing leases on acceptable terms; • the success of other retail stores in and around our retail locations; • our ability to secure required governmental permits and approvals; • the availability and cost of building materials needed for store remodels; • our hiring and training of skilled store operating personnel, especially management; • the availability of financing on acceptable terms, if at all; and • the financial stability of our landlords and potential landlords.
Our ability to open additional stores or close existing stores successfully will depend upon a number of factors, including: • general economic conditions; • our identification of, and the availability of, suitable store locations; • our success in negotiating new leases and amending, subleasing or terminating existing leases on acceptable terms; • the success of other retail stores in and around our retail locations; • our ability to secure required governmental permits and approvals; • the availability and cost of building materials needed for store remodels; • our hiring and training of skilled store operating personnel, especially management; • the unionization, or potential for unionization, of store personnel; • the availability of financing on acceptable terms, if at all; and • the financial stability of our landlords and potential landlords.
The GDPR, CCPA and other such laws and regulations impose new and burdensome obligations, and include substantial uncertainty as to their interpretation, and we may face challenges in addressing their requirements, which could result in fines or penalties, lead us or our third-party vendors to change our data privacy policies and practices and limit our ability to deliver personalized advertising.
The GDPR, CCPA, CPRA and other such laws and regulations impose new and burdensome obligations, and include substantial uncertainty as to their interpretation, and we may face challenges in addressing their requirements, which could result in fines or penalties, lead us or our third-party vendors to change our data privacy policies and practices and limit our ability to deliver personalized advertising.
The continued sales growth in the e-commerce industry a has encouraged the entry of many new competitors, including discount retailers selling similar products at reduced prices, new business models, and an increase in competition from established companies, many of whom are willing to spend significant funds and/or reduce pricing in order to gain market share.
The continued sales growth in the e-commerce industry has encouraged the entry of many new competitors, including discount retailers selling similar products at reduced prices, new business models, and an increase in competition from established companies, many of whom are willing to spend significant funds and/or reduce pricing in order to gain market share.
We operate several retail businesses, subsidiaries and branch offices throughout Asia, Australia, Europe and Canada, which includes managing overseas employees, and may expand these overseas operations in the future. Our global presence exposes us to the laws and regulations of these jurisdictions, including those related to marketing, privacy, data protection, employment and product safety and testing.
We operate several retail businesses, subsidiaries and branch offices throughout Asia, Australia, Europe, Mexico, and Canada, which includes managing overseas employees, and may expand these overseas operations in the future. Our global presence exposes us to the laws and regulations of these jurisdictions, including those related to marketing, privacy, data protection, employment and product safety and testing.
As a result, consumer preferences cannot be predicted with certainty and may change between selling seasons. We must be able to stay current with preferences and trends in our brands and address the customer tastes for each of our target customer demographics. Additionally, changes in customer preferences and buying trends may also affect our brands differently.
As a result, consumer preferences cannot be predicted with certainty and may change between selling seasons. We must be able to stay current with preferences and trends in our brands and address the customer tastes for each of our target customer demographics. Additionally, changes in customer preferences and buying trends may affect our brands differently.
Alternatively, we may be required to mark down certain products to sell any excess inventory or to sell such inventory through our outlet stores or other liquidation channels at prices which are significantly lower than our retail prices, any of which would negatively impact our business and operating results.
Alternatively, we may be required to mark down certain products to sell any excess inventory or to sell such inventory through our outlet or other liquidation channels at prices which are significantly lower than our retail prices, any of which would negatively impact our business and operating results.
We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in sufficient quantities and at acceptable prices to meet our needs. Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices.
We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices.
In addition, as we continue to expand our global operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, in addition to the laws of the foreign countries in which we operate. We must ensure that our employees and third-party agents comply with these laws.
In addition, as we continue to expand our global operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate. We must ensure that our employees and third-party agents comply with these laws.
For example, the COVID-19 pandemic has impacted our supply chain by forcing some factories that manufacture our merchandise to temporarily close or experience worker shortages and by causing delays and increased costs in international shipping.
For example, the COVID-19 pandemic impacted our supply chain by forcing some factories that manufacture our merchandise to temporarily close or experience worker shortages and by causing delays and increased costs in international shipping.
The competitive challenges facing us include: • anticipating and quickly responding to changing consumer demands or preferences better than our competitors; • maintaining favorable brand recognition and achieving customer perception of value; • effectively marketing and competitively pricing our products to consumers in several diverse market segments; • effectively managing and controlling our costs; • effectively managing increasingly competitive promotional activity; • effectively attracting new customers; • developing new innovative shopping experiences, like mobile applications and augmented reality capabilities, that effectively engage today’s digital customers; • developing innovative, high-quality products in colors and styles that appeal to consumers of varying age groups, tastes and regions, and in ways that favorably distinguish us from our competitors; and • effectively managing our supply chain and distribution strategies in order to provide our products to our consumers on a timely basis and minimize returns, replacements and damaged products.
The competitive challenges facing us include: • anticipating and quickly responding to changing consumer demands or preferences better than our competitors; • maintaining favorable brand recognition and achieving customer perception of value; • effectively marketing and competitively pricing our products to consumers in several diverse market segments; • effectively managing and controlling our costs, including advertising spend; • effectively managing increasingly competitive promotional activity; • effectively attracting new customers; • developing new innovative shopping experiences, like mobile applications and augmented reality capabilities, that effectively engage today’s digital customers; • developing innovative, high-quality products in colors and styles that appeal to consumers of varying age groups, tastes and regions, and in ways that favorably distinguish us from our competitors; and • effectively managing our supply chain and distribution strategies in order to provide our products to our consumers on a timely basis and minimize returns, replacements and damaged products.
Further, if we devote time and resources to new brands, acquired brands, brand extensions, brand repositioning, or new lines of business and those businesses are not as successful as we planned, then we risk damaging our overall business results or incurring impairment charges, including to write off any existing goodwill or intangible assets associated with previously acquired brands.
Further, if we devote time and resources to new brands, acquired brands, brand extensions, brand repositioning, or new lines of business and those businesses are not as successful as we planned, then we risk damaging our overall business results or incurring impairment charges, including to write off any existing property and equipment, goodwill or intangible assets associated with previously acquired brands.
Any failure or perceived failure by us to comply with our privacy policies, data privacy-related obligations to customers or other third parties, or our data privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, or other failure to comply with these laws and regulations, or regulatory scrutiny, may result in governmental enforcement actions or litigation that could expose our business to substantial financial penalties, or other monetary or non-monetary relief, negative publicity, loss of confidence in our brands, decline in customer growth or damage to our brands and reputation.
Any failure or perceived failure by us to comply with our privacy policies, data privacy-related obligations to customers or other third parties, or our data privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, or other failure to comply with these laws and regulations, or regulatory scrutiny, may result in governmental enforcement actions or litigation that could expose our business to substantial financial penalties, or other monetary or non-monetary relief, negative publicity, loss of confidence in our brands, decline in customer growth or damage 16 Table of Contents to our brands and reputation.
This could materially and adversely affect our results of operations, cash flows, and liquidity. If we are unable to pay quarterly dividends or repurchase our stock at intended levels, our reputation and stock price may be harmed. We have historically repurchased our shares through our stock repurchase program and paid a common stock dividend each year.
This could materially and adversely affect our results of operations, cash flows, and liquidity. If we are unable to pay quarterly dividends or repurchase our stock at intended levels, our reputation and stock price may be harmed. We have historically repurchased our shares through our stock repurchase program and paid a common stock dividend quarterly.
If our ESG practices do not meet evolving consumer, employee, investor or other stakeholder expectations and standards or our publicly-stated goals, then our reputation, our ability to attract or retain employees and our competitiveness, including as an investment and business partner, could be negatively impacted.
If our ESG practices do not meet evolving consumer, employee, investor, regulatory body, or other stakeholder expectations and standards or our publicly-stated goals, then our reputation, our ability to attract or retain employees and our competitiveness, including as an investment and business partner, could be negatively impacted.
Our retail stores, corporate offices, distribution and manufacturing facilities, infrastructure and e-commerce operations, as well as the operations of our vendors from which we receive goods and services, are vulnerable to damage from earthquakes, tornadoes, hurricanes, fires, floods or other volatile weather, power losses, telecommunications failures, hardware and software failures, computer hacking, cybersecurity breaches, computer viruses and similar events.
Our retail stores, corporate offices, distribution and manufacturing facilities, infrastructure and e-commerce operations, as well as the operations of our vendors from which we receive goods and services, are vulnerable to damage from earthquakes, tornadoes, 11 Table of Contents hurricanes, fires, floods or other volatile weather, power losses, telecommunications failures, hardware and software failures, computer hacking, cybersecurity breaches, computer viruses and similar events.
We must also be able to identify and adjust the customer offerings in our brands to cater to customer demands. For example, a change in customer preferences for children’s room furnishings may not correlate to a similar change in buying trends for other home furnishings.
We must also be able to identify and adjust the customer offerings in each of our brands to cater to customer demands. For example, a change in customer preferences for children’s room furnishings may not correlate to a similar change in buying trends for other home furnishings.
Any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent legislation that impacts employment and labor, trade, or health care, could have an adverse impact on our financial condition and results of operations. 20 Table of Contents We contract with various agencies to provide us with qualified personnel for our workforce.
Any changes in regulations, the imposition of additional regulations, or the enactment of any new or more stringent legislation that impacts employment and labor, trade, or health care, could have an adverse impact on our financial condition and results of operations. We contract with various agencies to provide us with qualified personnel for our workforce.
We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce and mobile websites and digital marketing efforts, including: changes in required technology interfaces; website downtime and other technical failures; internet connectivity issues; costs and technical issues as we upgrade our website software; computer viruses; vendor reliability; changes in applicable federal and state regulations, such as the California Consumer Privacy Act (“CCPA”), and related compliance costs; security breaches; and consumer privacy concerns.
We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce and mobile websites and digital marketing efforts, including: changes in required technology interfaces; website downtime and other technical failures; internet connectivity issues; costs and technical issues as we upgrade our website software; computer viruses; human error; vendor reliability; changes in applicable federal and state regulations, such as the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”), and related compliance costs; security breaches; and consumer privacy concerns.
Further, we have experienced, and may continue to experience increased costs and restricted capacity from our third-party shipping providers and shortages of raw materials used to make our products. Failure to deliver merchandise in a timely and effective manner could cause customers to cancel their orders and could damage our reputation and brands.
Further, we have experienced, and may continue to experience increased costs and restricted capacity from our third-party shipping providers and shortages of raw materials used to make our products and increased costs associated with our packaging. Failure to deliver merchandise in a timely and effective manner could cause customers to cancel their orders and could damage our reputation and brands.
Should we need it, we also may not be able to obtain additional credit on terms which are acceptable to us, if at all. Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
Should we need it, we also may not be able to obtain additional credit on terms which are acceptable to us, if at all. 20 Table of Contents Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
In addition, in the past, we have insourced certain aspects of our business, including certain technology services and the management of certain furniture manufacturing and delivery, each of which were previously outsourced to third-party providers.
In addition, in the past, we have insourced certain aspects of our business, including certain technology services and the management of certain furniture manufacturing and delivery, each of which was previously outsourced to third-party providers.
Non-governmental organizations might attempt to create an unfavorable impression of our sourcing practices or the practices of some of 17 Table of Contents our foreign vendors that could harm our image. If either of these events occurs, we could lose customer goodwill and favorable brand recognition, which could negatively affect our business and operating results.
Non-governmental organizations might attempt to create an unfavorable impression of our sourcing practices or the practices of some of our foreign vendors that could harm our image. If either of these events occurs, we could lose customer goodwill and favorable brand recognition, which could negatively affect our business and operating results.
Tariffs or retaliatory trade restrictions implemented by other 19 Table of Contents countries, could adversely affect customer sales, cause potential delays in product received from our vendors, and negatively impact our cost of goods sold and results of operations. Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results.
Tariffs or retaliatory trade restrictions implemented by other countries, could adversely affect customer sales, cause potential delays in product received from our vendors, and negatively impact our cost of goods sold and results of operations. Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results.
Our ultimate realized gain or loss with respect to currency fluctuations will generally depend on the size and type of the transactions that we enter into, the currency exchange rates associated 18 Table of Contents with these exposures, changes in those rates and whether we have entered into foreign currency hedge contracts to offset these exposures.
Our ultimate realized gain or loss with respect to currency fluctuations will generally depend on the size and type of the transactions that we enter into, the currency exchange rates associated with these exposures, changes in those rates and whether we have entered into foreign currency hedge contracts to offset these exposures.
We are subject to income taxes in many U.S. and foreign jurisdictions. Our provision for income taxes is subject to volatility and could be adversely impacted by a number of factors that require significant judgment and estimation. At any one time, many tax years are subject to examination by various taxing jurisdictions.
We are subject to income taxes in many U.S. and foreign jurisdictions. Our provision for income taxes is subject to volatility and could be adversely impacted by a number of factors that require significant judgment and estimation. At any point in time, multiple tax years are subject to examination by various taxing jurisdictions.
Additionally, if third parties that we work with, such as advertisers, service providers or developers, violate applicable laws or our policies, these violations may also put customers’ information at risk, which could, in turn, have an adverse effect on our business, revenue and financial results. 16 Table of Contents We are undertaking certain systems changes that might disrupt our business operations.
Additionally, if third parties that we work with, such as advertisers, service providers or developers, violate applicable laws or our policies, these violations may also put customers’ information at risk, which could, in turn, have an adverse effect on our business, revenue and financial results. We are undertaking certain systems changes that might disrupt our business operations.
Our actual results may not always be in line with or exceed the guidance we have provided or the expectations of our investors and analysts, especially in times of economic uncertainty. In the past, when we have reduced our previously provided guidance, the market price of our common stock has declined.
Our actual results may not always be in line with or exceed the guidance we have provided or the expectations of our 21 Table of Contents investors and analysts, especially in times of economic uncertainty. In the past, when we have reduced our previously provided guidance, the market price of our common stock has declined.
Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our customers’ connection to our brands.
We must protect and maintain our brand image and reputation. Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our customers’ connection to our brands.
Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns.
Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online advertising campaigns.
We continually analyze the business results of our channels, brands and products in an effort to find opportunities to build incremental sales. A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. As noted above, approximately 35% of our net revenues are generated by our retail stores.
We continually analyze the business results of our channels, brands and products in an effort to find opportunities to build incremental sales. A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. Approximately 34% of our net revenues are generated by our retail stores.
Risks Related to our Vendors and Global Operations Our dependence on foreign vendors and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. Approximately 65% of our merchandise purchases in fiscal 2021 were sourced from foreign vendors predominantly in Asia and Europe.
Risks Related to our Vendors and Global Operations Our dependence on foreign vendors and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. Approximately 67% of our merchandise purchases in fiscal 2022 were sourced from foreign vendors predominantly in Asia and Europe.
These risks and uncertainties include import duties and quotas, compliance with anti-dumping regulations, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, trade restrictions, regulations to address climate change, employment and labor matters, wars and fears of war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease (such as the COVID-19 pandemic), and other unexpected events.
These risks and uncertainties include import duties and quotas, compliance with anti-dumping regulations, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, trade restrictions, regulations to address climate change, employment and labor matters, wars and fears of war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease, and other unexpected events.
We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology, evolving creative user interfaces, and other e-commerce marketing trends such as paid search, re-targeting, loyalty programs and the proliferation of mobile usage, among others.
We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology, evolving creative user interfaces, and other e-commerce marketing changes as it relates to paid search, re-targeting, loyalty programs, paid social advertising, and the proliferation of mobile usage, among others.
We do not have extensive experience operating on a global basis and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
We have limited experience operating on a global basis and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and in our other public filings.
If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Quantitative and Qualitative Disclosures about Market Risk” and elsewhere in this report and in our other public filings.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including general economic conditions, including inflationary pressures, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, outbreaks of disease (such as the COVID-19 pandemic), adverse weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including 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 9 Table of Contents in future economic and political conditions, and consumer perceptions of personal well-being and security.
Additionally, although we continue to insource furniture delivery hubs in certain geographies and continue with the regionalization of our retail and e-commerce fulfillment capabilities, we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as increasing labor costs, union organizing activity (including the International Longshore & Warehouse Union negotiations to occur during the first half of 2022, which may affect port operations) and our ability to effectively locate real estate for our distribution facilities or other supply chain operations.
Additionally, although we continue to insource furniture delivery hubs in certain geographies and continue with the regionalization of our retail and e-commerce fulfillment capabilities, we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as increasing labor costs, union organizing activity (including the UPS Teamsters negotiation scheduled to occur in mid-2023, the International Longshoremen's Association negotiations to occur during 2023, and the International Longshore & Warehouse Union negotiations to occur during 2023, which may affect port operations) and our ability to effectively locate real estate for our distribution facilities or other supply chain operations.
Moreover, global awareness of our brands and our products may not be high. Consequently, we may not be able to successfully compete with established brands in these markets and our global sales may not result in the revenues we anticipate.
Consequently, we may not be able to successfully compete with established brands in these markets and our global sales may not result in the revenues we anticipate.
In addition, if we misjudge the correlation between our catalog circulation and net sales, or if our catalog strategy overall does not continue to be successful, our results of operations could be negatively impacted.
In addition, if we misjudge the correlation between our advertising spend and net sales, if we mismanage budgets or if our strategy overall does not continue to be successful, our results of operations could be negatively impacted.
Moreover, our global operations subject us to a variety of risks and challenges, including: • increased management, infrastructure and legal compliance costs, including the cost of real estate and labor in those markets; • increased financial accounting and reporting requirements and complexities; • increased operational and tax complexities, including managing our inventory globally; • the diversion of management attention away from our core business; • general economic conditions, changes in diplomatic and trade relationships, including the imposition of new or increased tariffs, political and social instability, war and acts of terrorism, outbreaks of diseases (such as the COVID-19 pandemic) and natural disasters in each country or region; • economic uncertainty around the world; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • compliance with U.S. laws and regulations for foreign operations; • fluctuations in foreign currency exchange rates and the related effect on our financial results, and the use of foreign exchange hedging programs to mitigate such risks; • growing cash balances in foreign jurisdictions which may be subject to repatriation restrictions; and • reduced or varied protection for intellectual property rights in some countries and practical difficulties of enforcing such rights abroad.
Moreover, our global operations subject us to a variety of risks and challenges, including: • increased management, infrastructure and legal compliance costs, including the cost of real estate and labor in those markets; • increased financial accounting and reporting requirements and complexities; • increased operational and tax complexities, including managing our inventory globally; • the diversion of management attention away from our core business; • general economic conditions, changes in diplomatic and trade relationships, including the imposition of new or increased tariffs, political and social instability, war and acts of terrorism, outbreaks of diseases (such as the COVID-19 pandemic) and natural disasters in each country or region; • economic uncertainty around the world; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • compliance with U.S. laws and regulations for foreign operations; • reputational harm due to negative post about our brands or products on foreign social media or online forums; • fluctuations in foreign currency exchange rates and the related effect on our financial results, and the use of foreign exchange hedging programs to mitigate such risks; • growing cash balances in foreign jurisdictions which may be subject to repatriation restrictions; and • reduced or varied protection for intellectual property rights in some countries and practical difficulties of enforcing such rights abroad. 19 Table of Contents Any of these risks could adversely affect our global operations, reduce our revenues or increase our operating costs, which in turn could adversely affect our business, operating results, financial condition and growth prospects.
Our global operations in Asia, Australia, Europe and Canada could also be affected by changing economic and political conditions in foreign countries, such as Brexit, which could have a negative effect on our business, financial condition and operating results.
Our global operations in Asia, Australia, Europe and Canada 17 Table of Contents could also be affected by changing economic and political conditions in foreign countries, which could have a negative effect on our business, financial condition and operating results.
As a result of our dependence on all of these third-party providers, we are subject to risks, including labor disputes, union organizing activity (such as the International Longshore & Warehouse Union negotiations to occur during the first half of 2022 which may affect port operations), adverse weather, natural disasters, climate change, the closure of such carriers’ offices or a reduction in operational hours due to an economic slowdown or the inability to sufficiently ramp up operational hours during an economic recovery or upturn, availability of adequate trucking or railway providers, possible acts of terrorism, war, outbreaks of disease (such as the COVID-19 pandemic) or other factors affecting such carriers’ ability to provide delivery services to meet our shipping needs, disruptions or increased fuel costs and costs associated with any regulations to address climate change.
As a result of our dependence on all of these third-party providers, we are subject to risks, including labor disputes, union organizing activity (such as the UPS Teamsters negotiation scheduled to occur in mid-2023, the International Longshoremen's Association negotiations to occur during 2023, and the International Longshore & Warehouse Union negotiations to occur during 2023 which may affect port operations), adverse weather, natural disasters, climate change, the closure of such carriers’ offices or a reduction in operational hours due to an economic slowdown or the inability to sufficiently ramp up operational hours during an economic recovery or upturn, availability of adequate trucking or railway providers, the potential for railway and port worker strikes, possible acts of terrorism, war, outbreaks of disease or other factors affecting such carriers’ ability to provide delivery services to meet our shipping needs, disruptions or increased fuel costs and 10 Table of Contents costs associated with any regulations to address climate change.
Failure to maintain, enhance and protect our brand image could have a material adverse effect on our results of operations. Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. 11 Table of Contents The specialty e-commerce and retail businesses are highly competitive.
Failure to maintain, enhance and protect our brand image could have a material adverse effect on our results of operations. Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. The specialty e-commerce and retail businesses are highly competitive. We compete with other retailers that market lines of merchandise similar to ours.
Even if we are able to successfully manage the risks of our global operations, our business may be adversely affected if our vendors and franchisees are not able to successfully manage these risks.
Some of our vendors and our franchisees also have global operations and are subject to the risks described above. Even if we are able to successfully manage the risks of our global operations, our business may be adversely affected if our vendors and franchisees are not able to successfully manage these risks.
Although our credit facilities provide for up to a total of $750,000,000 in unsecured revolving lines of credit, in the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all.
Although our credit facilities provide for up to a total of $750 million in unsecured revolving lines of credit (which includes a $250 million accordion feature subject to lender consent), in the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all.
Global financial markets can experience extreme volatility, disruption and credit contraction, which adversely affect global economic conditions. Such turmoil in financial and credit markets, including as a result of the COVID-19 pandemic, or other changes in economic conditions could adversely affect sources of liquidity available to us and our costs of capital.
Global financial markets and the banking sector can experience extreme volatility, disruption and credit contraction, which adversely affect global economic conditions. Such turmoil in financial and credit markets or other changes in economic conditions could adversely affect the sources of liquidity available to us and our costs of capital.
We compete with other retailers that market lines of merchandise similar to ours. We compete with national, regional and local businesses that utilize a similar retail store strategy, as well as traditional furniture stores, department stores, direct-to-consumer businesses and specialty stores.
We compete with national, regional and local businesses that utilize a similar retail store strategy, as well as traditional furniture stores, department stores, direct-to-consumer businesses and specialty stores.
House of Representatives passed the Build Back Better Act, and 137 member states of the Organization of Economic Co-operation and Development agreed to a two-pillar inclusive framework that will fundamentally change the taxing rights of governments and the allocation of profits among tax jurisdictions in which companies conduct business.
For example, in 2021, 137 member states of the Organization of Economic Co-operation and Development agreed to a two-pillar inclusive framework that will fundamentally change the taxing rights of governments and the allocation of profits among tax jurisdictions in which companies conduct business.
Our ability to achieve any ESG-related goal or objective is subject to numerous risks, many of which are outside of our control, including: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements affecting ESG standards or disclosures, (3) the availability of vendors and suppliers that can meet our sustainability, diversity and other standards, and (4) the availability of raw materials that meet and further our sustainability goals.
Our ability to achieve any ESG-related goal or objective is subject to numerous risks, many of which are outside of our control, including: (i) the availability and cost of renewable energy sources, credits and technologies, (ii) evolving regulatory requirements affecting ESG standards or disclosures, (iii) the availability of vendors and suppliers that can meet our sustainability, diversity and other standards, and (iv) the availability and cost of raw materials that meet and further our sustainability goals.
If any one of our key employees leaves, is seriously injured or unable to work, or fails to perform and we are unable to find a qualified replacement, we may be unable to execute our business strategy.
If any one of our key employees leaves, as we experienced during the last year, is seriously injured or unable to work, or fails to perform and we are unable to find a qualified replacement either internally or externally, we may be unable to execute our business strategy.
Significant increases in our inventory levels may result in increased warehousing and distribution costs, such as costs related to additional distribution facilities, which we may not be able to lease on acceptable terms, if at all. Such increases in inventory levels may also lead to increases in costs associated with inventory that is lost, damaged or aged.
Significant increases in our inventory levels may result in increased warehousing and distribution costs, such as costs related to additional distribution facilities, which we may not be able to lease or purchase on acceptable terms, if at all.
We make assumptions, judgments and estimates that impact amounts reported in our consolidated financial statements for a number of items, including merchandise inventories, long-lived assets, leases, goodwill, and income taxes, among others.
In preparing our financial statements we make certain assumptions, judgments and estimates that affect the amounts reported, which, if not accurate, may impact our financial results. We make assumptions, judgments and estimates that impact amounts reported in our consolidated financial statements for a number of items, including merchandise inventories, long-lived assets, leases, goodwill, and income taxes, among others.
In addition, fuel costs have been volatile and airline and other transportation companies continue to struggle to operate profitably, which could lead to increased fulfillment expenses. Any rise in fulfillment expenses could negatively affect our business and operating results.
In addition, fuel costs have been volatile and airline and other transportation companies continue to struggle to operate profitably, which could lead to increased fulfillment expenses. Any rise in fulfillment expenses could negatively affect our business and operating results. Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results.
Additionally, as a result of the COVID-19 pandemic, if long-term, remote or flexible work options become more commonplace, potential employees may choose to move to lower cost of living areas, which could negatively impact our ability to recruit appropriately skilled personnel for positions that cannot be performed remotely.
Additionally, if long-term, remote or flexible work options become more commonplace, potential employees may choose to move to lower cost of living areas or accept positions at companies with more favorable remote working policies, which could negatively impact our ability to recruit appropriately skilled personnel for positions that cannot be performed remotely.
Any new brands, brand extensions or expansion into new lines of business may not grow as expected. The work involved with integrating new brands or businesses into our existing systems and operations could be time-consuming, require significant amounts of management time and result in the diversion of substantial operational resources.
The work involved with integrating new brands or businesses into our existing systems and operations could be time-consuming, require significant amounts of management time and result in the diversion of substantial operational resources.
A significant portion of our customer orders are placed through our e-commerce websites or through our customer care centers. In addition, a significant portion of sales made through our retail channel require the collection of certain customer data, such as credit card information.
In addition, a significant portion of sales made through our retail channel require the collection of certain customer data, such as credit card information.
These impairment charges have been significant in the past and may be significant in the future and, as a result of these charges, our operating results have been and may, in the future, be adversely affected. 22 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These impairment charges have been significant in the past and may be significant in the future and, as a result of these charges, our operating results have been and may, in the future, be adversely affected.
Collecting, measuring, and reporting ESG information and metrics can be difficult and time consuming. Our selected disclosure framework or standards may need to be changed from time to time, which may result in a lack of consistent or meaningful comparative data from period to period.
Our selected disclosure framework or standards may need to be changed from time to time, which may result in a lack of consistent or meaningful comparative data from period to period.
Other states, including Colorado and Virginia, passed similar laws that will take effect in 2023. The application and interpretation of these laws and regulations are often uncertain, and as the focus on data privacy and data protection increases globally and domestically, we are, and will continue to be, subject to varied and evolving data privacy and data protection laws.
The application and interpretation of these laws and regulations are often uncertain, and as the focus on data privacy and data protection increases globally and domestically, we are, and will continue to be, subject to varied and evolving data privacy and data protection laws.
Customer response to our catalogs is substantially dependent on merchandise assortment, availability and creative presentation, as well as the selection of customers to whom the catalogs are mailed, timing of delivery of our mailings, the general retail sales environment and current domestic and global economic conditions.
Customer response to our advertisements is substantially dependent on merchandise assortment, availability and creative presentation, as well as the general retail sales environment, current domestic and global economic conditions and competition.
Any failure to meet the comparable brand revenue expectations of investors and securities analysts in one or more future periods could significantly reduce the market price of our common stock. Our failure to successfully manage the costs and performance of our catalog mailings might have a negative impact on our business.
Any failure to meet the comparable brand revenue expectations of investors and securities analysts in one or more future periods could significantly reduce the market price of our common stock.
Any disruptions could negatively impact our business and operating results. In fiscal year 2020, we replaced our core financial reporting and human capital management systems with new enterprise resource planning systems to standardize our processes worldwide and adopt best-in-class capabilities.
We recently replaced our core financial reporting and human capital management systems with new enterprise resource planning systems to standardize our processes worldwide and adopt best-in-class capabilities.
For example, we face the risk that our e-commerce business, including our catalog circulation, might cannibalize a significant portion of our retail sales or our newer brands, brand extensions and products may result in a decrease in sales of existing brands and products.
The changes in our business have forced us to develop new expertise and face new challenges, risks and uncertainties. For example, we face the risk that our e-commerce business, might cannibalize a portion of our retail sales or our newer brands, brand extensions and products may result in a decrease in sales of existing brands and products.
In addition, changes to any of our software implementation strategies could result in the impairment of software-related assets. We are also subject to the risks associated with the ability of our vendors to provide information technology solutions to meet our needs, including as a result of disruptions in the global workforce stemming from the COVID-19 pandemic.
In addition, changes to any of our software implementation strategies could result in the impairment of software-related assets. We are also subject to the risks associated with the ability of our vendors to provide information technology solutions to meet our needs. Any disruptions could negatively impact our business and operating results.
A change in accounting rules or regulations may even affect our reporting of transactions completed before the change is effective. The introduction of new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future.
A change in accounting rules or regulations may even affect our reporting of transactions completed before the change is effective.
Our failure, or perceived failure, to pursue or fulfill our goals, targets and 12 Table of Contents objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also expose us to government enforcement actions and private litigation.
Our failure, or perceived failure, to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also expose us to government enforcement actions and private litigation. Our business is subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks.
Our inability or failure to protect our intellectual property would have a negative impact on our brands, reputation and operating results. We may not be able to effectively protect our intellectual property in the U.S. or in foreign jurisdictions, particularly if we continue to expand our business offerings and geographic reach.
Our inability or failure to adequately protect or enforce our intellectual property could negatively impact our business. We may not be able to effectively protect or enforce our intellectual property rights in the U.S. or in foreign jurisdictions, particularly as we continue to expand our business offerings and geographic reach.
Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results. 10 Table of Contents Our e-commerce business depends, in part, on our ability to maintain efficient and uninterrupted order-taking and fulfillment operations in our distribution facilities, our customer care centers and on our e-commerce websites.
Our e-commerce business depends, in part, on our ability to maintain efficient and uninterrupted order-taking and fulfillment operations in our distribution facilities, our customer care centers and on our e-commerce websites.
Risks Related to Technology • We may be exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. • We receive, process, store, use and share data, some of which contains personal information, which subjects us to complex and evolving governmental regulation and other legal obligations. • We are undertaking certain systems changes that might disrupt our business operations. 8 Table of Contents Risks Related to Our Vendors and Our Global Operations • Our dependence on foreign vendors and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. • We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in sufficient quantities and at acceptable prices to meet our needs. • If our vendors fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results. • Our efforts to expand globally may not be successful and could negatively impact the value of our brands. • We do not have extensive experience operating on a global basis and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
Risks Related to Our Vendors and Our Global Operations • Our dependence on foreign vendors and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. • We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. • If our vendors fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results. • Our efforts to expand globally may not be successful and could negatively impact the value of our brands. • We have limited experience operating on a global basis and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
In some cases, we rely on a single vendor for such services. Accordingly, we are subject to the risks associated with their ability to successfully provide the necessary services to meet our needs.
For example, we utilize outside vendors for such things as payroll processing, email and other digital marketing and various distribution facilities and delivery services. In some cases, we rely on a single vendor for such services. Accordingly, we are subject to the risks associated with their ability to successfully provide the necessary services to meet our needs.
If we are not able to respond to and manage the impact of such events effectively, our business, operating results, financial condition and cash flows could be adversely affected. We must protect and maintain our brand image and reputation.
If we are not able to respond to and manage the impact of such events effectively, our business, operating results, financial condition and cash flows could be adversely affected. Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business.
Adverse changes in factors affecting discretionary consumer spending have reduced and may in the future reduce consumer demand for our products, thus reducing our sales and harming our business and operating results. 9 Table of Contents If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory commensurate with customer demand, our sales levels and operating results may decline.
If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand, our sales levels and operating results may decline.
If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing brands, our business and operating results may be negatively impacted. We have in the past and may in the future introduce new brands and brand extensions, reposition brands, close existing brands, or acquire new brands, especially as we continue to expand globally.
We have in the past and may in the future introduce new brands and brand extensions, reposition brands, close existing brands, or acquire new brands, especially as we continue to expand globally. Any new brands, brand extensions or expansion into new lines of business may not perform as expected.
The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing trends.
The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing trends. Our vendors also may not have the capacity to handle our demands or may go out of business or have other delays in production in times of economic crisis.
Our success in e-commerce has been strengthened in part by our ability to leverage the information we have on our customers to infer customer interests and affinities such that we can personalize the experience they have with us. We also utilize digital advertising to target internet and mobile users whose behavior indicates they might be interested in our products.
We must continually respond to changing consumer preferences and buying trends relating to e-commerce usage, including an emphasis on mobile e-commerce. Our success in e-commerce has been strengthened in part by our ability to leverage the information we have on our customers to infer customer interests and affinities such that we can personalize the experience they have with us.
Further, we incur substantial costs to warehouse and distribute our inventory. We continue to insource furniture delivery hubs in certain geographies and continue to regionalize our retail and e-commerce fulfillment capabilities.
To be successful, we need to manage our operating costs and continue to look for opportunities to reduce costs. We incur substantial costs to warehouse and distribute our inventory. We continue to expand our furniture delivery network including insourcing and third party expansion of furniture delivery hubs in certain geographies and continue to regionalize our retail and e-commerce fulfillment capabilities.
We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us. Better than expected sales demand may also lead to customer backorders and lower in-stock positions of our merchandise, which could negatively affect our business and operating results. In addition, our vendors may have difficulty adjusting to our changing demands and growing business.
Better than expected sales demand may lead to customer backorders and lower in-stock positions of our merchandise, which could negatively affect our business and operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLeased Properties The following table summarizes the location and size of our leased facilities occupied by us as of January 30, 2022: Location Occupied Square Footage (Approximate) Distribution and Manufacturing Facilities New Jersey 3,269,000 Mississippi 2,258,000 California 2,030,000 Georgia 1,537,000 Texas 1,298,000 Tennessee 603,000 North Carolina 412,000 Ohio 330,000 Massachusetts 140,000 Florida 135,000 Oregon 93,000 Colorado 80,000 Corporate Facilities California 255,000 New York 238,000 Oregon 51,000 Customer Care Centers Nevada 36,000 Other 32,000 In November 2021, we entered into an agreement for a new distribution facility in Arizona, which is expected to be operational in fiscal 2022.
Biggest changeOperations New Jersey 3,269,000 California 3,150,000 Mississippi 2,267,000 Texas 1,682,000 Georgia 1,537,000 Arizona 1,200,000 Florida 650,000 Tennessee 603,000 North Carolina 412,000 Ohio 329,000 Massachusetts 140,000 Colorado 125,000 Oregon 93,000 Foreign Operations Australia 187,000 Corporate Facilities New York 238,000 California 94,000 Oregon 61,000 Customer Care Centers Nevada 36,000 Other 25,000 In addition to the above leased properties, we enter into agreements for other offsite storage needs for our distribution facilities and our retail store locations, as necessary.
We believe that all of our facilities are adequate for our current needs and that suitable additional or substitute space will be available in the future to replace our existing facilities, or to accommodate the expansion of our operations, if necessary. 23 Table of Contents
We believe that all of our facilities are adequate for our current needs and that suitable additional or substitute space will be available in the future to replace our existing facilities, or to accommodate the expansion of our operations, if necessary. 24 Table of Contents
As of January 30, 2022, the total leased space related to these properties was not material to us and is not included in the occupied square footage reported above. Owned Properties As of January 30, 2022, we owned 471,000 square feet of space, primarily in California, for our corporate headquarters and certain data center operations.
As of January 29, 2023, the total leased space related to these properties was not material to us and is not included in the occupied square footage reported above. Owned Properties As of January 29, 2023, we owned 471,000 square feet of space, primarily in California, for our corporate headquarters and certain data center operations.
For our store locations, our gross leased store space as of January 30, 2022 totaled approximately 6,004,000 square feet for 544 stores compared to approximately 6,301,000 square feet for 581 stores as of January 31, 2021.
For our store locations, our gross leased store space as of January 29, 2023 totaled approximately 5,962,000 square feet for 530 stores compared to approximately 6,004,000 square feet for 544 stores as of January 30, 2022.
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This facility has approximately 1,200,000 leased square feet. The square footage is not included in the table above. In addition to the above leased properties, we enter into agreements for other offsite storage needs for our distribution facilities and our retail store locations, as necessary.
Added
Leased Properties The following table summarizes the location and size of our leased facilities occupied by us as of January 29, 2023: Location Occupied Square Footage (Approximate) Distribution and Manufacturing Facilities U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal 2021 under our stock repurchase program: Fiscal period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program 1 Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program November 1, 2021 – November 28, 2021 384,319 $ 207.47 384,319 $ 977,751,000 November 29, 2021 – December 26, 2021 973,538 $ 171.54 973,538 $ 810,751,000 December 27, 2021 – January 30, 2022 — — — $ 810,751,000 Total 1,357,857 $ 181.71 1,357,857 $ 810,751,000 1 Excludes shares withheld for employee taxes upon vesting of stock-based awards Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate.
Biggest changeThe following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal 2022 under our stock repurchase program: Fiscal period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program 1 Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program October 31, 2022 – November 27, 2022 — — — $ 729,044,000 November 28, 2022 – December 25, 2022 341,935 $ 114.30 341,935 $ 689,962,000 December 26, 2022 – January 29, 2023 — — — $ 689,962,000 Total 341,935 $ 114.30 341,935 $ 689,962,000 1 Excludes shares withheld for employee taxes upon vesting of stock-based awards Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate.
The graph shows historical stock price performance, including reinvestment of dividends, and is not necessarily indicative of future performance. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Among Williams-Sonoma, Inc., the NYSE Composite Index, and S&P Retailing * $100 invested on 1/29/2017 in stock or index, including reinvestment of dividends.
The graph shows historical stock price performance, including reinvestment of dividends, and is not necessarily indicative of future performance. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Among Williams-Sonoma, Inc., the NYSE Composite Index, and S&P Retailing * $100 invested on January 28, 2018 in stock or index, including reinvestment of dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The closing price of our common stock on the NYSE on March 20, 2022 was $164.18.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The closing price of our common stock on the NYSE on March 19, 2023 was $116.86.
STOCKHOLDERS The number of stockholders of record of our common stock as of March 20, 2022 was 290. This number excludes stockholders whose stock is held in nominee or street name by brokers.
STOCKHOLDERS The number of stockholders of record of our common stock as of March 19, 2023 was 286. This number excludes stockholders whose stock is held in nominee or street name by brokers.
As of January 30, 2022, there was $810,751,000 remaining under our current stock repurchase program. In March 2022, our Board of Directors authorized a new stock repurchase program for $1,500,000,000, which replaced our existing program.
As of January 29, 2023, there was $690.0 million remaining under our current stock repurchase program. In March 2023, our Board of Directors authorized a new stock repurchase program for $1 billion, which replaced our existing program.
If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. 25 Table of Contents STOCK REPURCHASE PROGRAM During fiscal 2021, we repurchased 5,102,624 shares of our common stock at an average cost of $176.27 per share and a total cost of $899,433,000.
If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. 26 Table of Contents STOCK REPURCHASE PROGRAM During fiscal 2022, we repurchased 6,423,643 shares of our common stock at an average cost of $137.00 per share and a total cost of $880.0 million under our $1.5 billion stock repurchase program approved in March 2022.
Fiscal year ending January 30, 2022. 1/29/17 1/28/18 2/3/19 2/2/20 1/31/21 1/30/22 Williams-Sonoma, Inc. $100.00 $115.92 $120.93 $161.55 $304.39 $371.43 NYSE Composite Index $100.00 $122.07 $115.21 $130.84 $141.76 $167.51 S&P Retailing $100.00 $148.34 $159.89 $190.43 $278.09 $296.49 Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B.
Fiscal year ended January 29, 2023. 1/28/18 2/3/19 2/2/20 1/31/21 1/30/22 1/29/23 Williams-Sonoma, Inc. $100.00 $104.33 $139.37 $262.59 $320.43 $268.67 NYSE Composite Index $100.00 $94.38 $107.18 $116.13 $137.22 $135.37 S&P Retailing $100.00 $108.42 $127.45 $180.19 $195.77 $160.10 Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis decrease was primarily driven by higher selling margins from reduced promotional activity and the leverage of occupancy costs from higher sales and low occupancy dollar growth, as well as inventory write-offs of approximately $11,378,000 resulting from the closure of our outlet stores due to COVID-19 in the first quarter of fiscal 2020 that did not recur in fiscal 2021. 30 Table of Contents SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (In thousands) Fiscal 2021 % Net Revenues Fiscal 2020 % Net Revenues Selling, general and administrative expenses $ 2,178,847 26.4 % $1,725,572 25.4 % Selling, general and administrative expenses consist of non-occupancy-related costs associated with our retail stores, distribution and manufacturing facilities, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions.
Biggest changeThis increase was primarily driven by (i) higher input costs as we absorbed higher product costs, ocean freight, detention and demurrage due to the impact of supply chain disruption and global inflation pressures, (ii) higher outbound customer shipping costs due to out-of-market shipping and shipping multiple times for multi-unit orders, and (iii) higher occupancy costs resulting from incremental costs from our new distribution centers on the east and west coasts to support our long-term growth, which was partially offset by our retail store optimization initiatives. 31 Table of Contents SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (In thousands) Fiscal 2022 % Net Revenues Fiscal 2021 % Net Revenues Selling, general and administrative expenses $ 2,179,311 25.1 % $2,178,847 26.4 % SG&A consists of non-occupancy-related costs associated with our retail stores, distribution and manufacturing facilities, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions.
Comparable Brand Revenue Comparable brand revenue includes comparable store sales and e-commerce sales, including through our direct-mail catalog, as well as shipping fees, sales returns and other discounts associated with current period sales.
Comparable Brand Revenue Comparable brand revenue includes comparable e-commerce sales, including through our direct-mail catalog, and store sales, as well as shipping fees, sales returns and other discounts associated with current period sales.
The letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under the letter of credit facilities accrues at a base rate as defined in the credit facility, plus an applicable margin based on our leverage ratio.
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.
The Credit Facility contains certain restrictive loan covenants, including, among others, a financial covenant requiring a maximum leverage ratio (funded debt adjusted for operating lease liabilities to earnings before interest, income tax, depreciation, amortization and rent expense), and covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of assets.
Our Credit Facility contains certain restrictive loan covenants, including, among others, a financial covenant requiring a maximum leverage ratio (funded debt adjusted for operating lease liabilities to earnings before interest, income tax, depreciation, amortization and rent expense), and covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of assets.
The estimates of future store profitability and economic conditions require estimating such factors as sales growth, gross margin, employment costs, lease escalations, inflation and the overall economics of the retail industry, and are therefore subject to variability and difficult to predict. For right-of-use assets, we determine the fair value of the assets by using estimated market rental rates.
The estimates of future profitability and economic conditions require estimating such factors as sales growth, gross margin, employment costs, lease escalations, inflation and the overall economics of the retail industry, and are therefore subject to variability and difficult to predict. For right-of-use assets, we determine the fair value of the assets by using estimated market rental rates.
Accordingly, there is no shrinkage reserve at year-end. Historically, actual shrinkage has not differed materially from our estimates. Our obsolescence and shrinkage reserve calculations contain estimates that require management to make assumptions and to apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends.
Accordingly, there is no material shrinkage reserve at year-end. Historically, actual shrinkage has not differed materially from our estimates. Our obsolescence and shrinkage reserve calculations contain estimates that require management to make assumptions and to apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends.
Comparable stores are defined as permanent stores where gross square footage did not change by more than 20% in the previous 12 months, and which have been open for at least 12 consecutive months without closure for seven or more consecutive days within the same fiscal month.
Comparable stores are defined as permanent stores where gross square footage did not change by more than 20% in the previous 12 months, and which have been open for at least 12 consecutive months without closure for more than seven days within the same fiscal month.
Under these contracts, we may provide certain routine indemnification relating to representations and warranties or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Historically, we have not made significant payments for these indemnifications.
Under these contracts, we may provide certain routine indemnifications relating to representations and warranties or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Historically, we have not made significant payments for these indemnifications.
These estimates can be affected by factors such as future store results, real estate supply and demand, store closure plans, and economic conditions that can be difficult to predict. Actual future results may differ from those estimates.
These estimates can be affected by factors such as future results, real estate supply and demand, closure plans, and economic conditions that can be difficult to predict. Actual future results may differ from those estimates.
In fiscal 2022, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment related-costs, advertising and marketing initiatives, rental payments on our leases, stock repurchases and dividend payments, property and equipment purchases, and the payment of income taxes.
In fiscal 2023, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment related-costs, advertising and marketing initiatives, rental payments on our leases, stock repurchases and dividend payments, property and equipment purchases, and the payment of income taxes.
In addition to our cash balances on hand, we have a credit facility (the "Credit Facility") which provides for a $500,000,000 unsecured revolving line of credit (the “Revolver”). The Revolver may be used to borrow revolving loans or to request the issuance of letters of credit.
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 (the “Revolver”). Our Revolver may be used to borrow revolving loans or to request the issuance of letters of credit.
For information on risks, please see “Risk Factors” in Part I, Item 1A. 28 Table of Contents Results of Operations NET REVENUES Net revenues consist of sales of merchandise to our customers through our e-commerce websites, direct-mail catalogs, and at our retail stores and include shipping fees received from customers for delivery of merchandise to their homes.
For information on risks, please see “Risk Factors” in Part I, Item 1A . 29 Table of Contents Results of Operations NET REVENUES Net revenues consist of sales of merchandise to our customers through our e-commerce websites, retail stores and direct-mail catalogs, and include shipping fees received from customers for delivery of merchandise to their homes.
The interest rate applicable to the Revolver is variable and may be elected by us as: (i) the LIBOR (or future alternative rate) plus an applicable margin based on our leverage ratio ranging from 0.91% to 1.775% or (ii) a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio ranging from 0% to 0.775%.
Currently, the interest rate applicable to the Revolver is variable and may be elected by us as: (i) the LIBOR plus an applicable margin based on our leverage ratio ranging from 0.91% to 1.775% or (ii) a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio ranging from 0% to 0.775%.
A 50 basis point increase or decrease in the incremental borrowing rate would not have a material impact on the value of our new or remeasured right-of-use assets and lease liabilities. As of fiscal 2021 and fiscal 2020, our incremental borrowing rates were 3.2% and 3.6%, respectively. Many of our leases contain renewal and early termination options.
A 50 basis point increase or decrease in the incremental borrowing rate would not have a material impact on the value of our new or remeasured right-of-use assets and lease liabilities. As of fiscal 2022 and fiscal 2021, our incremental borrowing rates were 3.4% and 3.2%, respectively. Many of our leases contain renewal and early termination options.
LIQUIDITY AND CAPITAL RESOURCES Material Cash Requirements We are party to contractual obligations involving commitments to make payments to third parties in the future. Certain contractual obligations are reflected on our Consolidated Balance Sheet as of January 30, 2022, while others are considered future obligations.
LIQUIDITY AND CAPITAL RESOURCES Material Cash Requirements We are party to contractual obligations involving commitments to make payments to third parties in the future. Certain contractual obligations are reflected on our Consolidated Balance Sheet as of January 29, 2023, while others are considered future obligations.
See Note E to our Consolidated Financial Statements for amount outstanding as of January 30, 2022 related to operating leases. • Our purchase obligations consist primarily of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.
See Note E to our Consolidated Financial Statements for amount outstanding as of January 29, 2023 related to operating leases. • Our purchase obligations consist primarily of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.
A discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 31, 2021 (“fiscal 2020”), compared to the 52 weeks ended February 2, 2020 (“fiscal 2019”), can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2020, filed with the SEC on March 30, 2021, which is available on the SEC’s website at www.sec.gov and under the Financial Reports section of our Investor Relations website.
A discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 30, 2022 (“fiscal 2021”), compared to the 52 weeks ended January 31, 2021 (“fiscal 2020”), can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2021, filed with the SEC on March 28, 2022, which is available on the SEC’s website at www.sec.gov and under the Financial Reports section of our Investor Relations website.
All stores were reopened as of the end of fiscal 2021. Fiscal 2021 Fiscal 2020 Store Count Avg. LSF Per Store Store Count Avg.
All stores were reopened as of the end of fiscal 2021. Fiscal 2022 Fiscal 2021 Store Count Avg. LSF Per Store Store Count Avg.
We have improved several product-finding and purchasing experiences on our websites; from improved room styling, native registry applications, and the removal of friction in the checkout process. Additionally, we relentlessly focus on continued optimization and automation in our distribution centers and logistics networks to improve our service times.
We have improved several product-finding and purchasing experiences on our websites, including improved room styling, native registry applications, and the removal of friction in the checkout process. Additionally, we are focused on continued optimization and automation in our distribution centers and logistics networks to improve our service times.
As of January 30, 2022, we were in compliance with our financial covenants under our credit facilities and, based on our current projections, we expect to remain in compliance throughout the next 12 months. Letter of Credit Facilities We have three unsecured letter of credit reimbursement facilities for a total of $35,000,000.
As of January 29, 2023, we were in compliance with our financial covenants under our credit facilities and, based on our current projections, we expect to remain in compliance throughout the next 12 months. Letter of Credit Facilities We have three unsecured letter of credit reimbursement facilities for a total of $35 million.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 30, 2022 (“fiscal 2021”), and the 52 weeks ended January 31, 2021 (“fiscal 2020”) should be read in conjunction with our Consolidated Financial Statements and notes thereto.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 29, 2023 (“fiscal 2022”), and the 52 weeks ended January 30, 2022 (“fiscal 2021”) should be read in conjunction with our Consolidated Financial Statements and notes thereto.
Sales from certain operations are also excluded until such time that we believe those sales are meaningful to evaluating their performance. Additionally, comparable brand revenue growth for newer concepts is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.
Additionally, comparable brand revenue growth for newer concepts is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.
If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the excess of the asset or asset group’s net carrying value over its estimated fair value. During fiscal 2021, no impairment charges were recognized.
If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the excess of the asset or asset group’s net carrying value over its estimated fair value.
Our estimate of undiscounted future cash flows over the store lease term is based upon our experience, the historical operations of the stores and estimates of future store profitability and economic conditions.
Our estimate of 34 Table of Contents undiscounted future cash flows over the lease term is based upon our experience, the historical operations and estimates of future profitability and economic conditions.
These brands are also part of The Key Rewards, our free-to-join loyalty program that offers members exclusive benefits across the Williams-Sonoma family of brands.
These brands are also part of The Key Rewards, our loyalty and credit card program that offers members exclusive benefits across the Williams-Sonoma family of brands.
Actual results could differ from these estimates. Merchandise Inventories The significant estimates used in our inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and estimates of inventory shrinkage. We reserve for obsolescence based on historical trends of inventory sold below cost and specific identification.
Merchandise Inventories The significant estimates used in our inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or net realizable value reserves) and estimates of inventory shrinkage. We reserve for obsolescence based on historical trends of inventory sold below cost and specific identification.
Comparable brand revenue growth Fiscal 2021 Fiscal 2020 Pottery Barn 23.9 % 15.2 % West Elm 33.1 15.2 Williams Sonoma 10.5 23.8 Pottery Barn Kids and Teen 11.6 16.6 Total 1 22.0 % 17.0 % 1 Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham. 29 Table of Contents RETAIL STORE DATA Fiscal 2021 1 Fiscal 2020 1 Store count – beginning of year 581 614 Store openings 12 10 Store closings (49) (43) Store count – end of year 544 581 Store selling square footage at year-end 3,821,000 3,975,000 Store leased square footage (“LSF”) at year-end 6,004,000 6,301,000 1 Retail store data for fiscal 2021 and fiscal 2020 includes stores temporarily closed due to COVID-19.
Comparable brand revenue growth (decline) Fiscal 2022 1 Fiscal 2021 1 Pottery Barn 14.9 % 23.9 % West Elm 2.5 33.1 Williams Sonoma (1.7) 10.5 Pottery Barn Kids and Teen 0.4 11.6 Total 2 6.5 % 22.0 % 1 Comparable brand revenue includes business-to-business revenues within each brand. 2 Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham. 30 Table of Contents RETAIL STORE DATA Fiscal 2022 Fiscal 2021 1 Store count – beginning of year 544 581 Store openings 15 12 Store closings (29) (49) Store count – end of year 530 544 Store selling square footage at year-end 3,813,000 3,821,000 Store leased square footage (“LSF”) at year-end 5,962,000 6,004,000 1 Retail store data for fiscal 2021 includes stores temporarily closed due to COVID-19.
We ended the year with a cash balance of $850,338,000 and generated positive operating cash flow of $1,371,147,000. In addition to our strong cash balance, we also ended the year with no outstanding borrowings under our revolving line of credit.
We ended the year with a cash balance of $367.3 million and generated positive operating cash flow of $1.1 billion. In addition to our strong cash balance, we also ended the year with no outstanding borrowings under our revolving line of credit.
LSF Per Store Pottery Barn 188 14,500 195 14,600 Williams Sonoma 174 6,800 198 6,800 West Elm 121 13,200 121 13,100 Pottery Barn Kids 52 7,700 57 7,800 Rejuvenation 9 9,400 10 8,500 Total 544 11,000 581 10,800 COST OF GOODS SOLD (In thousands) Fiscal 2021 % Net Revenues Fiscal 2020 % Net Revenues Cost of goods sold 1 $ 4,613,973 56.0 % $ 4,146,920 61.1 % 1 Includes occupancy expenses of $728.0 million and $696.3 million in fiscal 2021 and fiscal 2020, respectively.
LSF Per Store Pottery Barn 188 14,800 188 14,500 Williams Sonoma 165 6,800 174 6,800 West Elm 122 13,200 121 13,200 Pottery Barn Kids 46 7,700 52 7,700 Rejuvenation 9 8,000 9 9,400 Total 530 11,200 544 11,000 COST OF GOODS SOLD (In thousands) Fiscal 2022 % Net Revenues Fiscal 2021 % Net Revenues Cost of goods sold 1 $ 4,996,684 57.6 % $ 4,613,973 56.0 % 1 Includes occupancy expenses of $785.4 million and $728.0 million in fiscal 2022 and fiscal 2021, respectively.
This strong liquidity position allowed us to fund the operations of the business by investing over $226,517,000 in capital expenditures during fiscal 2021, and to provide shareholder returns of approximately $1,086,972,000 in fiscal 2021 through share repurchases and dividends.
This strong liquidity position allowed us to fund the operations of the business by investing $354.1 million in capital expenditures during fiscal 2022, and to provide shareholder returns of approximately $1.1 billion in fiscal 2022 through share repurchases and dividends.
As of January 30, 2022, our purchase obligations were approximately $1,831,551,000, with $1,621,891,000 expected to be settled within 12 months. In addition, we had $39,335,000 of unrecognized tax benefits recorded in our accompanying Consolidated Balance Sheet as of January 30, 2022, for which we cannot make a reasonably reliable estimate of the amount and period of payment.
As of January 29, 2023, our purchase obligations were approximately $981.0 million, with $910.0 million expected to be settled within 12 months. In addition, we had $37.1 million of unrecognized tax benefits recorded in our accompanying Consolidated Balance Sheet as of January 29, 2023, for which we cannot make a reasonably reliable estimate of the amount and period of payment.
Our material cash requirements as of January 30, 2022 include the following contractual obligations and commitments arising in the normal course of business: • Our operating leases had fixed lease payment obligations, including imputed interest, of $1,452,522,000, with $269,238,000 payable within 12 months.
Our material cash requirements as of January 29, 2023 include the following contractual obligations and commitments arising in the normal course of business: • Our operating leases had fixed lease payment obligations, including imputed interest, of $1.7 billion, with $308.3 million payable within 12 months.
As of January 30, 2022 and January 31, 2021, our inventory obsolescence reserves were $13,955,000 and $9,827,000, respectively. Long-lived Assets Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
As of January 29, 2023 and January 30, 2022, our inventory obsolescence reserves were $24.7 million and $14.0 million, respectively. Long-lived Assets Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations. See Note I to our Consolidated Financial Statements for further information related to our commitments and contingencies.
We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations.
As of January 30, 2022, we had $33,612,000 of gross unrecognized tax benefits, of which $28,090,000 would, if recognized, affect the effective tax rate. Additionally, we accrue interest and penalties related to these unrecognized tax benefits in the provision for income taxes.
As of January 29, 2023, we had $37.1 million of gross unrecognized tax benefits, of which $31.0 million would, if recognized, affect the effective tax rate. Additionally, we accrue interest and penalties related to these unrecognized tax benefits in the provision for income taxes.
Sources of Liquidity As of January 30, 2022, we held $850,338,000 in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $139,418,000 was held by our international subsidiaries.
Sources of Liquidity As of January 29, 2023, we held $367.3 million in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $81.2 million was held by our international subsidiaries.
Our effective tax rates for fiscal 2021 and fiscal 2020 were 22.4% and 23.9%, respectively. 34 Table of Contents
Our effective tax rates for fiscal 2022 and fiscal 2021 were 24.8% and 22.4%, respectively. 35 Table of Contents
During fiscal 2021, we had no borrowings under our Revolver. Additionally, as of January 30, 2022, $11,745,000 in issued but undrawn standby letters of credit were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.
Additionally, as of January 29, 2023, issued but undrawn standby letters of credit of $11.2 million were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.
During fiscal 2020, we recognized asset impairment charges of approximately $19,204,000 related to property and equipment and $7,865,000 related to right-of use assets for our retail stores, which is recognized within selling, general and administrative expenses.
During fiscal 2021, no impairment charges were recognized. During fiscal 2020, we recognized asset impairment charges of approximately $19.2 million related to property and equipment and $7.9 million related to right-of use assets for our retail stores, which is recognized within SG&A.
Our revenues also include sales to our franchisees and wholesale customers, breakage income related to our stored-value cards, and incentives received from credit card issuers in connection with our private label and co-branded credit cards.
Our revenues also include sales to our business-to-business customers and franchisees, incentives received from credit card issuers in connection with our private label and co-branded credit cards, and breakage income related to our stored-value cards. Net revenues in fiscal 2022 increased $428.5 million, or 5.2%, with company comp growth of 6.5%.
We may, upon notice to the administrative agent, request existing or new lenders, at such lenders’ option, to increase the Revolver by up to $250,000,000 to provide for a total of $750,000,000 of unsecured revolving credit. Our Credit Facility also provided for a $300,000,000 unsecured term loan facility (the “Term Loan”), which was fully repaid in February 2021.
We may, upon notice to the administrative agent, request existing or new lenders, at such lenders’ option, to increase the Revolver by up to $250 million to provide for a total of $750 million of unsecured revolving credit.
These costs include employment, advertising, third-party credit card processing and other general expenses. Fiscal 2021 vs. Fiscal 2020 Selling, general and administrative expenses increased by $453,275,000, or 26.3%, for fiscal 2021, compared to fiscal 2020. Selling, general and administrative expenses as a percentage of net revenues increased to 26.4% for fiscal 2021 from 25.4% for fiscal 2020.
These costs include employment, advertising, third-party credit card processing and other general expenses. Fiscal 2022 vs. Fiscal 2021 SG&A increased $0.5 million and remained relatively flat compared to fiscal 2021. SG&A as a percentage of net revenues decreased to 25.1% from 26.4% for fiscal 2021.
However, our unique operating model and pricing power helped mitigate these increased costs during fiscal 2021. We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future.
Global trends, including inflationary pressures, are weakening customer sentiment, negatively impacting consumer spending behavior and slowing down consumer demand for our products. However, our unique operating model and pricing power helped mitigate these increased costs during fiscal 2022. We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future.
The following table summarizes our net revenues by brand for fiscal 2021 and fiscal 2020: (In thousands) Fiscal 2021 Fiscal 2020 Pottery Barn $ 3,120,687 $ 2,526,241 West Elm 2,234,548 1,682,254 Williams Sonoma 1,345,851 1,242,271 Pottery Barn Kids and Teen 1,139,893 1,042,531 Other 1 404,957 289,892 Total $ 8,245,936 $ 6,783,189 1 Primarily consists of net revenues from Rejuvenation, our international franchise operations and Mark and Graham.
The following table summarizes our net revenues by brand for fiscal 2022 and fiscal 2021: (In thousands) Fiscal 2022 1 Fiscal 2021 1 Pottery Barn $ 3,555,521 $ 3,120,687 West Elm 2,278,131 2,234,548 Williams Sonoma 1,286,651 1,345,851 Pottery Barn Kids and Teen 1,132,937 1,139,893 Other 2 421,177 404,957 Total $ 8,674,417 $ 8,245,936 1 Includes business-to-business net revenues within each brand. 2 Primarily consists of net revenues from Rejuvenation, our international franchise operations and Mark and Graham.
Net cash provided by operating activities compared to fiscal 2020 increased primarily due to an increase in net earnings adjusted for non-cash items, partially offset by higher spending on merchandise inventories as a result of our increased sales, as well as an increase in accrued expenses.
For fiscal 2022, net cash provided by operating activities was primarily attributable to net earnings adjusted for non-cash items, partially offset by higher spending on merchandise inventories as a result of our efforts to improve our in-stock position as well as accounts payable.
Comparable stores that were temporarily closed during either year due to COVID-19 were not excluded from the comparable brand revenue calculation. Outlet comparable store net revenues are included in their respective brands. Sales to our international franchisees are excluded from comparable brand revenue as their stores and e-commerce websites are not operated by us.
Comparable stores that were temporarily closed during fiscal 2021 due to COVID-19 were not excluded from the comparable brand revenue calculation. Outlet comparable store net revenues are included in their respective brands. Business-to-business revenues are included in comparable brand revenue for each of our brands.
These costs, which include distribution network employment, third-party warehouse management and other distribution-related administrative expenses, are recorded in selling, general and administrative expenses. Fiscal 2021 vs. Fiscal 2020 Cost of goods sold increased by $467,053,000, or 11.3%, in fiscal 2021 compared to fiscal 2020.
These costs, which include distribution network employment, third-party warehouse management and other distribution-related administrative expenses, are recorded in selling, general and administrative expenses ("SG&A"). Fiscal 2022 vs. Fiscal 2021 Cost of goods sold increased $382.7 million, or 8.3%, compared to fiscal 2021. Cost of goods sold as a percentage of net revenues increased to 57.6% from 56.0% in fiscal 2021.
Stock Repurchase Program See section titled “Stock Repurchase Program” within Part II, Item 5 of this Annual Report on Form 10-K for further information. 31 Table of Contents Liquidity Outlook We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as capital expenditures, dividends, share repurchases, and other liquidity requirements associated with our business operations over the next 12 months.
Liquidity Outlook We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as capital expenditures, dividends, share repurchases, and other liquidity requirements associated with our business operations over the next 12 months.
As of January 30, 2022 and January 31, 2021, our accruals for the payment of interest and penalties totaled $5,723,000 and $8,225,000, respectively. Due to the potential resolution of tax issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $3,300,000.
Due to the potential resolution of tax issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $6.2 million.
During fiscal 2021, global supply chain disruptions, including COVID-19 related factory closures and increased port congestion, caused delays in inventory receipts, increased raw material costs, shipping container shortages and higher shipping-related charges. We expect these supply chain challenges to continue into fiscal 2022, which could negatively impact our business.
We are also proud to be a leader in our industry with our Environmental, Social and Governance (“ESG”) efforts. During fiscal 2021 and continuing through fiscal 2022, global supply chain disruptions, including COVID-19 related factory closures and increased port congestion, caused delays in inventory receipts and backorder delays, increased raw material costs, and higher shipping-related charges.
As of January 30, 2022, an aggregate of $4,429,000 was outstanding under the letter of credit facilities, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. The latest expiration date possible for any future letters of credit issued under the facilities is January 19, 2023.
As of January 29, 2023, the aggregate amount outstanding under our letter of credit facilities was $0.5 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. On August 19, 2022, we renewed all three of our letter of credit facilities on substantially similar terms.
CRITICAL ACCOUNTING ESTIMATES Our Consolidated Financial Statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates 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.
These estimates 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 from these estimates.
Cash Flows from Investing Activities For fiscal 2021, net cash used in investing activities was $226,247,000 compared to $168,884,000 in fiscal 2020 and was primarily attributable to purchases of property and equipment related to technology and supply chain enhancements. 32 Table of Contents Cash Flows from Financing Activities For fiscal 2021, net cash used in financing activities was $1,491,985,000 compared to $343,019,000 in fiscal 2020 and was primarily attributable to the repurchases of common stock, the repayment of our term loan and payment of dividends.
Cash Flows from Investing Activities For fiscal 2022, net cash used in investing activities was $354.0 million compared to $226.2 million in fiscal 2021 and was primarily attributable to purchases of property and equipment related to technology and supply chain enhancements.
Net cash used in financing activities for fiscal 2021 increased compared to fiscal 2020 primarily due to an increase in repurchases of common stock and the repayment of our term loan in fiscal 2021.
Cash Flows from Financing Activities For fiscal 2022, net cash used in financing activities was $1.2 billion compared to $1.5 billion in fiscal 2021 and was primarily attributable to the repurchases of common stock and payment of dividends.
Dividends In fiscal 2021 and fiscal 2020, total cash dividends declared were approximately $199,395,000, or $2.60 per common share, and $163,316,000, or $2.02 per common share, respectively. In March 2022, our Board of Directors authorized a 10% increase in our quarterly cash dividend, from $0.71 to $0.78 per common share, subject to capital availability.
In March 2023, our Board of Directors authorized a 15% increase in our quarterly cash dividend, from $0.78 to $0.90 per common share, subject to capital availability. Our quarterly cash dividend may be limited or terminated at any time.
Pottery Barn, our largest brand, delivered 23.9% comparable brand revenue growth during the year driven by growth in all product categories, including our core lifestyle furniture category, home furnishings, decorating, our design services, and our furniture-advantaged growth initiatives such as apartment and our curated market-place assortment.
On a two-year basis, company comp growth was 28.5%. Pottery Barn, our largest brand, delivered 14.9% comparable brand revenue ("brand comp") growth driven by our growth initiatives such as our accessible home, apartment and our market-place assortment. On a 3-year basis, Pottery Barn delivered 54.0% brand comp growth.
INCOME TAXES The effective income tax rate was 22.4% for fiscal 2021 and 23.9% for fiscal 2020. The decrease in the effective tax rate from fiscal 2020 is primarily due to higher excess tax benefit from stock-based compensation in fiscal 2021 compared to fiscal 2020.
This decrease in rate was primarily driven by the leverage of employment costs and advertising expenses from overall cost discipline and adjusted incentive compensation commensurate with business performance. INCOME TAXES The effective income tax rate was 24.8% for fiscal 2022 and 22.4% for fiscal 2021.
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We are also proud to be a leader in our industry with our Environmental, Social and Governance (“ESG”) efforts. In March 2020, we announced the temporary closures of all of our retail store operations to protect our employees, customers and the communities in which we operate and to help contain the COVID-19 pandemic.
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We expect the impact of higher product costs, ocean freight, detention and demurrage to continue into fiscal 2023, which could negatively impact our business. Fiscal 2022 Financial Results Net revenues in fiscal 2022 increased $428.5 million, or 5.2%, with company comparable brand revenue ("company comp") growth of 6.5%. This was driven by strong order fulfillment and growth initiatives.
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As of January 30, 2022, all of our stores have reopened for in-person shopping. However, we have experienced, and may continue to experience, reduced traffic in our stores due to the continued uncertainty around COVID-19.
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In West Elm, brand comp growth was 2.5% with strong operating margins, on top of 33.1% brand comp growth the prior year, resulting in a 35.6% brand comp growth on a two-year basis. On a 3-year basis West Elm generated 50.8% brand comp growth. West Elm is our brand most affected by the current tough macroeconomic environment.
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Fiscal 2021 Financial Results Net revenues in fiscal 2021 increased by $1,462,747,000, or 21.6%, compared to fiscal 2020 with comparable brand revenue growth of 22.0% and double-digit comparable brand revenue growth across all our brands.
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Our Williams Sonoma brand had a brand comp decrease of 1.7% as we continued recovery in our in-stock inventory position and increased our focus on product exclusivity and innovation. On a 3-year basis, Williams Sonoma generated 32.6% brand comp growth.
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This was primarily driven by strength in both e-commerce and retail, primarily due to an increase in furniture sales, as well as the impact of stores operating at a limited capacity due to COVID-19 during portions of fiscal 2020. The increase in net revenues also included a 23.4% increase in international revenues, related to both our franchise and company-owned operations.
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In our Pottery Barn Kids and Teen businesses, we saw brand comp growth of 0.4% driven by growth in baby and dorm as in-stock inventory improved. Finally, our emerging brands, Rejuvenation and Mark and Graham, combined, delivered 9.6% brand comp growth.
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On a two-year basis, comparable brand revenues increased 39.0%. During fiscal 2021, we delivered double-digit comparable brand revenue growth across all our brands. In West Elm, comparable brand revenue growth was 33.1%, with all categories driving growth. The upholstery and outdoor businesses were strong, and customers responded well to new products, including bedroom, dining, storage, and occasional categories.
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In fiscal 2022, diluted earnings per share was $16.32 (which included a $0.21 impact from the impairment of Aperture, a division of our Outward, Inc. subsidiary) versus $14.75 in fiscal 2021 (which included a $0.10 impact from acquisition-related expenses of Outward, Inc.).
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Our growth initiatives of Outdoor and Bath Renovation also out-paced our brand growth for the year. The Williams Sonoma brand delivered comparable brand revenue growth of 10.5%, with growth across all key categories. Strength in both electrics and home furniture drove these results.
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Our three key differentiators - our in-house design, our digital-first channel strategy, and our values - continued to distinguish us as the world’s largest digital-first, design-led and sustainable home retailer. Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, sustainable products at competitive prices.
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In our Pottery Barn Kids and Teen businesses, we saw comparable brand revenue growth of 11.6% d riven by our proprietary 100% GREENGUARD GOLD furniture and back-to-school assortment. We also saw outsized growth in Baby, a key initiative and entry point to the brands.
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Through our e-commerce platform, our in-house customer relationship management and data analytic teams optimize our digital spend and customer connections. Our stores serve as design centers and omni-fulfillment hubs. Along with our key differentiators, our success and profitability are driven by our growth initiatives that are cross-brand and/or outside of our core brands.
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This growth however, was impacted by the supply chain disruptions around the world, particularly the shutdown and backlog in Vietnam. We expect to be impacted by this backlog until at least the second quarter of fiscal 2022. Finally, our emerging brands Rejuvenation and Mark and Graham, combined, accelerated to 33.0% comparable brand revenue growth.
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Our largest cross-brand growth driver is business-to-business, which positions us to furnish our customers everywhere - from restaurants to hotels, from football stadiums to office spaces. Another successful growth initiative is our expansion into global markets.
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In fiscal 2021, diluted earnings per share was $14.75 (which included a $0.10 impact from acquisition-related expenses of Outward, Inc.) versus $8.61 in fiscal 2020 (which included a $0.26 impact related to store asset impairments, a $0.13 impact from acquisition-related expenses of Outward, Inc., an $0.11 impact related to inventory write-offs, and a $0.06 benefit related to the adjustment of certain deferred tax assets and liabilities). 27 Table of Contents Our three key differentiators - our in-house design, our digital-first channel strategy, and our values - continued to provide the framework for execution both in our core business and in our growth areas.
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We have expanded our franchise business into India with an exclusive and differentiated product line, and our three stores and websites are outperforming our expectations in a market where we 28 Table of Contents see tremendous opportunity. In Canada, we relaunched our websites and saw improvements in conversion and average unit retail across brands.
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Throughout fiscal 2021, we continued our deliberate reduction in site-wide promotional cadence in all of our brands, and instead shifted our focus on delivering aspirational and inspirational content. This pricing power also allowed us the flexibility to absorb supply chain costs and aggressively fund marketing efforts. Our cross-brand loyalty program, The Key, drove record levels of engagement and membership.
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Our emerging brands, Rejuvenation and Mark and Graham, have also provided incremental growth. These two brands service the white space needs of customers. At Rejuvenation, we’re expanding into remodel categories related to kitchen and bathroom, including vanities, cabinet hardware and custom wall lighting.
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Our recently launched cross-brand credit card has produced cardholder spend and cross-brand activity that has exceeded our expectations. We are also focused on personalization efforts in our digital marketing.
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At Mark and Graham, our high-quality gift and personalization business is resonating with our customers, and we saw outsized growth in the travel space including luggage and accessories. As a digital-first company, we are in continuous pursuit of incremental improvement to our customers’ shopping journey online.
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We continue to leverage our in-house managed, first-party-data across our brands. which we believe positions us well for the increased focus on consumer privacy and the “cookie-less” future that is rapidly approaching. As a digital-first company, we are in continuous pursuit of incremental improvement to our customers’ shopping journey online.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWhile the impact of foreign currency exchange rate fluctuations was not material to us in fiscal 2021, we have continued to see volatility in the exchange rates in the countries in which we do business. As we continue to expand globally, the foreign currency exchange risk related to our foreign operations may increase.
Biggest changeWhile the impact of foreign currency exchange rate fluctuations was not material to us in fiscal 2022, we have continued to see volatility in the exchange rates in the countries in which we do business.
We do not engage in financial transactions for trading or speculative purposes. Interest Rate Risk Our Revolver has a variable interest rate which, when drawn upon, subjects us to risks associated with changes in that interest rate. During fiscal 2021, we had no borrowings under the Revolver.
We do not engage in financial transactions for trading or speculative purposes. Interest Rate Risk Our Revolver has a variable interest rate which, when drawn upon, subjects us to risks associated with changes in that interest rate. During fiscal 2022, we had no borrowings under the Revolver.
Foreign Currency Risks We purchase the majority of our inventory from vendors outside of the U.S. in transactions that are primarily denominated in U.S. dollars and, as such, any foreign currency impact related to these international purchase transactions was not significant to us during fiscal 2021 or fiscal 2020.
Foreign Currency Risks We purchase the majority of our inventory from vendors outside of the U.S. in transactions that are primarily denominated in U.S. dollars and, as such, any foreign currency impact related to these international purchase transactions was not significant to us during fiscal 2022 or fiscal 2021.
To mitigate this risk, we hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies (see Note L to our Consolidated Financial Statements). 35 Table of Contents
To mitigate this risk, we hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies (see Note L to our Consolidated Financial Statements). 36 Table of Contents
In addition, we have fixed and variable income investments consisting of short-term investments classified as cash and cash equivalents, which are also affected by changes in market interest rates. As of January 30, 2022, our investments, made primarily in interest bearing demand deposit accounts and money market funds, are stated at cost and approximate their fair values.
In addition, we have fixed and variable income investments consisting of short-term investments classified as cash and cash equivalents, which are also affected by changes in market interest rates. As of January 29, 2023, our investments, made primarily in interest bearing demand deposit accounts and money market funds, are stated at cost and approximate their fair values.
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Additionally, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical or current consolidated financial statements. As we continue to expand globally, the foreign currency exchange risk related to our foreign operations may increase.

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